Viewpoint: US steel supply to remain short in 1Q

Market: Coking coal, Metals
24/12/20

The US steel market is expected to remain undersupplied through the first quarter of 2021, with a lack of imports and steel production continuing to weigh on the market.

Despite multiple restarts of idled capacity that was taken down due to the Covid-19 pandemic, steel producers are not expected to be able to match demand through at least the first quarter, according to many market participants.

Steel buyers have been unable to find the tons they need for their customers for months, with steel inventories said to be at some of their lowest levels ever.

The lack of steel has only been exacerbated by a recovery in demand, with the Metals Service Center Institute (MSCI) reporting that steel shipments in November were only down by 1.3pc compared to the same month of 2019. In May shipments fell by 34.2 pc year-over-year, the largest percent decline since the coronavirus pandemic shut down large parts of the North American economy beginning in mid-March.

Inventories dwindled between the end of March and August, when steel demand plummeted as the North American economies adjusted to the reality of the coronavirus pandemic. Approximately 19mn short tons (st)/yr of pig iron and steel production was idled, the majority of it by integrated steelmakers ArcelorMittal USA, Cleveland-Cliffs, and US Steel.

US mill production for the year through 19 December measured 76.95mn st, around 16.9mn st or 18pc lower than the same period in 2019, according to estimates from the American Iron and Steel Institute (AISI). Average capacity utilization so far for 2020 is 67.4pc, compared to 79.8pc for the same period of 2019.

In mid-August the Argus US hot-rolled coil (HRC) assessment bottomed out at $450/st and a buying spree began, quickly increasing HRC lead times from 3-4 weeks for the week ending 11 August to 7-8 weeks for the week ending 1 September.

Prices have more than doubled since the mid-August low to $977/st on 22 December with lead times of 8-9 weeks. Both prices and lead times are driven by supply side issues related to the coronavirus idlings of pig iron and steel production and low inventories within steel service centers.

US Steel has restarted three of its four idled blast furnaces, most recently announcing on 1 December that it would restart its No 4 blast furnace at its Gary Works mill in Indiana in a week. In Arkansas electric arc furnace (EAF) minimill steelmaker Big River Steel has fired up its 1.65mn st/yr flat-rolled expansion.These and other capacity restarts are not expected to help alleviate supply strains in the market through the first quarter, exacerbated by a lack of steel imports.

Global steel prices have remained at historically high price levels,with HRC fob Turkey prices at $657.71/st as of 18 December and HRC fob Tianjin at $621.42/st as of 22 December. These products would be subject to at least the 25pc Section 232 steel tariff, adding another $155.36-$164.43/st to those prices before factoring in other costs such as freight.

Imports have fallen by 22pc year-over-year through November to 18.6mn metric tons (t) (20.5mn st), according to preliminary data from the US Department of Commerce.

Imports traditionally have played the role of providing a low-cost influx of HRC products into the US, smoothing out sharp price increases and generally signaling the end of a price rally. Few if any in the market believe imports will flow into the US in a significant way this time, and high prices appear to be prepared to stick around for some time.

