US Fed cuts rate, signals half point cut next year

: Metals, Natural gas
24/12/18

The US Federal Reserve cut its target interest rate by 25 basis points today, its third cut of the year, and signaled only a half percentage point of rate cuts next year to avoid any resurgence of inflation.

The Fed's Federal Open Market Committee (FOMC) lowered the federal funds rate to 4.25-4.50pc from the prior range of 4.5-4.75pc. This followed a quarter point reduction in November and a half-point cut made in mid-September, the first cut since 2020.

The Fed penciled in 50 basis points worth of cuts for 2025, down from 100 basis points projected in the September median economic projections of Fed board members and Fed bank presidents.

By Bob Willis

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24/12/18

Alabama lock expected to reopen late April

Houston, 18 December (Argus) — The main chamber of the Wilson Lock in Alabama along the Tennessee River is tentatively scheduled to reopen in four months, according to the US Army Corps of Engineers (Corps). The Corps expects to finish phase two of dewatering repairs on the lock on 20 April, after which navigation can resume through the main chamber of the lock. The timeline for reopening may shift depending on final assessments, the Corps said. Delays at the lock average around 12 days through the auxiliary chamber, according to the Lock Status Report by the Corps. Delays at the lock should wane during year-end holidays but pick up as spring approaches, barge carriers said. The main chamber of the Wilson Lock will have been closed for nearly seven months by the April reopening after closing on 25 September . By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

ArcelorMittal increases EU HRC offer

24/12/18

ArcelorMittal increases EU HRC offer

London, 18 December (Argus) — ArcelorMittal has increased its hot-rolled coil (HRC) offer by €20/t to €630/t across Europe. The mill has greater visibility over its order book after concluding contractual business and sees firmer apparent demand in the first quarter, including from the automotive industry. Suppliers, and the market at large, expect import volumes to fall in the first quarter owing to the dumping case against Egypt, Japan, India and Vietnam, and the 15pc cap on other countries' volumes. The European Commission's review of its safeguard, from which changes could be implemented in April — rather than July as has typically been the case — could also further tighten arrivals. Sources suggest quota volumes could be reduced, in line with softer EU production and demand, and that all developing economies could some in scope of the safeguard. In the 4A hot-dip galvanised market, there could also be a cap imposed on each country selling into the 'other countries' quota, while for HRC, countries with their own quota might not be able to access 30pc of the 'other countries' quota in the final April-June quarter. Some traders are totally stepping back from importing as a result of the measures, trying to find different ways to do business domestically. A Benelux-based HRC producer has also pulled its offer, and is expected to return in January at higher prices, sources suggest. By Colin Richardson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: More US met coal consolidation ahead

