Battery Metals

Global crude steel output, a gauge of economic health, rose 4.6% in the first half of 2018 versus the same period the previous year, as strong margins prompted mills in major producing countries to ramp up, recent industry data showed.

Crude steel production for the 64 countries that form part of the World Steel Association was 881.5-million tonnes in the first half. In June, it rose 5.8% versus June 2017 to 151.4-million tonnes, the association said.

Production in China, which makes and consumes half of the world’s steel, increased 6% to 451.2-million tonnes in the first half, and gained 7.5% in June versus June 2017, to reach 80.2-million tonnes.

“We expect global production to continue to rise in the next few months as Chinese mills take advantage of higher margins and boost output ahead of winter [production] restrictions,” Capital Economics said in a note. “At the same time, the tariff on US steel imports, coupled with high prices, will continue to incentivise US output. [This] underpins our bearish view on prices this year.” The research firm sees US hot rolled coil at $800 per tonne at the end of 2018, from $915 on Friday.

US President Donald Trump slapped tariffs of 25% on incoming steel in March 2018, and extended them to cover major suppliers Europe, Canada and Mexico on June 1 after their exemptions ran out.

The steel industry, the world’s second largest after oil and gas, is worth about $900bn a year. Steel production in the US jumped 2.9% in the first half to 41.9-million tonnes and gained 0.8% in June to reach 6.9-million tonnes, the association showed, indicating strong demand for the metal as the economy powers ahead.

The American Iron and Steel Institute data shows that capacity utilisation at US mills in the year to July was 76.4%, up from 74.4% in 2017, indicating tariffs are proving effective in boosting domestic production.

Output in India, which in 2018 overtook Japan to become the world’s second largest steel producer, rose 5.1% in the first half, while Japan’s production was 1.3% higher.

Global steel equity values have more than doubled since hitting 12-year lows in early 2016 at the peak of the steel sector crisis. The World Steel Association represents more than 160 steelmakers and 85% of global output.

Columbus won’t need steel for the next phase of the Route 315/West North Broadway interchange project until February, but it’s putting in its order now.

That might not be early enough.

City officials say it recently has become harder to acquire the materials they need for public projects since federal steel tariffs took effect, and they have been unable to get waivers for federal Buy American policies that require domestically produced parts for public projects.

It could take six to eight months to obtain the girders, bearings and other steel parts for the highway ramp, so the city needs to order now — months before it even selects a contractor — if the project is going to stay on track to open in May.

“Currently, right now in the country, steel is at a premium,” Public Service Director Jennifer Gallagher told City Council members before they approved spending $1.6 million on those parts last week.

Tariffs that President Donald Trump’s administration announced in May could be a boon to U.S. steel producers, but they also could make it more expensive for local governments to pay for public infrastructure.

And the tariffs could jeopardize timelines for completing projects if steel orders aren’t made early enough. Fabricators that take raw steel and turn it into usable components are seeing delays in acquiring the material because domestic producers have been overwhelmed by demand.

“For us to get the raw plate material to fabricate it used to be we would order steel today and get the steel two months later. Now, it’s five to six months,” said Evan Morrison, vice president of Ohio Structures Inc. in Canfield, southwest of Youngstown.

Buying steel for a construction project is an unusual step for the city. Typically, contractors include materials in their bids, but the city won’t put the Route 315/West North Broadway project’s second phase out to bid until the fall. By then, it could be too late to get steel in time.

“It’s just like anything else: You place an order and you get put in line,” said Jim Pajk, the city’s assistant administrator for design and construction. “You’ve got to get yourself in line as early as you can. We’re seeing that line was stretching out.”

Morrison said his company is considering bidding on the city’s steel contract for the interchange, but it already has asked whether the delivery date can be extended. Even if fabricators already have placed orders, barges, rail lines and trucks that deliver it are backed up, too, he said.

“There’s no fabricator that’s going to have this much inventory on hand,” he said.

