The Stainless Monthly Metals Index (MMI) dropped 8.87% from June to July. After nickel prices hit a bottom mid-July, they followed the base metal trend upward. By the beginning of August, however, the rebound had faltered, and prices resumed their descent.
Both last month’s increases and this month’s declines were extremely narrow. For that reason, prices appear consolidated within their current range, leaving no clear direction for the coming month.
Indonesia continues to pursue value adds to its nickel reserves. The hope is that doing so will aid in advancing its stainless steel and battery production capacity through export taxes on raw materials. Back in 2020, Indonesia banned the export of nickel ore entirely. The aim was to pressure its mining sector to invest in processing capacity.
That move forced China to replace ore imports with nickel pig iron and ferro-nickel in an effort to feed its stainless steel mills. Now, Indonesia plans to add an export tax to both of those products. This should provide the funding to allow for additional investment in its steel supply chain. Since 2021, Indonesia alone accounts for roughly half of all global nickel production.
The first export ban on nickel ore occurred in January 2014. Following the enforcement of that ban, nickel prices rose more than 39% throughout the first five months of that year. Eventually, market dynamics pushed prices lower once again. This dramatic price increase occurred despite weak economic conditions throughout parts of the world, including parts of the EU. For Indonesia, the ban had the intended effect as numerous companies in both Indonesia and China soon announced plans to construct NPI facilities on the archipelago. Outside of Indonesia, the ban forced countries like China, Australia, and Japan to pursue other sources of the metal. Before long, companies had secured direct shipping ore (DSO) from places like the Philippines and the Solomon Islands.
Indonesia substantially eased the ban in early 2017. This was due to several factors. One was a 2016 budget deficit. Another related to just how successful the ban was – spurring the development of nine additional nickel smelters (up from two). Ultimately, this led to a nearly 19% decline in nickel prices during the first half of 2017 alone.
Despite previously-stated intentions to reimpose the export ban in 2022, Indonesia instead expedited its resumption to January 2020. The decision aimed to bolster the domestic processing sector, which saw rapid development during that time. The move also caused China to increase NPI and stainless steel projects in Indonesia, as it dramatically limited ore imports. Chinese imports of NPI from Indonesia also surged as a result. However, the ban’s reinstatement did not trigger the same impact in terms of price trend. This was likely due to the emerging pandemic. Instead, prices remained within an overall downtrend that did not hit bottom until late March of that year.
The most recent announcement of potential export taxes comes as a result of the increased flow of NPI exports. It was supported by the forecasted increase in the number of domestic NPI and ferro-nickel processing facilities. In fact, the current estimate predicts an increase from 16 facilities to 29 over just five years. Still, a low-value product and limited exports of NPI will incentivize foreign investment in Indonesia as countries pursue battery and stainless steel manufacturing. It would also force importers like China to seek alternate sources for their supply.
However, the announcement has yet to spark any noticeable increase in prices. Instead, nickel prices have continued downward since their most recent rally stalled back at the start of August. According to Septian Hario Seto, Deputy Coordinating Minister For Maritime and Investment Affairs, the tax could begin as early as Q3 2022. That said, no formal date has yet been announced. When it comes, the announcement alone will likely trigger a sharp uptick in Indonesian NPI exports as countries prepare to absorb the tax. Of course, any actual response from nickel prices will likely follow the decided levy date.
The best way to track monthly nickel prices is to sign up for MetalMiner’s monthly MMI reports, which come directly to your inbox.
On July 26, the European Commission launched a new anti-circumvention investigation. The subject was hot rolled stainless sheets and coils imported from Turkey, but which originated in Indonesia. EUROFER, the association of European steel producers, triggered the investigation over allegations that imports from Turkey violate the anti-dumping measures imposed against Indonesia. Indonesia remains home to several Chinese stainless steel manufacturers. At the moment, the case is expected to be concluded in the next nine months. Meanwhile, all imports of SSHR from Turkey will be registered with immediate effect as instructed by the EC.
