Commodities Roundup: Suez Canal aftermath; ATI strike; HRC in Europe

For the buyers and category managers out there, here’s a quick rundown of news and thoughts from particular commodity markets, including analysis of the aftermath of the Suez Canal blockage, a strike at ATI, steel imports and more.

MetalMiner, a sister site of ours, scours the landscape for what matters. This week:

Steel imports fall in February

US steel imports fell 22% in February compared with the previous month, according to the Census Bureau.

However, imports rose to 1.71 million metric tons, compared with 1.37 million metric tons in February 2020.

Through the first two months of 2021, imports fell 7% year-over-year.

Imports of tin plate surged by 158% from January to February. Furthermore, imports of cold rolled sheets jumped by 69%.

The Economic Policy Institute recently released an analysis of former President Donald Trump’s Section 232 metals tariffs. The EPI argued the tariffs — 25% for steel, 10% for aluminum — produced “near-immediate benefits.”

In 2020, steel imports fell 21.2% year-over-year.

Liberty Steel struggles

As we’ve noted in previous roundups, Liberty Steel faces significant financial challenges on the heels of backer Greensill Capital’s collapse.

MetalMiner’s Stuart Burns delved further into the crisis earlier this week.

“The failure of GFG’s principal source of funds, Greensill Capital, sent shivers through a large UK workforce,” he wrote. “In addition, it again shined a spotlight on GFG’s murky and opaque corporate structure.

“The failure to find a ready alternative backer in a relatively liquid financial market speaks volumes about lenders’ reluctance to get involved in an organization that is structured in such a complex — for outsiders, at least — and unfathomable manner.”

He further expanded on the structure of GFG Alliance, which he notes is less of an alliance than it is a loose affiliation.

“This served the firm well in terms of isolating risk and in avoiding scrutiny of relative profitability and the allocation of internal funding,” he wrote. “However, it is counting against it now as it scrabbles to find alternative funding following Greensill’s collapse.

“While the French government has been quick to provide a €20 million loan to support the Hayange and Ascoval rail-making sites in France, support has come with strings attached. The operations are to be ringfenced from the rest of the group. In the event of failure, Paris will take ownership of the operations, which it views as key for the French rail industry.”

Suez Canal aftermath

The weeklong blockage of the critical shipping route of the Suez Canal came to an end after the container vessel Ever Green was dislodged.

However, the ripple effects of the disruption of global trade will linger.

“Due to the non-arrival of vessels in both Europe and Asia, there will be trips out of both regions that are already being canceled (so-called blank sailings), because the container ships do not reach the ports on time and cannot unload and get new cargoes on board,” Burns wrote.

“The market already struggled with congestion in some regions, notably Europe. In Asia, particularly China, there is a lack of empty containers. This will just exacerbate that problem, delaying empty boxes getting to their destinations by two weeks and further extending a situation that has resulted in sky-high rates.”

USW launches ATI strike

The United Steelworkers union this week announced workers were on strike at nine Allegheny Technologies Inc. facilities.

Five of the facilities are in Pennsylvania, a USW spokesperson told MetalMiner. The remaining facilities are in Ohio, Connecticut, New York and Massachusetts.

“We are willing to meet with management all day, every day, but ATI needs to engage with us to resolve the outstanding issues,” USW International Vice President David McCall said in a prepared statement. “We will continue to bargain in good faith, and we strongly urge ATI to do start doing the same.”

Meanwhile, ATI expressed its disappointment in the union’s decision.

“Last night, ATI further improved our proposal in hopes of averting a work stoppage,” ATI spokesperson Natalie Gillespie wrote in an emailed statement. “With such a generous offer on the table — including 9% wage increases and premium-free health care — we are disappointed for this action, especially at such an economically challenging time for ATI.”

ATI reported a net loss of $1.57 billion in fiscal year 2020, compared with net income of $270.1 million in 2019.

Hot rolled coil price rises in Western Europe

Meanwhile, hot rolled coil prices continue to rise in Western Europe, MetalMiner contributor Christopher Rivituso noted (adding to last week’s report).

“Hot rolled coil offers in mid-March reached €850-900 ($1,000-1,060) for May rolling and June delivery,” he wrote. “However, traders warned then that the price and lead times were not certain and could rise further.

“Import offers for hot rolled coil are now $900-910 cost and freight (CFR) for European ports. That is up from $890-900 transacted earlier in March for material from India and Japan, respectively for May and June delivery, sources also noted.”

China, Russia could push Suez alternatives

Circling back to the Suez Canal aftermath, Burns explained how China and Russia could leverage the disruption for their own benefit.

That is, each could push alternative shipping routes.

For China, that is a rail route from China to Europe.

“Believe it or not, the route exists,” Burns wrote.

“The journey takes some 15 days to Moscow or 20 days to Duisburg in Germany, shorter than the sea voyage. However, it is historically more expensive, with 40-foot container rates in the region of $10,000 to Duisburg. Meanwhile, ocean freight rates reached $3,000 this time last year.

“However, as ocean freight rates have doubled and then trebled and delays have extended, the rail route has gained favor. Volumes doubled in January and February this year, long before the Suez Canal blockage this month and delays lengthened further.”

Meanwhile, Russia’s alternative goes through the Arctic.

“The Financial Times reported on Russia’s state nuclear corporation Rosatom’s promotion of the Arctic northern sea route from Asia to Europe as an alternative to the longer and congested Suez-Mediterranean route,” Burns added.

“Why would Rosatom be the body to promote such a route? Because you still need a nuclear-powered icebreaker to keep the northern sea route clear.

“So, for the Russians, Rosatom is in charge.”

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