US HRC: Prices slide, market assesses tariff news
US hot-rolled coil (HRC) prices continued to fall this week as spot orders remained weak and the market waits to see how the lifting of steel tariffs on Canada and Mexico will impact supply.
The Argus domestic US HRC index fell by $17.25/st to $617.75/st ex-works Midwest today on seven indications from sell and buy-side sources.
Lead times remained steady at 3-4 weeks as spot deals remained muted.
HRC orders of 1,000st or more traded for less than $600/st. One buyer said they were offered $560/st for HRC orders above 5,000st.
The Friday afternoon announcement by President Donald Trump that the 25pc tariff on steel imports from Canada and Mexico came suddenly. A quota system, which many expected to be imposed with the lifting of the tariffs, was not included.
The US also reduced steel tariffs on Turkish imports from 50pc to 25pc Friday.
While HRC prices are expected to continue to fall, some believe the reduction in tariffs on Turkey could lead to higher production in that country and boost demand for US scrap, potentially pushing prices higher. Since the announcement, offers for HMS 1/2 80:20 scrap into Turkey climbed back above $300/t cfr after trading in the $280s/t cfr as recently as last week.
Buyers and sellers are unsure how the tariff moves will impact the US market. But US Census figures show how steel trade from Mexico and Canada has changed since the 25pc steel tariffs were imposed.
Canadian steel exports to the US for the 10-month period between June 2018, the first month of tariffs, to March 2019 averaged 397,000 t/month (438,000 st/month), down from a 480,000 t/month average over the same months from the prior year.
One of the biggest drops in Canadian exports into the US was in HRC, which fell to an average of 68,860 t/month between June 2018 and March 2019 from an average of 76,800 t/month over the same months from the prior year.
Oil country goods exports fell to 4,685 t/month between June 2018 and March 2019 from an average of 17,250 t/month over the same months from the prior year.
Exports from Mexico, the third largest exporter into the US, averaged 274,000 t/month between June 2018 and March 2019, a slight increase from an average of 271,000 t/month from the same period the prior year. Much of the growth was because of an increase in exports of blooms, billets and slabs into the US to an average of 106,000 t/month between June 2018 and March 2019 from 72,000t/month over the same months from the prior year.
The growth in blooms, billets and slab exports was offset by a drop in oil country goods, which averaged 27,000 t/month between June 2018 and March 2019, down from 34,000t/month over the same months from the prior year. Mexican exports of heavy structural shapes and structural pipe and tube fell by more than 10,000 t/month to 8,100 t/month between June 2018 and March 2019 compared to the same months from the prior year.
Mexican steelmaker Ahmsa said today it plans to increase its steel production 30pc because of US tariffs being lifted. The company's chief executive Alonso Ancira Elizondo said around 25pc, or 100,000t, of the company's export production capacity had dropped off during the period when the tariffs were imposed.
US flat-rolled steel exports to Canada and Mexico may also have some room to grow now that Canada's reciprocal tariffs have been dropped. US exports to Canada of flat-rolled products more than halved to an average of 32,000 t/month between June 2018 and March 2019 from an average of 67,000 t/month over the same months from the prior year. US flat-rolled exports to Mexico fell by an average of more than 21,000 t/month to 61,000 t/month in the same time periods.
Other news Friday included a temporary reprieve for the US automobile market as Trump announced he would delay a decision on imposing tariffs on imported automobiles and parts from the EU, Japan and other countries until November. Some have warned imposing tariffs on imported automobiles and parts could cut demand by as many as 2mn vehicles/yr and trigger a recession.
The CME HRC futures market for June fell by $24/st from 14 May to $596/st yesterday. July prices fell by $31/st to $594/st, while August prices dropped $37/st to $593/st. Steel traders now expect forward prices to remain below $605/st for the rest of 2019.
