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Unprecedented cost rise batters Al alloy margins

  • Spanish Market: Metals
  • 21/09/21

European aluminium alloy producers are facing huge pressure on profit margins as costs rise swiftly across all raw material markets, and alloy prices will need to rise further to sustain production even as demand from the domestic automotive industry suffers under the semiconductor shortage.

Alloy prices are most influenced by raw material costs, mainly through movements in the price of scrap metal — the primary feedstock for alloy production in Europe. But other costs include silicon and magnesium metal for alloying purposes, as well as gas for smelter furnaces, in addition to general power and logistics costs.

Every one of those costs is currently rising sharply, mostly because of factors external to the European market.

The biggest driver is, unsurprisingly, China. Base metal prices have almost all hit multi-year highs this quarter, mostly owing to strong industrial activity in China since its economy began to recover from Covid-19 lockdowns last year. London Metal Exchange (LME) aluminium prices reached 13-year highs of above $2,900/t this month, up by 16pc from the start of the quarter.

LME aluminium prices affect scrap prices, particularly among the higher grades of scrap such as aluminium wheels, which have a larger aluminium element and fewer impurities than other scrap grades.

Argus' assessment for aluminium wheel scrap delivered to European smelters has risen to €2,000-2,050/t ($2,345-2,400/t) this month, up by 23.9pc from the end of August.

But all scrap prices are rising on strong demand from export markets in Asia-Pacific, predominantly to supply China. Lower-grade scraps have not risen as sharply as the higher grades this month, but have strengthened throughout the year and the consistent driving factor has been high export demand.

European taint/tabor scrap prices have reached €1,400-1,450/t this month, up by 5.9pc from the end of August and by 11.8pc from the start of the quarter.

Meanwhile, prices for the silicon and magnesium units that go into alloy production have rocketed this month on output cuts in China, leading to limited supply held by European traders.

Argus' assessment for 5-5-3 grade silicon is at €4,000-4,200/t ddp, a 15-year high and up by 46.4pc since the beginning of September. This is largely down to China's Yunnan province imposing energy consumption controls for September-December, aimed at reducing its silicon output by 90pc from August levels.

Magnesium prices have reached $5,000-5,150/t delivered Rotterdam, up by 9.7pc from the start of the month.

European gas prices have tripled this year, while the eurozone energy consumer price index has reached its highest level since records began in 1996.

Alloy prices have been rising strongly in response, with DIN 226 alloy reaching €2,100-2,200/t last week, up by 10.5pc from the start of September. Prices are racing higher even as the European automotive market has slowed because of the continuing shortage of semiconductors for vehicles. Strong demand for alloys and scrap, most notably from China but also from European primary aluminium producers looking to boost their environmental credentials, has offset much of the lost nearby demand.

While European alloy producers have sold strong volumes for the fourth quarter to automotive manufacturers, almost all of those contracts include clauses that allow customers to defer delivery, as automotive customers have done repeatedly this year because of slowdowns caused by the shortage of electrical semiconductor parts for vehicles.

No relief in sight

None of the factors driving the market show any sign of going away soon. There has been strong demand for scrap and alloy units from export markets since the start of 2020, and it only took a temporary dip during the initial Covid lockdowns.

The shortage of semiconductors has been an issue throughout 2021 and is expected to last well into next year, which will increase alloy producers' dependence on export markets for alloy sales as they look to offload volumes they will have left to sell after deferments on deliveries to automotive companies.

LME aluminium prices look robust at higher levels, after forward spreads moved into a strong contango in recent weeks and stocks started to fall at LME warehouses. On-warrant aluminium stocks dropped by more than 120,000t in the first two days of this week alone — a fall of almost 15pc.

Silicon and magnesium prices will stay high as long as supply is scarce, and the production outlook depends on China, where a lot of metals manufacturing has been curtailed in recent months because of environmental concerns.

Alloy producers will hope that the semiconductor shortage is alleviated sooner rather than later, or that long-term demand sources can be found elsewhere, because the confluence of high costs that is driving massive pressure on alloy profit margins does not look like it will abate any time soon.