24/12/18

Viewpoint: More US met coal consolidation ahead

London, 18 December (Argus) — Expectations that weak seaborne coking coal prices in the last quarter of 2024 will carry over to 2025 in the face of low steel prices is pointing to further consolidation among US coking coal producers. Consol Energy and Arch Resources set up the most significant merger of 2024 for the US market , with the merged company expected to generate $110mn-140mn of cost savings and "operational synergies" within 6-18 months of the close of the transaction. But continuing cost pressures will likely lead to closures of smaller high-cost mines, not uncommon in the past when US coking coal prices have reached a down cycle. The fob Australia premium low volatile (PLV) coking coal price fell from this summer's high of $260/t in early July to average $203.46/t from the start of October, translating to prices that are below cost for many US producers. In recent years, price volatility and lack of liquidity, particularly in the Atlantic market, has meant many buyers have chosen to buy at index-linked prices, often with fob Australia indexes. The fob US east coast price has averaged $192.84/t for the current quarter, while the high volatile A fob Hampton Road price has averaged $186.47/t in the same period, prices cited by many US producers at near or even below cost after taking into consideration rail and port handling charges. Lower cost longwall miners like Alpha Met Resources reported an average sale cost of $114.27/short ton ($125.96/t) in the third quarter for metallurgical coal, Arch Resources reported $93.81/st for the same and Warrior Met Coal indicated $120.21/st. But others such as Corsa are in clear loss-making territory at $169/st. After freight and handling charges, many of these producers will have fob equivalent costs closer to $170-190/t or even above $200/t for smaller continuous mining operations. The poor margins has also meant US producers like Ramaco have cut back their guidance while lost output capacity has failed to lift prices . Last month, many US producers have already looked to reduce shifts by extending time off for the holidays and hunting season. But this has still failed to stem supplies, particularly in the high volatile coal segment where traders and suppliers that had secured tonnes earlier this year or more recently via term contracts have been offering prices at steep discounts for on-water cargoes to Asia and port stocks in China. US producers have been focusing their efforts on sales to Asia in the face of weak demand in Europe, leading to the absence of much incremental coking coal demand in the region since last year. In a time of high fob Australia prices, margins for US sales to Asia might have been attractive. But with low Australian prices and competition from Russia and Mongolia continuing to grow, the second half of 2024 has seen poor margins for US sales to Asia. While Russian mining costs have risen, they are still well under the levels in the US. Industry sources peg average production cost for open-pit mining in the Kuzbass region at $18.37-35.75/t, excluding value-added tax (VAT), while underground mining stands at $24.83-60.58/t, excluding VAT, according to sources at Russian coal mining companies. Russian coal is also typically discounted to account for sanctions and difficulties with payments, and more recently the export duty on Russian coking coal was removed. US president-elect Donald Trump's threat to impose import tariffs on all imports from China has drawn concern in the market about China imposing retaliatory tariffs on US coal. In a well-supplied market and the presence of strong competing producing countries at key import destinations, many US producers expect they will have to absorb any increase in tariff to secure sales to China. At a recent industry conference in Prague, several participants indicated the fob Australia PLV index should be in the region of $220-225/t to be sustainable for the wider industry. By Siew Hua Seah Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

India’s AMNS in talks to build Suvali LNG terminal

24/12/18

India’s AMNS in talks to build Suvali LNG terminal

Mumbai, 18 December (Argus) — Indian steel manufacturer ArcelorMittal Nippon Steel (AMNS) is in advanced talks to build a 5mn t/yr LNG import terminal at Suvali, Surat city, in India's western state of Gujarat, a source close to the matter told Argus . The terminal will be part of its plan to build a new captive port at Suvali which would handle 60mn t of bulk cargoes and finished goods, the source added. The firm has yet to announce the timeline for the terminal and the port. It received environmental clearance in 2023. The LNG terminal is being built in response to higher regasification charges, pipeline tariffs and storage fares at Shell's 5mn t/yr Hazira facility, the source said. Shell's 5mn t/yr LNG terminal charges one of the highest regasification rates in the world at $0.75/mn Btu, industry sources said. The Suvali terminal will be located 10km from Shell's 5mn t/yr Hazira LNG terminal. AMNS has reduced its imports to Hazira terminal with no deliveries in 2023 and 2024 compared with 12 cargoes totalling 820,483t received in 2022, data from market intelligence firm Kpler show. The firm only received nine LNG cargoes at Dahej this year totalling 596,000t, Kpler data show. AMNS has largely stopped using Shell's Hazira terminal, only using one slot in 2024 as compared to around 10-16 slots every year previously, the source said. Petronet's 17.5mn t/yr Dahej import terminal provides more than 30 days of free storage, while Hazira provides only 16 days, the source added. A slot refers to utilisation of an LNG cargo from its evacuation to regasification facility. AMNS is likely to invest a total of $1.95bn to build the Suvali terminal. It will have two LNG storage tanks, a sea-water based regasification unit, pumps and cryogenic piping with pipelines to supply regasified LNG to AMNS' 9mn t/yr crude steel plant. The terminal will be designed to handle LNG carriers with capacities of 20,000-26,5000m³, the source added. But it remains to be seen if this will materialise as it will be in competition with several LNG terminals in close proximity, including GSPC's 5mn t/yr Mundra LNG terminal and HPCL's upcoming 5mn t/yr Chhara LNG terminal in Gujarat. Further terminal plans Adani Ports and Special Economic Zone (APSEZ) also has plans to expand the capacity of its Hazira port and may even consider setting up an LNG facility as the port currently handles bulk cargoes, liquid chemicals, and oil products. India currently has seven operational LNG terminals with a combined capacity of 47.7mn t/yr, with the highest utilisation in Petronet at 103pc during April-October, followed by Shell's Hazira at 44pc. Utilisation in other terminals remains in a nominal range of 20-35pc, an oil ministry report shows. This is due to lack of a breakwater facility or weak pipeline connectivity from terminals to end users. India's state-controlled gas distributor Gail has bought a total of 25 slots equating to 1.5mn t/yr of LNG at Shell's Hazira LNG terminal for 2025, prompting speculation that its 5mn t/yr Dabhol LNG terminal might not be operational for the whole of next year, another source told Argus . Gail was planning to operate the Dabhol LNG facility at full capacity throughout the year from 2025 as it has resumed construction on its breakwater facility after a monsoon this year, director of finance Rakesh Kumar Jain said in an investor call on 31 July. The construction of the breakwater facility has been delayed since 2022 because of conflicts with local communities. By Rituparna Ghosh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Japan to continue filling bulk scrap demand