Summary of market activity heard by Argus
- HRC, US: Tradeable value at $640/st ex-works Midwest, according to seller
- HRC, US: Tradeable value at $620/st ex-works Midwest, according to seller
- HRC, US: Tradeable value at $635/st ex-works Midwest, according to buyer
- HRC, US: Tradeable value at $630/st ex-works Midwest, according to buyer
- HRC, US: Tradeable value at $600/st ex-works Midwest, according to buyer
- HRC, US: Tradeable value at $580/st ex-works Midwest, according to buyer
- HRC, US: Tradeable value at $620/st ex-works Midwest, according to buyer
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Q&A: Ramaco adding production, sees market growth
Q&A: Ramaco adding production, sees market growth
New York, 16 April (Argus) — Randall Atkins is a founder and chief executive of metallurgical coal producer Ramaco Resources. He also has been involved in energy-related investment and financing activity for over 40 years. In this Q&A, edited for length and clarity, he discusses effects from the Francis Scott Key bridge collapse, his outlook for coal and the company's research projects. What effect has the Key bridge collapse and Port of Baltimore closing had on Ramaco and the US coal industry in general? Like most things of that tragic nature, it is going to take longer than everyone expects to actually solve the problem. I think where it is going to impact producers probably more is on the rails. There will be a need for...producers to rearrange stockpiles and to rearrange where they are going to try and ship, even at reduced levels. Particularly, CSX is going to have an immense logistical complexity to deal with over the near-term. We do not ship from Baltimore. We have not seen any problems, knock on wood, with our rail shipments post the incident. What are your long-term projections for metallurgical coal given expectations that low-volatile coal reserves will shrink in coming decades and the steel industry could be in oversupply? Low vol coal has traditionally been the highest priced coal and the dearest, if you will. High vol A coal has over the last few years grown in importance, and to the extent that there is any new increase in production in the US, it's high vol. What we perceive is that there is going to be a crowding in the high vol space. As a result, our increase in production is primarily in low vol. As far as the demand side is concerned, we do not believe that blast furnace steel demand is going to decline anytime soon. There's a lot of noise from the green community that hydrogen is going to replace coal in blast furnaces. We took some advice on that from the IEA…and when that question was posed (to IEA), the answer that was given was it would take about $1.5 trillion to build a pilot plant using hydrogen by 2035 and probably about another equal or greater sum to build a commercial facility by 2040. So, I don't lose a lot of sleep on the demand for coal for blast furnaces. What I do see shifting, however, is the US has held relatively steady at about 20mn short tons (18.1mn metric tonnes) of met coal demand over the last 10 to 15 years. The growth is clearly overseas, and the growth is clearly at the moment in Asia. When we started back in 2017, and 2018 was really our first year of production, we predominantly sold coal domestically; I think 80pc of our coal went to US steel mills. Now that is almost reversed. We're going to sell probably this year, 70pc overseas, and about a third or less domestically. With Europe moving towards electric arc furnace technology and significant new blast furnace capacity coming online in Asia, what kind of role will the US play as a coal supplier over the coming years? It is cheaper to use a blast furnace than electric arc. And the steel that they (Asian companies) mostly require is the heavier steel for cars and buildings and things of that nature. So, they have a bias towards blast furnace capacity. The US and Europe are very developed economies that are trying to go and wean away from coal, (while) the rest of the world is aggressively moving further into coal. People will shake their heads at the cost that European and American consumers will start to have to pay for that privilege. We see market growth is still there, but it's a different kind of growth. It will be more in the Asian markets, predominantly some in Europe, some in South America and Africa. The low vol coal demand in Asia is extremely strong because while they are able to buy high vol product from Australia very inexpensively, they do not have the low vol production. They need that to blend up to get the proper mix in their blast furnaces. There is a very good future for low vol, and that is the direction we are positioning ourselves. How confident is Ramaco about securing its investments in the longer run given the emphasis on ESG? What I see is sort of a dichotomy. In the thermal coal business, there's not a lot of investment in new mining there for the obvious reason that their customer base is declining. On the met side, it is a bit shortsighted from an investment standpoint because of the composition of the ownership of met coal companies. Virtually every major metallurgical coal producer except for us went through bankruptcy and post-bankruptcy proceedings. Their board composition became essentially distressed debt investors...Their interest was not developing a long-term coal company. Strategically their vision was: "How can we most quickly get money back out of that coal company?" We are certainly the only coal company