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04/02/25

Trump eyes Ukraine metals in exchange for aid

Trump eyes Ukraine metals in exchange for aid

Houston, 4 February (Argus) — US president Donald Trump wants to secure access to Ukrainian critical metals in exchange for continued support in its war against Russia. "I want to have security of rare earth," Trump said at the White House on Monday. "We are putting in hundreds of billions of dollars and [Ukraine has] great rare earth. And I want security of the rare earth and they're willing to do it." In order to obtain access to what Trump is calling rare earth, he seeks to negotiate with Ukraine over continued funding. As of 23 October, 2024, the US had appropriated $174bn in supplemental funding in response to Russia's invasion of Ukraine, of which $111bn was provided for defense-related purposes, according to the Congressional Research Service. Despite Trump's insisted desire for Ukraine's rare earths, Ukraine neither historically produces rare earths nor contains significant proven reserves of rare earth metals. Trump was most likely referring to titanium, lithium, and other base and minor metals that the US Geological Survey (USGS) does not consider to be rare earths instead of actual rare earths such as Neodymium and Praseodymium. Ukraine produced 120,000 metric tonnes (t) of titanium in 2024, according to the USGS, while the US imported 21,400t of titanium ore and concentrates from Ukraine between January and November 2024, according to data from the US Census Bureau. Lithium is not currently mined in Ukraine, but the country does contain significant unexplored lithium reserves responsible for roughly about one third of all proven reserves in Europe, according to the Ukrainian Geological Survey. One lithium project is currently preparing for primary production and processing. Ukraine also contains one of the world's largest reserves of graphite, about 19mn t of ore with a graphite content of 5-8pc. One of six known graphite fields currently produces 5,500t of graphite concentrate annually under the operation of Australian mining firm Volt Resources. There is one beryllium deposit in Ukraine containing 13,900t of beryllium oxide that is currently overseen by Ukrainian mining group BGV and one field containing an unspecified amount of gold, lead, and zinc where production is currently ongoing. Ukraine contains reserves of 390,000t of nickel, 20,000t of cobalt, 700,000t of chromium oxide, and 101,000t of copper but does not currently mine any of these materials. Ukraine is also a significant supplier of pig iron, a key steelmaking raw material used by US electric arc furnace (EAF) mills. Ukraine does not contain significant reserves of tantalum and niobium but does extract non-commercial volumes of the metals as a coproduct of titanium during production. By Cole Sullivan Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US tariffs to push automotive prices higher