24/12/18

Viewpoint: Japan to continue filling bulk scrap demand

Shanghai, 18 December (Argus) — Asian steel scrap buyers will probably remain risk-averse next year and continue to focus on purchasing Japanese scrap in small bulk cargoes over US scrap on large vessels. Japanese scrap, which has a shorter lead time and more flexible shipment sizes, is often considered by Asian buyers to be lower risk compared with US scrap, which has a longer delivery period and less wiggle room in parcel sizes, particularly when steel and scrap demand is weak. South Korean scrap imports fell by 44pc year on year to 1.83mn t in the first 10 months of 2024, but Japanese scrap's market share increased to 72pc from 70pc the previous year. Vietnamese buyers, which have been largely absent from the US scrap export market for over a year, imported 2mn t of Japanese scrap in January-October, rising by 63pc on the year and accounting for 44pc of Vietnam's total imports. The Philippines, once a net exporter of ferrous scrap, has imported more scrap in recent years, with Japan supplying 92pc of its scrap imports during the first three quarters of 2024. The growing steelmaking capacity and infrastructure investments in southeast Asia will further drive demand for Japanese scrap in the region in the coming years. Japanese scrap suppliers may also have greater appetite to sell to overseas markets in the coming year because lower domestic scrap demand in the country and the weaker yen against the US dollar have widened the price spread between domestic and exported scrap. The spread between Vietnam imported scrap prices and Japan domestic collection prices increased to $77/t on 6 December from around $53/t on 5 January after Tokyo Steel — the domestic scrap price setter in Japan — made multiple price cuts of more than ¥10,000/t ($66/t) since July, while prices for HMS 1/2 80:20 cfr Vietnam have dropped by only around $40/t. Japan's leading steel mills plan to transit more production from blast furnaces to electric arc furnaces, which may increase domestic scrap demand after 2027. But in the short term, prices are still expected to remain largely dependent on conditions in the wider ferrous market. Japanese crude steel production in the first 10 months of 2024 totalled 70.2mn t, down by 3.7pc year on year. Major steelmakers in Japan have cut their production forecasts for the 2024-25 fiscal year, citing a weaker domestic market. Demand for building materials is expected to decline further owing to rising construction costs and persistent labour shortages. Japanese steel imports rose by 10pc year on year to 2.8mn t in April-September, the highest since 2014, according to the finance ministry. Many Japanese mills fear that rising imports could further pressure the domestic steel market in 2025 if there is no government intervention. With the Japanese ferrous market expected to remain clouded by lower domestic steel production and higher steel imports, any excess scrap supply will be sold in the export market to reduce sales pressure in the domestic market. Japanese scrap exporters are facing challenges such as volatile exchange rates and vessel shortages, which have limited their export appetite in the past few months. Freight rates for scrap cargoes from Japan have increased by over $10/t since October and led to lower offers from Japanese suppliers and a wider bid-offer spread in the last quarter of 2024. But traders anticipate that this bottleneck will gradually ease in early 2025. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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