Thus far, President Biden has largely continued the protectionist approach against China set forth by his predecessor. While the outcome of the investigation and subsequent response to its findings remain undetermined, Europe’s actions could inspire the U.S. to follow suit. After all, anti-dumping has always been a politically favored agenda. Furthermore, the investigation could cause materials once destined for Europe to instead shift toward the U.S. market. If that happens, it could embolden U.S. mills to lobby for political action to protect domestic interests.
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U.S. steel imports through the first 11 months of 2019 were down 17% compared with the same period in 2018, according to preliminary U.S. Census Bureau data.
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Imports through the first 11 months of 2019 reached 23.9 millions tons, down from 28.9 million tons from January-November 2018.
This morning in metals news, Rio Tinto downgraded its 2019 iron ore guidance, India is looking to combat Chinese steel imports with higher duties, and the copper price lost some gains late this week on the back of U.S.-Iran tensions and ahead of the G20 Summit in Japan.
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Due to operational challenges, Rio Tinto this week announced it has downgraded its 2019 iron ore guidance down to between 320 million and 330 million tons (from between 333 million and 343 million tons).
“Rio Tinto Iron Ore is currently experiencing mine operational challenges, particularly in the Greater Brockman hub in the Pilbara,” the firm said. “This is resulting in a higher proportion of certain lower grade products, partly to protect the quality of our flagship Pilbara Blend.
“Around 1.5 million tonnes of these products were sold in the first quarter, as noted in the 2019 Quarterly Operations Review, 16 April 2019. Additional sales of these products will be made during 2019.”
The Indian steel ministry is targeting a duty increase on imports of finished steel products, Reuters reported, up to 15% from a range of between 7.5% to 12.5%.
According to the report, the Indian steel ministry cited concerns related to the U.S.-China trade war and resulting diverted supplies of steel away from the U.S. market.
After making gains earlier in the week, the copper price slipped on account of tensions between the U.S. and Iran, Reuters reported.
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Three-month LME copper fell 0.4% to $5,592 on Friday after hitting its highest level since May 21 on Thursday, according to the report.
This morning in metals news, U.S. steel mills churned out steel at a capacity utilization rate of 81.5%, the E.U. officially blocked the proposed joint venture of the European operations of Tata Steel and Thyssenkrupp, and the Aluminum Association is looking for a new CEO.
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The U.S. steel sector reached a capacity utilization rate of 81.5% for the year through June 8, the American Iron and Steel Institute (AISI) reported.
Adjusted year-to-date production for that period reached 43.1 million net tons, up 6.0% from the 40.7 million net tons during the same period last year (the capacity utilization rate for that period was 76.7%).
Signs were pointing in a negative direction last month for the fate of the proposed joint venture of Tata Steel and Thyssenkrupp’s European operations.
The E.U.’s competition regulators made it official this week, rejecting the proposed JV.
“Steel is a crucial input for many things we use in our everyday life, such as canned food and cars,” Commissioner Margrethe Vestager said in a release. “Millions of people in Europe work in these sectors and companies depend on competitive steel prices to sell on a global level. Without remedies addressing our serious competition concerns, the merger between Tata Steel and ThyssenKrupp would have resulted in higher prices. So we prohibited the merger to avoid serious harm to European industrial customers and consumers.”
Competition regulators were concerned the merger would raise prices and result in fewer choices for steel consumers in the market, arguing the firms did not make enough concessions to assuage those concerns.
The proposed JV would have yielded the second-largest steelmaking entity in Europe, behind only ArcelorMittal.
The Aluminum Association announced the resignation of President and CEO Heidi Brock, who is leaving the industry group to become president and CEO of the American Forest & Paper Association.
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Brock led the Aluminum Association for eight years.
“I am grateful for the outstanding engagement and support I have received from the leadership, members and staff of the Aluminum Association for the past eight years,” Brock said in a release. “Working together, we have contributed to the growth of the U.S. aluminum industry and strengthened the communities in which it operates. It has been a privilege to serve in this role, and I will miss working closely with the exceptional team at the Aluminum Association and the wonderful representatives of our member companies. Given their talent, commitment, and strong industry story, I have every confidence in the Association’s continued success.”
gui yong nian/Adobe Stock
The U.S. imported a total of 3.48 million tons of finished steel in January, the American Iron and Steel Institute (AISI) reported this week (based on U.S. Census Bureau data).