Ohio Contractors Association President Chris Runyan said he hasn’t heard about significant delays on projects yet because contractors have submitted their orders early. But project price tags are rising as contractors bake steel price volatility into their bids, he said.

When the city received bids for a new police substation and fire station, the cost was more than $2 million higher than expected, said Joe Lombardi, the city’s finance director. Council members approved two contracts totaling about $18 million for those projects last week.

Construction prices have been increasing steadily for the past several years, and the Ohio Department of Transportation has “not seen recently anything that would be out of line with that trend,” spokesman Matt Bruning said.

As prices rise, public projects often are delayed or scaled back, said Kent Scarrett, executive director of the Ohio Municipal League.

“It sort of feeds on itself, because the more you delay, these costs aren’t going down. The delay is costing our communities on the residual side by missing opportunities now,” he said.

Columbus also is contending with potential delays because the Buy American policies are making it harder to acquire nuts and bolts for a project that would allow the city to treat more raw sewage at its Southerly Wastewater Treatment Plant during heavy rain.

The city is paying for the project using U.S. Environmental Protection Agency loans, but it has received waivers for the Buy American policy for nuts and bolts in previous years. Purchasing those components from domestic producers is backed up by about four months, said John Ivanic, assistant director in the Department of Public Utilities.

Buy American policies have existed for decades, but Trump issued an executive order in 2017 that doubles down on them. Under that order, the executive branch can require those who receive federal financial assistance to use materials produced in the United States.

The federal EPA has taken public comments on providing waivers to Buy American policies in 2018, but it has not taken any formal action, said James Lee, a spokesman for the Ohio EPA. Columbus is the only loan recipient that has expressed difficulty in complying with the requirement, he said.

“The policies were poorly executed, the tariffs and such. We’re all dealing with that. The people who are really suffering are the workers in the construction industry because these projects have to be scaled back,” said Robin Davis, a spokeswoman for Mayor Andrew J. Ginther.

Steel imports dropped nearly 16 percent month-over-month to 2.48 million tons in June, grabbing 22 percent of the U.S. market share.

The United States imported 1.43 tons of finished steel products that don’t require further processing at service centers in the United States, down 24.6 percent as compared to May, according to preliminary U.S. Census Bureau data. The largest offshore suppliers in June were South Korea, Japan, Vietnam, Germany and Taiwan.

Through the first six months of 2018, the United States imported 17.8 million tons of foreign-made steel, down 9.3 percent as compared to the same period the previous year, according to the American Iron and Steel Institute. That includes 13.9 million tons of steel imports, down 7.1 percent from the same period in 2017.

In the first half of the year, imports are down 10 percent from Korea, down 7 percent from Japan, up 10 percent from Germany, down 56 percent from Turkey and down 16 percent from Taiwan.

Even with tariffs of 25 percent on all foreign-made steel, imports still account for 25 percent of the market share.

So far this year, imports of hot rolled sheets are up 24 percent, plates in coils by 21 percent, line pipe by 14 percent and mechanical tubing by 11 percent, according to the American Iron and Steel Institute. In June, the only significant year-over-year increase was an 11 percent jump on sheets and strip all other metallic coatings.

Blockbuster profits: The trade war has cast a shadow over parts of Corporate America, but it is bringing a bit of good fortune to the steel industry.

President Donald Trump’s metal tariffs have sent steel prices surging and sparked blockbuster profits for steel manufacturers.

Reliance Steel & Aluminum (RS) hauled in record sales, thanks to an 18% spike in prices. Nucor (NUE) recorded the best second quarter in its history. Its profit more than doubled.

“All in all, we’re very happy with tariffs,” Nucor CEO John Ferriola told analysts earlier this month.

Those words haven’t been uttered by many other corporate bosses, who are grappling with sticker shock.

Tariffs levied by the United States and major trading partners are eating into the profits of Harley-Davidson (HOG), General Motors (GM), General Electric (GE), 3M (MMM) and hundreds of other companies. CEOs are scrambling to raise prices and reshuffle their supply chains.

