Battery Metals

ISLAMABAD: The oil industry is resisting implementation of recently introduced specifications for lower manganese content in petrol, saying it required additional investments and time to enable the industry for a phase-out plan.

The Petroleum Division of the Ministry of Energy had introduced fresh specifications for manganese and iron content in petrol in May this year after automakers, particularly Honda Pakistan, complained about choking of some of their engines due to higher manganese in petrol. It emerged later that Pakistan did not have any limits for manganese content in any type of petrol.

After months of deliberations and interaction with all the stakeholders, the notified fresh limits of manganese in the specifications of 90/92/95/97 RON for both imported and locally produced petrol were set at 40mg per litre with effect from Oct 30, 2018, which should further decline to 24mg per litre from Nov 1, 2018 to April 30, 2019.

Consequently, the notification required complete elimination of manganese content in all types of petrol from May 1, 2019. It also required that iron in any form such as related to iron-base octane enhancing additives (e.g. Ferrocene) or factors other than iron base octane enhancing additives is not permitted.

Ever since the Obama administration set stricter fuel-economy standards for vehicles sold in the US, automakers have been using technological innovations to improve efficiency. Some notable enhancements include fuel injection, three- and four-cylinder engines, turbochargers, and stop/start technology—which turns off the engine when a vehicle is idling at a stop light or sign and automatically restarts it when the accelerator pedal is pushed. But those upgrades can only do so much.

The real enemy of fuel efficiency is weight. That is why manufacturers are taking a hard look at the materials—traditionally, steel—that make up the frame, hood, and other parts. Some companies are turning to advanced materials such as aluminum and carbon fiber; others are implementing a new generation of lightweight, high-strength steel.

Losing weight

The attributes of aluminum and carbon fiber are enticing to automakers: Not only are both materials one-fifth the weight of steel, carbon fiber is also up to 10 times as strong. However, aluminum costs three times as much as steel to manufacture, and companies would need to spend hundreds of millions of dollars to incorporate new welding production techniques.

Carbon fiber is three to five times as expensive as aluminum, partly because few factories manufacture it. To address that issue, BMW invested heavily in a joint venture with SGL Automotive Carbon Fibers from 2010 to 2017. The resulting carbon-fiber factory at Moses Lake, Washington, has single-handedly increased global production of the material by 50%. The fiber’s current cost isn’t public, but “our goal is to reduce the price of carbon fiber to the price of aluminum by 2020,” says SGL spokesperson Katharina Schraidt.

BMW’s carbon fiber is delivered to Wackersdorf, Germany, where it’s laminated into stacks with varying fiber alignments. The stacks are molded into parts to create the passenger cage, which is glued or welded by robots to an aluminum chassis. The entire car is manufactured in about 20 hours, about half the time required by more conventional production processes. BMW currently uses carbon fiber for two car models: the $130 000 i8, with production in Landshut, Germany, and the $44 000 i3, made in Leipzig.

Improving an old favorite

Carbon fiber makes sense for producing some upscale models, but it’s too expensive for family vehicles, which usually cost between $15 000 and $40 000 and are the largest market segment by volume. Although some manufacturers are using aluminum for the hood, trunk, and certain other parts, the rest of the automobile is usually made of steel.

Due to steel’s lower cost and existing production infrastructure, automakers have invested heavily into developing lighter alloys. In 2011 the industry-backed WorldAutoSteel organization introduced a concept model called the Future Steel Vehicle, developed during a three-year program conducted in conjunction with the US Department of Energy. Because of new manufacturing technologies and advanced steel compounds, the resultant model vehicle was 39% lighter than existing steel vehicles.

The new generation of advanced high-strength steel (AHSS) represents the best of the hard and modestly formable first generation and the more highly alloyed but more formable second generation. The properties of AHSS result from careful control over both the cooling time of the molten metal and the temperature at which impurities are added to the alloy. To reduce the risk of corrosion, the steel is dipped into a bath of molten zinc as it moves along the production line.

The latest generation of steel microstructures could prove useful in numerous applications and markets, says John G. Speer, director of the Advanced Steel Processing and Products Research Center at the Colorado School of Mines. But the auto industry is leading the way “because of their great drive to increase fuel economy,” he says.

One recent advance is the use of supercomputing to tinker with potential steel designs before real-world tests are conducted. Under the Future Steel Vehicle program, DOE scientists merged separate simulations for tensile strength, impurities, and cooling temperatures into one supercomputer program. Simulations that once took two months now take two days, says Jody Hall, vice president of the automotive market at the Steel Market Development Institute (SMDI) in Southfield, Michigan. SMDI is a nonprofit organization funded by companies in the industry.