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The January import total marked a 20.7% increase from the January 2018 total. Imports were also up 83.3% compared with December 2018.
Finished steel import market share was an estimated 25% in January, according to the report. The 25% steel import market share for January marked a steep increase from December, when it stood at 19% (after four consecutive months at 21%). In 2018, import market share peaked at 29% in April.
By steel product, several posted significant import increases during the first month of 2019 (compared with December 2018):
By country, South Korea was the biggest offshore exporter of steel to the U.S. in January, sending 361,000 net tons (up 298% from the December total).
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In other steel news, the U.S.’s Section 232 tariffs on steel and aluminum remain in place vis-a-vis NAFTA partners Canada and Mexico. The tariffs are a sticking point for the Canadian and Mexican governments as the three countries work to push the new iteration of NAFTA, the United States-Mexico-Canada Agreement (USMCA), across the finish line. Some U.S. lawmakers have also called for removal of the tariffs before final approval of the deal.
The executives of the three countries signed the deal late last year during the G20 Summit in Buenos Aires. However, each country’s legislature must ratify the USMCA before it can go into effect.
The U.S. Department of Commerce. qingwa/Adobe Stock
The impact of the U.S.’s Section 232 steel and aluminum tariffs on its relationships with other countries has been well-documented — but what about Section 232 challenges at home?
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For domestic businesses seeking to win product exclusions from the tariffs that went into effect March 23, the process has been slow going, to say the least.
Even now, exclusion requests and objections continue to roll in every day.
In June, the Department of Commerce (DOC) announced its first responses to a small percentage of exclusion requests — which then hovered around 20,000 — granting 42 requests (from seven companies), while also denying 56 requests from a total of 11 different companies.
As of late last month, the DOC had received more than 38,000 exclusion requests and 17,000 filed objections — and the numbers continue to rise, with objections being filed this week.
Earlier this summer during a Senate Finance Committee hearing — during which Secretary of Commerce Wilbur Ross testified — committee members offered criticism of the exclusion request process, questioning if the DOC was prepared for the number of requests that have come in.
While some progress has been made since June, the DOC has still produced determinations for a relatively small percentage of the overall requests.
Naturally, with the exclusion request process under fire for its lack of pace, the DOC announced a change last week that it hopes will streamline the process.
According to a DOC release, it has implemented an updated rebuttal system, which is available to “all U.S. businesses which have not received a final determination.”
“The Department of Commerce and the Bureau of Industry and Security have made an unprecedented effort to ensure American businesses are not unduly harmed by Section 232 tariffs,” said Secretary of Commerce Wilbur Ross. “These updates will help perfect the process to ensure a fair hearing for all parties involved.”
The Bureau of Industry and Security published information in the Federal Register on an interim final rule governing the process, which went into effect Sept. 11.
“The revisions are informed by the comments received in response to the March 19 rule and the U.S. Department of Commerce’s (referred to henceforth as “the Department”) experience with managing the exclusion and objection process,” the rule document on the Federal Register states. “The Department understands the importance of having a transparent, fair and efficient exclusion and objection process. The publication of today’s rule should make significant improvements in all three respects, but due to the scope of this new process, BIS is publishing today’s rule as an interim final rule with request for comments.”
Per the DOC release, exclusion requesters have seven days to submit a rebuttal. Then, objectors will have seven days to submit a surrebuttal.
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“To further assist industry moving through the process, the Department of Commerce is also cataloging the Objection, Rebuttal, and Surrebuttal Identification Number associated with each Exclusion Request,” the DOC release states. “The Aluminum Rebuttal & Surrebuttal Finder and the Steel Rebuttal & Surrebuttal Finder will be uploaded each day at www.commerce.gov/232.”
UPDATED 11:47 AM with Comments from President Trump, Commerce Secretary Wilbur Ross and the American Iron & Steel Institute.