that is doubling in size. We produced a little under 4mn st last year. We will be at about 4.5mn st this year. We can maybe go higher, depending upon the market. The market is not strong right now. The other issue (for coal producers) even when they weren't doing special dividends, is they've now shifted to doing large-scale share buybacks. You are starting to see the cost curve increase for most domestic coal producers. What you haven't seen, but I think you will probably find over the next probably 18 to 24 months, is you will begin to see depletion kick in. The amount of coal that they are able to produce from their existing operation will begin to decline. And that is strictly a result of not investing in new mine production. My approach was to kind of be a little bit of an outlier and then approach coal to products as an alternative use, certainly for thermal coal. And that, of course, brought us to rare earth (mineral extraction). Do you have funding for Ramaco's rare earth materials projects? Let me step back one step. We introduced the idea that we actually had rare earth (deposits) in May 2023….When we sent the samples to be tested, they tested them as if they were hard minerals. In other words, they did not combust off the organic material. What we have done since then, is we went back and we had samples that were probably 200-300 parts per million. From a commercial standpoint, we have kind of crossed the Rubicon that this is indeed sufficiently concentrated that it makes commercial sense. Now what we are doing is we are going through a process of further chemical analysis and testing to determine what is the best extraction and refinement technique. And the last point you raised was financing. We have a very nice growing mining metallurgical business, which can provide the funding to do whatever we want to do on rare earth. I am not too concerned about our financing capability. Any updates on your coal-to-carbon product projects ? We have looked at a number of different things with the national labs. We started looking at carbon fiber, which could be made from coal and we have got some patents around some very interesting processes. The areas that we are now focusing on...are using coal to make synthetic graphite. The other thing we are working on is using coal for direct air capture. We are considering going into a pilot phase sometime starting later this year with Oak Ridge National Laboratory on a synthetic graphite plant. As far as direct air capture, we probably have more work to do. We are also working on that with Oak Ridge. But I would hope that sometime by 2025, certainly 2026, we would perhaps have our first product, quote unquote, to be able to offer into the market. And it would be delightful if it was synthetic graphite. By Elena Vasilyeva Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Liberty Whyalla blast furnace down after maintenance
Liberty Whyalla blast furnace down after maintenance
London, 16 April (Argus) — GFG Alliance is negotiating with workers at its Whyalla plant in Australia for "short-term" options as its blast furnace experienced operational and technical issues after maintenance work last month. Suppliers of the plant told Argus in late March that the blast furnace was experiencing issues. "Ageing assets like the blast furnace will eventually be retired as part of the Whyalla Steelworks transition to new technologies," a GFG spokesman said. "Plans are being developed to safely continue productivity of the blast furnace and, more broadly, the Whyalla Steelworks, as well as enable a more sustainable future." "GFG remains committed to returning the blast furnace safely to operational use," he added. GFG is a collection of entities including Liberty Steel. Whyalla has a production capacity of about 1.2mn t/yr, with about two-thirds of that cast into billet and sent by rail to GFG's Infrabuild business for processing into longs. Under the agreement between the two plants, payment from Infrabuild to Whyalla can be made before delivery. Infrabuild raised $350mn through a bond sale towards the end of last year at an interest rate of 14.5pc. Meanwhile, Liberty remains in talks with the Czech government over the emissions allowances for its Ostrava site. The Czech Ministry of Environment wants proof that Ostrava will produce again before granting free allowances to the site, and the significant change in its operating rates mean the company may not receive those allowances until June or July — its restructuring plan envisages selling a portion of those allowances in May. The idling of the blast furnace since October, and the stoppage of coking facilities at the site, also impacts the number of allowances that will be granted. Sources suggest coking is unlikely to restart, meaning there will be no allowances granted for the facility, while there is also concern about when the blast furnace may restart. "The EU emissions trading system is a complex system which is designed to avoid interference in the distribution of the allowances and the calculations of the emissions," a Liberty spokesperson said. "This system governs about 11,000 companies across the EU and Liberty Ostrava only expects to be treated in the same way as all the others." By Colin Richardson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Australian new environment agency to speed up approvals
Australian new environment agency to speed up approvals
