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Commodities Roundup: Global Steel Production, M&A Activity and an Alunorte Update

11/02/2018 By

For the buyers and category managers out there, especially those of you deep in the weeds of buying and managing commodities, here’s a quick rundown of news and thoughts from particular commodity markets.

From price movements to policy decisions, we scour the landscape for what matters. This week:

Global Crude Steel Production on the Rise

According to a recent World Steel Association report, global crude steel production in September was up 4.4% year over year.

By comparison, year-over-year production growth for August hit 2.7%.

Through the first nine months of the year, production increased 4.7% compared with the first nine months of 2017.

Q3 Metals M&A Activity

A recent report by PwC detailed mergers-and-acquisition activity in the metals sector, showing that the value of metals sector M&A deals jumped 78% in the third quarter of 2018 compared with the second quarter.

Per the report, global trade tensions and U.S. tariffs will continue to have an impact on M&A activity in the coming quarters.

“While the ongoing tariff disputes led to margin pressure for smaller producers of steel and aluminum and downstream manufacturers, it is expected to open up opportunities for strategic investors who are looking to consolidate and stay competitive,” the report states. “The U.S. maintained its stance on increased metal tariffs despite proposing USMCA (a revamped version of NAFTA) and allowing U.S. companies to petition for exemptions from tariffs where highly specialized metal imports (which cannot be produced domestically) are required in products.

“This is likely to shape North American deal activity in Q4 2018 and 2019.”

E.U. Steel Markets ‘Stabilizing’

According to a recent report from the European Steel Association (EUROFER), growth in EU steel markets is stabilizing, but the sector faces a variety of challenges — chiefly, of course, tariffs and general trade strife.

“Growth is stabilizing in E.U. steel markets, in line with expectations,” said Axel Eggert, EUROFER’s director general. “However, the various challenges facing the sector will impact us in the coming months. Trade tensions could clearly upset the market’s balance, as could slowing demand in other parts of the economy.”

Of concern to the E.U.’s steel sector is the fact that third-country imports into the E.U. market outpaced domestic deliveries from E.U. steel mills. According to a EUROFER report, domestic deliveries rose 3.7% year over year for the second quarter, while third-country imports were up 9.8%.

From the Skies to Your Wrist

MetalMiner’s Stuart Burns touched on a product development that would provide consumers the opportunity to wear a piece of history on their wrists.

Burns wrote about watchmaker REC’s plans to make a limited run of watches using the wing skin of an old Spitfire fighter plane (deployed during World War II).

“Part of the Spitfire’s novelty was the all-metal monocoque construction, in which the aircraft surface became a part of the airframe,” Burns explained. “Prior to World War II, most aircraft were designed around a wooden frame covered with a doped fabric skin, more akin to a World War I biplane.”

The Alunorte Situation

Aluminum prices went for a ride recently when Norsk Hydro in early October announced the shutdown of its Alunorte alumina plant in Brazil. Given the plant’s status as a major producer of alumina, aluminum prices skyrocketed on the heels of the shutdown.

However, after acquiring a permit for new technology that would be used within a disposal area of the plant, Hydro announced it would restart operations.

Earlier this week, Burns offered the latest update on the situation at Alunorte, as Brazil’s Institute of Environment and Renewable Natural Resources (IBAMA) has lifted an embargo on the refinery.

“The decision to lift the embargo came after successful trials of Hydro’s press filter technology earlier this month, in which the firm successfully demonstrated its ‘state of the art’ — in Hydro’s words — technology could process bauxite residues to a high enough standard to satisfy SEMA, the local environmental agency in the state of Pará, that the new treatment area DRS2 would be safe,” Burns wrote.

“However, the embargo on DRS2 from the federal court system remains in place; a return to 100% of production capacity cannot be resumed until that court order is lifted.”

Copper Mine Production Up 4.5%

The International Copper Study Group recently released a report covering July, showing global copper production increased 4.5% compared with the first seven months of 2017.

Per the report, Chile and China led the way in production, while Canada and the U.S. saw production declines.

As for the LME copper price, after surging in late September, it has largely traded sideways in recent weeks.