President Donald Trump will sign a directive asking for a speedy probe into whether imports of foreign-made steel are hurting U.S. national security, two administration officials told Reuters on Wednesday.
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Trump signed the memorandum related to section 232 of the Trade Expansion Act of 1962 at the White House with leaders of some domestic steel companies, such as U.S. Steel‘s CEO Mario Longhi and SSAB Americas President Chuck Schmitt in attendance. The law allows the president to impose restrictions on imports for reasons of national security. The order would only task the Commerce Department with starting a probe into the imports and if they, indeed, harm national security. Reuters reported that Commerce Secretary Wilbur Ross has already tasked Commerce personnel with starting the probe.
Trump said Ross and Commerce would be back “very, very soon” with recommendations about how to protect the American steel industry. He also repeated campaign trail criticism of the North American Free Trade Agreement and said that farmers in Wisconsin are also suffering from cheap imports of dairy products from Canada.
“Times of crisis call for extraordinary measures. Massive global steel overcapacity has resulted in record levels of dumped and subsidized foreign steel coming into the U.S. and the loss of nearly 14,000 steel jobs,” said Thomas J. Gibson, president and CEO of the American Iron & Steel Institute, the largest trade organization of North American steel producers. “The Administration launching this investigation is an impactful way to help address the serious threat posed by these unfair foreign trade practices, and we applaud this bold action.”
According to Ross, the investigation was “self-initiated” by Commerce and will consider “the domestic production (of steel) needed for the projected national defense requirement” and if domestic industries can meet that requirement. It will also look at “the impact of foreign competition on specific domestic industries and the impact of displacement of domestic product because of foreign imports.”
There are national security implications from imports of steel alloys that are used in products such as the armor plating of ships and require a lot of expertise to create and produce.
The Department of Commerce today announced its affirmative final determinations that steel producers in Austria, Belgium, France, Germany, Italy, Japan, the Republic of Korea (South Korea), and Taiwan are dumping imports of carbon and alloy steel plate in the U.S.
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Margins in the dumping investigations ranged from 3.62% to 148.02%, and were, in certain instances, based on adverse findings against non-cooperative responding parties. Commerce also determined that critical circumstances exist in three investigations, allowing for collection of duties for a retroactive period of 90 days before the preliminary determination, spanning back to August 16. Commerce also found that South Korea is providing unfair subsidies to its producers of steel plate at a countervailable duty rate of 4.31%. As a result of these final affirmative determinations, Commerce will instruct Customs and Border Protection to collect cash deposits based on these final rates. Read more
The seesaw battle between steelmakers in China and India took a new twist recently with a report in a Chinese newspaper calling the Indian government on its “protectionist” stance on steel.
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The state-run Global Times newspaper said in a report, referring to India’s decision to award its first bullet train project to Japan, that India needed to have a “sober” look vis-a-vis China when it came to solutions for India’s proposed railway network revamp or its entirely new high-speed rail project.
The high-speed “bullet train” project is likely to commence in 2018 on a 315-mile (508-kilometer) route between Mumbai and Ahmedabad. It’s slated to be completed by 2023.
India has been waging a war against cheap steel imports into the country for some time now, with Chinese steel companies high on their bad guy list. The government imposed taxes in various forms not to protect its own steel industry, but to equalize import prices to production costs. Over 80% of the funding for the project is coming from Japanese investments. Read more
I had the pleasure of attending the S&P Global Platts Steel Markets North America conference held recently in Chicago.
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The general outlook at the conference for steel markets in the year ahead was notably optimistic, although each of the initial speakers differed in who and/or what the audience should pay attention to in the coming months and years.
Conference keynote speaker, Herb Black, CEO of American Iron & Metal Company had his eyes on Turkey and its burgeoning scrap market. Timna Tanners, Managing Director of U.S. Metals and Mining at Bank of America Merrill Lynch, encouraged the audience to focus on China, while Beth Ann Bovino, Chief U.S. Economist for S&P Global Ratings, spoke to present macroeconomic conditions with a watchful eye on the current administration and potential post-election policy changes. Read more
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