Sydney, 16 April (Argus) — The Australian federal government announced today it will introduce new legislation in the coming weeks to implement the second stage of its Nature Positive Plan, which includes setting up a national environment protection agency to speed up approval decisions. The planned Environment Protection Australia (EPA) will initially operate within the Department of Climate Change, Energy, Environment and Water until it transitions to become an independent statutory agency, with "strong new powers and penalties" to better enforce federal laws, the government said on 16 April. The EPA chief will be an independent statutory appointment, similar to the Australian federal police commissioner, so that "no government can interfere" with the new agency's enforcement work. The agency will be able to audit businesses to ensure they are compliant with environment approval conditions and issue environment protection orders to anyone breaking the law. Penalties will be increased, with courts able to impose fines of up to A$780mn ($504mn) or jail terms for up to seven years in cases of extremely serious intentional breaches of federal environment law. EPA will also be tasked with speeding up development decisions, including project assessments in areas such as renewable energy and critical minerals. Almost A$100mn will be allocated to optimise the approval processes, with its budget directed to support staff to assess project proposals and help businesses comply with the law. A new independent body Environment Information Australia (EIA) will also be created to provide environmental data to the government and the public through a public website. EIA will need to develop an online database giving businesses quicker access to data and helping EPA to make faster decisions. It will also need to publish state of environment reports every two years. The government said that an audit ordered by environment minister Tanya Plibersek last year found that around one in seven developments could be in breach of their offset conditions, when a business had not properly compensated for the impact a development was having on the environment, highlighting "the need to urgently strengthen enforcement". The planned new legislation is part of the federal government's reform of Australia's environmental laws including the Environment Protection and Biodiversity Conservation Act. Resource project decisions are currently made by the environment minister, with the move to an independent agency will removing any perception of political interference in such decisions, the government said when it first announced the reforms in late 2022. The first stage of the reform was completed late last year with new laws passed to create the Nature Repair Market, with further stages expected to be implemented in the future, the government said. Tight timing Resources industry body the Chamber of Minerals and Energy of Western Australia (CMEWA) welcomed the announcement that the federal government will take a "staged approach" to the implementation of the reforms but noted the timing of EPA's implementation was "tight". "We continue to hold reservations about the proposed decision-making model and will continue to advocate for a model that balances ecologically sustainable development considerations and includes the [environment] minister as the decision maker," CMEWA chief executive Rebecca Tomkinson said. The Minerals Council of Australia (MCA) said that it had been advocating for the creation of EIA, whose future collated data "will provide greater certainty and reduced costs for both government and project proponents", which "may shave years off project development". But it was cautious about potential "unintended consequences" stemming from more bureaucracy. "Australia has one of the most comprehensive environmental approvals processes in the world and the MCA has been clear about the significant risks of duplicative, complex and uncertain approvals processes pose to the minerals sector, the broader economy and the environment if we do not get this right," it warned. By Juan Weik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Agriflex to supply phosphoric acid to Lithium Australia
Agriflex to supply phosphoric acid to Lithium Australia
Singapore, 16 April (Argus) — Australia-based phosphate rock producer Agriflex has agreed to supply high-quality phosphoric acid to Lithium Australia for its lithium-iron phosphate (LFP) or lithium manganese iron phosphate (LMFP) production. The firms have signed a non-binding initial agreement, which envisages Lithium Australia building a demonstration plant with an estimated capacity of 250 t/yr of LFP or LFMP, potentially in Queensland. The plant will require around 200-300 t/yr of phosphoric acid, Agriflex's parent company Centrex said on 16 April. Lithium Australia will move on to build a commercial plant with an estimated capacity of around 25,000 t/yr of LFP or LMFP if the demonstration plant is successful and following pre-qualification of cathode powders. The commercial plant will need 20,000-25,000 t/yr of phosphoric acid. No timelines were provided, except that the initial agreement will run for a period of 24 months. Agriflex will conduct a study to produce high-quality phosphoric acid with low impurity content in Queensland for supply to Lithium Australia. The two firms are committed to building a battery supply chain domestically in Australia, to provide global battery producers an alternative supply source for LFP and LFMP. By Huijun Yao Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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