03/02/25
03/02/25

US tariffs to push automotive prices higher

Houston, 3 February (Argus) — US tariffs on Canada and Mexico would likely lift automotive production costs noticeably higher as automakers and their suppliers rely on multiple cross-border shipments. US president Donald Trump said over the weekend he would enact 25pc tariffs on imports from Canada effective 4 February, but delayed Mexican tariffs until at least March . An all-encompassing tariff on the two and potential retaliatory tariffs could severely hamper regional automotive producers, which draw from cross border flows for both raw materials including finished steel and aluminum as well as integral parts and components. The tariffs are meant, in part, to drive more manufacturing back into the US — as General Motors chief executive Mary Barra said her company would likely do should the tariffs be imposed on Canada and Mexico. Other automotive manufacturers could possibly follow suit in order to escape the increased costs associated with tariffs. But shifting operations from one country to another would be costly and time consuming. Some manufacturers produce parts for the same vehicle on different sides of the border, meaning even a car or truck assembled in the US could see its costs increase if it relies on parts made by the same company at a Canadian factory. Completed vehicles The US imported 2.855mn of its smaller passenger vehicles from Mexico and Canada between January and November of 2024, according to customs data, or about 41pc of all such vehicles. The two nations also accounted for the import of 1.16mn heavier vehicles designed for the transport of goods in the same period, or about 95pc of all of those vehicles. Mexico alone sent 83,201 tractors to the US for the year-to-date 2024, roughly 39pc of the US total. Automotive parts Cross border flows of parts and accessories could be curtailed even more as they likely will have to cross in and out of the US in multiple stages, potentially receiving multiple 25pc tariff hits. The US imported 3.4bn motor vehicle parts and accessories from the two countries or about 38pc of all such imports, and exported 3,073t of these parts back across the border to Canada and Mexico. Nearly 90pc of the US' exports of spark-ignition piston engines, or 3.57mn units, were sent to Canada and Mexico, while 30pc of all US imports of such engines, or 2.26mn units, come from the two countries. The US imported roughly 82pc or 43,582t of its cast-iron parts for internal combustion engines from Mexico. Metal mounting and fitting imports for automobiles from Mexico alone represented 73pc of US totals, with the US in return exporting 64pc of such products back to Mexico. Canada took in 24pc or 29,035 metric tonnes (t) of the product. The US acquired 40pc or nearly 36,000 of larger auto bodies and chassis from the two nations in 2024, while sending 57.5pc of its exports or 21,553 back across the same borders. Alternatives limited Although some alternative import sources do exist, many of these auto plants are located inland of key receiving ports and have closely tied operations that could require multiple stagged parts replacements. Some vehicles are estimated to cross US borders into Canada and Mexico and back as many as seven or eight times before final assembly, according to a 2021 Congressional Research Service paper. China would be a major alternative supplier for US or Canadian automotive parts in multiple cases, including for internal combustion engines. The US imported $87.1bn in light vehicles from Canada and Mexico and $77.5bn in automotive parts in 2022, according to a 2023 US International Trade Commission report. Any tariff could notably sting regional automotive producers just climbing out of multi-year low sales levels. US total vehicle sales hit a seasonally adjusted annual rate of 17.22mn in December, the highest level since May of 2021, according to Federal Reserve data. By Cole Sullivan and Zach Schumacher US automotive imports from Canada count Jan-Nov 2024 Jan-Nov 2023 Diff ±% Share of total volumes Full vehicles, bodies, and chassis Tractors 1,612 1,395 217 15.60% 0.80% Motor vehicles 915,408 1,138,494 -223,086 -19.60% 13.00% Motor vehicles for transport of goods 152,232 150,279 1,953 1.30% 12.50% Special-use vehicles (ex. firetrucks) 1,826 1,554 272 17.50% 53.40% Work trucks (ex. airport luggage vehicles) 1,595 1,656 -61 -3.70% 8.00% Vehicle chassis fitted with engines 1,821 1,622 199 12.30% 14.60% Vehicle bodies 8,896 8,584 312 3.60% 11.50% Spark-ignition engine parts 705,337 924,439 -219,102 -23.70% 9.40% Compression-ignition engine parts 3,198 3,759 -561 -14.90% 0.10% Parts and accessories 1.23bn 1.28bn -48mn -3.80% 13.70% — US Census Bureau US automotive imports from Mexico count Jan-Nov 2024 Jan-Nov 2023 Diff ±% Share of total volumes Full vehicles, bodies, and chassis Tractors 83,201 108,267 -25,066 -23.20% 38.90% Motor vehicles 1.94mn 1.79mn 151,439 8.50% 28.00% Motor vehicles for transport of goods 1,007,433 919,850 87,583 9.50% 82.40% Special-use vehicles (ex. firetrucks) 35 70 -35 -50.00% 1.00% Work trucks (ex. airport luggage vehicles) 6,513 4,214 2,299 54.60% 32.50% Vehicle chassis fitted with engines 4 7 -3 -42.90% <0.1% Vehicle bodies 25,285 15,922 9,363 58.80% 32.60% Spark-ignition engine parts 1,551,874 1,415,311 136,563 9.60% 20.60% Compression-ignition engine parts 1,526,994 1,943,567 -416,573 -21.40% 68.60% Parts and accessories 2.17bn 2.18bn -8,121,686 -0.40% 24.30% — US Census Bureau Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US delays Mexico tariffs by a month: Update