By Rye Druzin

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20/12/24

Viewpoint: Copper volatility, uncertainty ahead in 2025

Houston, 20 December (Argus) — US copper prices are expected to remain volatile in 2025 because of uncertain market conditions, including Chinese demand, electric vehicle (EV) rollouts and falling borrowing costs. Following a two-year downturn prompted by China's economic slowdown in the wake of the Covid-19 pandemic, the next active price on the Chicago Mercantile Exchange (CME) hit an all-time record high of $5.106/lb on 21 May 2024. Expectations of increased demand in China, the prospect of looming US interest rate cuts, and projected ramped-up demand for copper in EVs and the green energy sector fueled copper price gains into the mid-year. These expectations proved partly exaggerated, leading copper to fall back to an average of $4.33/lb over the second half of 2024. US copper market participants expect those same factors, albeit to varying degrees, to retain a prominent role in determining prices for 2025. Macroeconomic uncertainties Suppliers and consumers widely expect volatility to persist in the global copper trade as broader macroeconomic factors — chiefly Chinese demand and stimulus, US Federal Reserve interest rate decisions — and delayed US EV ramp-up plans pull the market in diverging directions. President-elect Donald Trump's pledge to implement import tariffs have further complicated the picture for US participants, with likely retaliatory tariffs clouding the picture even more. Trade disagreements and tariffs would not only raise costs but also curb demand as the flow of various goods is dented, market sources said. Meanwhile, US Federal Reserve policymakers on 18 December signaled they are likely to cut the target rate by only 50 basis points next year, paring back their expectations from a prior 100 basis points as inflation remains sticky. The DXY dollar index, which tracks the greenback against six major currencies, surged after the Fed announcement to its highest in two years. A strong dollar puts downward pressure on copper prices because it tends to weaken demand from holders of other currencies. Tariffs are also expected to spur inflation and may prompt the Fed to further slow the pace of rate cuts, or even hike rates, effectively lending support to the dollar, making it more expensive for holders of other currencies to buy into copper. The US Dollar index, DXY, surpassed 108.2 on 19 December, the highest since November 2022. Goldman Sachs has forecast that the greenback will remain strong in the near-term. Automakers slow EV transition Although the green energy transition — generally covering solar, wind, and EV markets for copper markets — is expected to contribute to US consumption of copper, automakers have signaled their interest in delaying EV deployments. Wind and solar markets are widely expected to remain growth sectors with US projects and installations scheduled to rise next year . Still, the picture for EVs, which could ultimately contribute to copper demand heavily, is murkier. EVs utilize copper in motor coils for engines, and the cabling for charging stations among other components, and each EV requires 183 lbs of copper, nearly four times more than equivalent internal combustion engine vehicles. Several automakers, including GM, Ford and Toyota, have either delayed EV plans or shifted more towards hybrids instead this year. Price outlooks diverge Market participants broadly expect the copper market to slide into a deficit by 2026, chiefly because of growing demand from the renewable sector but until then are split on the direction of prices. The CME next active month price through November averaged $4.24/lb in 2024, up from a $3.86/lb average for the same time period in 2023. Investment bank Goldman Sachs said copper prices will average $4.61/lb for 2025, forecasting upside risk from potential further stimulus while simultaneously seeing downside risk from likely US-China trade tensions. Other financial organizations have forecast copper to range from $3.97-4.99/lb in 2025. Citigroup forecast copper at $3.97/lb, Bank of America dropped its outlook to $4.28/lb while UBS was at $4.76-$4.99/lb. Most copper traders and analysts agree that 2025 will likely be a year of transition for the red metal market, buffeted by ongoing uncertainty. By Mike Hlafka Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Viewpoint: PGM demand from hydrogen sector to rise

20/12/24

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20/12/24

Viewpoint: PGM demand from hydrogen sector to rise

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US Congress passes waterways bill

19/12/24

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19/12/24

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Q&A: Xcelsior aims to derisk minor metals investment

19/12/24

News

19/12/24

Q&A: Xcelsior aims to derisk minor metals investment

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EU HRC imports drop a quarter on safeguards, AD probe

19/12/24

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19/12/24

EU HRC imports drop a quarter on safeguards, AD probe

London, 19 December (Argus) — EU hot-rolled coil (HRC) imports have dropped by 24pc year on year in October, as a result of the safeguards changes introduced earlier in the year and the anti-dumping (AD) probe on key suppliers launched in August. Volumes amounted to 1.16mn t. The drop was underpinned by sharp declines from Japan, Egypt, Vietnam, Taiwan and South Korea. Meanwhile, other countries stepped in to fill the supply gap, such as Turkey, Ukraine and Serbia — deemed less risky for buyers, with all ramping up their volumes year on year by 292pc, 69.5pc and 172.8pc, respectively. Turkey was the top supplier with 222,760t in October. Imports from Indonesia also notably increased, by 41.5pc on the year to 29,140t. This volume will be likely to grow over November-March, but the country is expected to no longer be exempt from the safeguard measures from April onwards, market participants said. The European Commission this week launched an early review of the tariff-rate quotas, with changes, including on the developing countries list, to be introduced from April. Import supply is likely to drop further over the rest of the year, and into the first quarter, with January the last month in which residual larger volumes from countries under investigation can be custom cleared. Sales from Japan, Egypt, Vietnam and India, all under the scope of the AD probe , have mostly stopped over the current quarter. Cold-rolled coil (CRC) imports are meanwhile on the rise, with 281,336t clearing in October, up by 33.4pc on the year and 53.5pc on the month. Taiwan was the top supplier with 64,208t, followed by Turkey and India with just over 40,000t each. The increase in Taiwanese imports, which are expected to rise further, have fuelled talks in the market of a potential AD investigation. Similarly, hot-dipped galvanised (HDG) imports rose by 60.1pc on the year to 802,688t, of which 270,226t was from Vietnam, representing a 279.1pc increase year on year. Market participants have expected a probe on Vietnamese HDG for a while, but following the safeguards review launch said that a reduction in quota volumes might hit downstream products such as HDG and CRC in particular. Plate imports have also nudged up, but more modestly, by 6.9pc on the year in October to 222,133t. Rebar and wire rod arrivals were up by 170.6pc and 46.5pc on the year, respectively. By Lora Stoyanova EU HRC imports t Oct-24 ±% Oct-23 Total 1,164,750 -24 Turkey 222,760 292 Japan 164,691 -38.2 Egypt 148,979 -19.7 Vietnam 144,512 -54.7 Taiwan 127,350 -54.5 Ukraine 103,003 69.5 South Korea 90,674 -45.9 Serbia 55,372 172.8 Australia 30,690 -62.4 Indonesia 29,140 41.5 — GTT Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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