Unsurprisingly, steel companies are feasting on a price spike from Trump’s 25% steel tariff. The benchmark price of US-made steel has zoomed 41% higher since the start of the year to $917 per short ton, according to S&P Global Platts.

Tariffs aren’t the only factor. Steel demand is strong in an economy that just clocked its fastest growth since 2014.

Following the booming profits from Nucor and Reliance, US Steel (X) and AK Steel are scheduled to report results this week.

Both steel makers are expected to reveal a jump in revenue, though not by as much as their rivals. That’s because US Steel and AK Steel (AKS) are locked into annual contracts that have fixed pricing. Those contracts expire later this year, potentially allowing them to capitalize on the price hikes.

Nucor is seizing on the momentum to plow $1 billion back into its business, a huge increase that will mostly go toward expansion.

“What will happen to our great country if we continue to operate with a massive trade imbalance?” Ferriola asked. “We agree with the administration’s efforts to address this issue.”

Of course, steel customers are less than thrilled.

Material costs have risen by as much as 50% at FJM Ferro, a Brooklyn company that fabricates steel used in Manhattan skyscrapers.

Steel companies may have record profits, but it does hurt the mom-and-pop shops,” said Joe Casucci, FJM Ferro’s founder and CEO.

Even large companies are getting squeezed. GM slashed its profit outlook last week, warning of a $300 million jump in commodity costs linked to higher steel and aluminum costs.

“You have to be careful with tariffs because there’s always a cost,” said Philip Gibbs, a steel analyst at KeyBanc Capital Markets.

He pointed out that spiking US steel prices threaten to make American businesses less competitive. Some companies may eventually try to find other ways to get steel into the country.

“It feels good in the short run as prices go up,” Gibbs said. “But then all the customers complain.”

Transnet Freight Rail (TFR) will shut down its Manganese line as part of its annual large scale maintenance.

“The shutdown will commence on 2 August with the anticipation that all work will be completed on 8 August 2018,” Transnet said in a statement on Thursday.

Transnet is set to spend approximately R90 million for the maintenance of the railway line spanning over three provinces.

The line which spans over Port Elizabeth and Hotazel in the Eastern Cape and Northern Cape; Kimberly and Bloemfontein in the Northern Cape and the Free State, will be going under specialised infrastructure maintenance and upgrade projects.

“There will not be any traffic flowing on the line during this period as this is a pre-planned exercise following consultations with customers.

“This maintenance window presents an opportunity to catch up on the maintenance backlog, i.e. replace old and obsolete infrastructure and accelerate the major capital expansions in line with the expected volume growth on the manganese line.

“Planning for this operation is a meticulous process and depends on participation from several cross functional departments within Transnet Freight Rail, as well as involvement of numerous third parties,” Transnet said.

A safety strategy has been formulated to ensure that project objectives are achieved without harm to people or damage to the environment as well as the equipment.

“The strategy will also play a crucial part in ensuring that there are no incidents which could impact negatively on business.

As thousands of American farmers get squeezed financially in President Trump’s escalating trade war, some corners of the industrial Midwest are celebrating economic rejuvenation.

“After years of shutdowns and cutbacks today the blast furnace here in Granite City is blazing bright, workers are back on the job and we are once again pouring new American steel into the spine of our country,” Trump told a crowd of steelworkers in Illinois on Thursday.

U.S. Steel — the second largest American steel producer — announced that it would restart the furnaces in Granite City, Ill., and call back 500 employees that were laid off in 2015 less than a week after Trump slapped steep new 25 percent tariffs on imported steel back in March.

“We had been praying for over two years, ‘Lord please open our mill,'” said Sandy Mifflin, whose husband Jeff was laid off when the mill closed down.

“The night when we got the call that they were making the announcement the next morning, Jeff had just had cancer surgery that day,” she said. “That night our prayer kind of changed a little bit: ‘Lord please give us four weeks to recover and you can open it back up.’ So we’re very thankful.”