03/02/25
03/02/25

US delays Mexico tariffs by a month: Update

Adds comments from press conference, White House response, historic context. Mexico City, 3 February (Argus) — The US has agreed to postpone the 4 February implementation of 25pc tariffs on Mexican goods by one month to allow more time for negotiations, President Claudia Sheinbaum said today. Under an agreement with the US, Mexico will immediately reinforce its border with the US with 10,000 national guard troops to limit drug trafficking into the US, with a specific focus on fentanyl, Sheinbaum posted on social media platform X. The US pledged to take stronger action to curb the flow of high-powered firearms into Mexico, she said. The pause will allow "Mexico time to demonstrate good results for the US people and our people" on key security concerns, Sheinbaum said. US president Donald Trump confirmed the tariff delay in a social media post, saying there would be negotiations in the coming weeks with Mexican officials and US secretary of state Marco Rubio, secretary of the treasury Scott Bessent and secretary of commerce Howard Lutnick. The White House praised Mexico's willingness to respond positively to the tariff threats, while characterizing the Canadian response as [a] misunderstanding. "The good news is that in our conversations over the weekend, one of the things we've noticed is that Mexicans are very, very serious about doing what President Trump said," White House National Economic Council director Kevin Hassett said in a broadcast interview. Canada had "misunderstood the plain language of the executive order and they're interpreting it as a trade war." Trump said this morning that he "looks forward to negotiations" with Sheinbaum to reach a deal between the countries. He is also talking to Canadian premier Justin Trudeau later today. The announcements today do not address Trump's complaints of a trade deficit with Mexico, which Sheinbaum said during a press conference today the US misinterprets as a negative. Both the US and Mexico benefit from the region becoming more competitive, she said. Mexico will also keep its retaliatory tariffs on the table: "We will save Plan B for later, if necessary," Sheinbaum said. The current tensions are similar to those from 2019, when Trump threatened to impose 5pc tariffs on all Mexican goods. He relented when former president Andres Manuel Lopez Obrador said Mexico would deploy 21,000 national guard troops to contain the flow of migrants toward the US. If the tariffs were implemented, it would disrupt the energy trade between the US and Mexico. Nearly all of Mexico's roughly 500,000 b/d of crude shipments to the US in January-November 2024 were waterborne cargoes sent to US Gulf coast refiners. Those shipments in the future could be diverted to Asia or Europe. Mexico also imports much of its road fuels and LPG from the US. But the country is unlikely to hit these goods with retaliatory tariffs, according to market sources. By Antonio Gozain and Cas Biekmann Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US manufacturing expands in Jan after 26 months: ISM


03/02/25
03/02/25

US manufacturing expands in Jan after 26 months: ISM

Houston, 3 February (Argus) — US manufacturing activity expanded in January after 26 consecutive months of contraction, according to the Institute for Supply Management's latest factory survey. The manufacturing purchasing managers' index (PMI) registered 50.9 in January, up from 49.2 in December. The new orders index rose to 55.1 last month from 52.1 in December, marking a third month of expansion. Readings above 50 signal expansion while readings under that point to contraction. Production rose to 52.5 last month from 49.9 the prior month. Employment rose to 50.3 from 45.4. "Demand clearly improved, while output expanded and inputs remained accommodative," ISM said. "Demand and production improved; and employment expanded." US factory activity expanded robustly in the first two years after Covid-19 hit, then contracted for the subsequent two years, even as growth in services activity, the largest part of the economy, maintained the overall economy in expansion territory. The new export orders index rose by 2.4 points to 52.4 and the imports index rose by 1.4 points to 51.1. The prices index rose to 54.9 from 52.5, with aluminum, freight rates, natural gas, and scrap among gainers. "Prices growth was moderate, indicating that further growth will put additional pressure on prices," ISM said. The inventories index fell by 2.5 to 45.9, signaling contracting inventories. Backlog of orders fell by one point to 44.9, indicating order backlogs contracted for the 28th consecutive month after 27 months of expansion. Supplier deliveries rose by 0.8 to 50.9, suggesting marginally slower deliveries. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US delays Mexico tariffs by a month


03/02/25
03/02/25

US delays Mexico tariffs by a month

Mexico City, 3 February (Argus) — The US has agreed to postpone the implementation of 25pc tariffs on Mexican goods for one month, "allowing Mexico time to demonstrate good results for the US people and our people" on key security concerns, President Claudia Sheinbaum said today. Under the agreement Mexico will immediately reinforce its border with the US with 10,000 national guard troops to prevent drug trafficking into the US, with a specific focus on fentanyl, Sheinbaum posted on social media platform X following a conversation with President Donald Trump. The US pledged to take stronger action to curb the flow of high-powered firearms into Mexico, she said. US president Donald Trump confirmed the tariff delay in a social media post, saying there would be negotiations in the coming weeks with Mexican officials and US secretary of state Marco Rubio, secretary of the treasury Scott Bessent and secretary of commerce Howard Lutnick. The tariffs were originally set to take effect on 4 February. By Antonio Gozain Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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