Gratitude for President Trump — and the tariffs on foreign imports which have given the steel sector a boost — is common among steelworkers and residents in Granite City, where a sense of optimism has taken hold following an increase in business and jobs with the re-opening of the steel mill.

Families like the Mifflins also express a sense of relief thanks to steady income and restoration of health insurance.

Jeff Mifflin is a third-generation steelworker who began working at the Granite City mill in 1995, after nine years in the U.S. Marine Corps and a string of low-paying jobs. He had actually been laid off for several months once before, in 2009, and said he didn’t think the U.S. government had done much to address trade issues since then.

“We’re glad to be back, we’re proud to be a steel mill and proud to supply our country and not have to worry about the tariffs that are so low for the countries that ship into us,” Mifflin told ABC News.

“It’s just good to be back into the country looking up and helping us out, which we can turn around and help out the country in itself,” he said.

Other business leaders said that renewed activity at the steel mill has helped their own businesses — both financially and through the overall optimism around town.

Pat Notestine runs a company called Custom Steel Processing, Inc. near Granite City, which cuts down steel for customers who make it into other products and parts. Notestine said that the price of steel has gone up for him and his customers, but so has demand and cost savings from having steel available so close to his plant.

“It will enable me to buy more steel locally,” he said. “Freight is a big issue in steel and it only costs me $5 a ton to get steel from the steel mill to my plant — which is only two miles away — as opposed to $20 a ton to as much as $60 a ton to get steel from the other steel mills even in the Midwest. So it’s a big cost savings for my customers and me.”

But Trump’s tariffs haven’t been welcome news for everyone.

The move to boost American steel producers, in turn, triggered retaliatory tariffs from China, Mexico, Canada and the European Union, which have hit other sectors of the U.S. economy hard — especially agriculture and industrial goods.

“Since that time we’ve been managing our business day to day in what we consider crisis mode,” said Chris Pratt, general manager of Mid Continent Steel and Wire in Poplar Bluff, Missouri.

The company manufactures nails, and Pratt said that they had to raise prices after the steel tariffs went into effect. More than half of the company’s customers canceled their orders and Pratt said the company had to lay off more than 100 of their 500 employees.

Mid Continent Steel and Wire makes about 10 percent of the nails that are used in the U.S. at its Poplar Bluff facility, three hours away from Granite City. That is half of all domestically-produced steel nails.

Pratt said that he’s glad the tariffs created steel manufacturing jobs but that he’s worried more manufacturing jobs will be lost from companies that need steel to make a finished product.

Mid Continent has applied for an exemption from the tariffs, but Pratt said that the company may have to shut down before that exemption is approved. Company officials even took out a full-page ad in the local paper, asking Trump to visit the factory when he was in Kansas City and see firsthand how important the facility is to the community.

“Its a pretty somber feeling out there,” Pratt said. “We have completely idled one facility and when you walk into that facility to hear nothing, see nothing moving, hear nothing and all you see is cobwebs growing.”

David Dollar, a senior fellow in global policy and economic development at the Brookings Institution, said Mid Continent is a good example of what could happen to manufacturing jobs if tariffs on steel and aluminum keep raising prices on domestic steel.

Dollar said that steel processing doesn’t require as much manpower as other industries that use steel or aluminum, like assembling cars or even soda cans. As those companies make less of a profit because steel is more expensive, they could end up laying off more people than steel companies hired.

In the even longer term, Dollar said, tariffs could result in lost jobs in the service sector because as people are laid off from manufacturing jobs or face the threat of layoffs, they’ll spend less money.

“We’ve gone through this before [and] it certainly doesn’t increase jobs on any net basis it usually loses jobs on a net basis because it makes the country poor,” Dollar said.

At least 27,000 other companies have applied for exemptions to the steel tariffs, lawmakers confirmed in a hearing last week.

Trump announced Wednesday that he agreed to work with the European Union to end the steel and aluminum tariffs but did not provide details or a timeline on when the tariffs will be lifted.