Hall says that from SMDI’s perspective, the Future Steel Vehicle has been a big success. “Within three years of us showing the concept, Mazda had incorporated some of the work into their latest SUV design,” the CX-9, she says.

Indeed, nearly every newly designed vehicle showcased at the recent 2018 Washington Auto Show used third-generation steel, sometimes in combination with aluminum and other advanced materials. Back in 2015, Ford switched to aluminum for the body and steel for the frame of its F-150 truck, which shaved 450 pounds (204 kilograms) off its weight. Ram has reduced the weight of its new 1500 truck by 225 pounds by using high-strength steels as the dominant material, increasing the amount of AHSS in the frame, and using aluminum for the hood, tailgate closures, and two crossbeams. Besides improving fuel efficiency, the changes helped to “improve stiffness, meet durability requirements, and absorb energy in crash events,” says Mike Raymond, chief engineer for the Ram 1500. Now Ram has the most weight-efficient frame (as determined by mass per unit area) in the light-duty truck segment.

The 2019 Ram 1500 truck has a combination of different materials to balance weight and strength. Photo credit: Ram/FCA

Present trends in reducing vehicle weight seem destined to continue. Until more factories join the Moses Lake plant, carbon fiber will likely remain a luxury product, despite BMW’s push. Aluminum’s cost and complex welding requirements will minimize its use as well. But steel’s future remains promising. DOE continues to invest in projects to make lighter, stronger steels, and more manufacturers are joining SMDI’s consortium to help develop and deploy those steels. Steel remains a tried-and-true industrial material and continues to advance through technology innovation.

Russia and Kazakhstan are cutting back sales of hot-rolled steel coils to Iran in part because of new U.S. sanctions on Tehran, steel traders said.

The development shows that, despite protests from the Kremlin that unilateral U.S. sanctions should not affect Russian companies, the firms are changing their behavior for fear of falling foul of U.S. sanctions.

Imports of Russian and Kazakh hot-rolled steel coils – used in industries from pipes to cars to agricultural equipment – make up only a small part of Iranian consumption, and can be replaced. The imports were already slowing before sanctions because of low prices and weak demand.

But the U.S. sanctions have accelerated the slowdown, traders said.

The coils are shipped to Iran by Russian steelmakers Severstal and MMK along with ArcelorMittal’s plant in Temirtau, Kazakhstan.

“I believe that Arcelor and the likes are cutting trade with Iran because of (U.S. President) Donald Trump’s pressure on big companies,” an Iranian trader said.

Alex Agoureev, an adviser to Paramjit Kahlon, CEO of ArcelorMittal CIS, confirmed that the company plans to suspend supplies to Iran due to the U.S. sanctions. ArcelorMittal is the world’s top steel producer.

“Supplies to Iran will be temporarily suspended due to the sanctions. Once sanctions are lifted, the supplies will be resumed,” Agoureev said.

He did not say when the suspension would happen or provide further details.

Severstal and MMK declined to comment. A spokesman for the Iranian ministry of industry, mines and trade also declined to comment.

“HORRIBLE DEAL”

In May, Trump pulled the United States out of an international nuclear deal with Iran and promised to reimpose U.S. economic sanctions on Iran to undermine “a horrible one-sided deal that should have never, ever been made.”

As a result, a number of European energy and financial groups have said they will end projects in Iran or suspend dealings with the country.

U.S. measures due to kick in after a 90-day “wind-down” period ends on Aug. 6 include sanctions on the purchase or acquisition of U.S. dollars by the Iranian government, on Iran’s trade in gold and precious metals, and on the sale, supply and transfer to or from Iran of graphite, raw or semi-finished metals, coal and industrial-related software.

Russia and European Union states opposed the U.S. withdrawal from the deal. Russian President Vladimir Putin and French leader Emmanuel Macron have both said they will resist any move by the U.S. authorities to punish Russian or French companies for doing business with Iran.

In a speech in May, Putin referred to U.S. laws being used to force non-U.S. companies to pay fines. “We need to put an end to this. It’s not acceptable,” he said.

However, business executives have to confront the reality that many of their transactions are in dollars, which means they are exposed to U.S. jurisdiction. That makes it risky for them to ignore U.S. sanctions.

Despite a promise by Macron to protect French business interests from any fallout from U.S. sanctions on Iran, French oil major Total announced it may pull out of Iran unless it secures a waiver from the sanctions.

LIMITED IMPACT

According to CRU, a market intelligence group specializing in metals, mining and fertilisers, Iran’s net hot-rolled (HR) coil consumption was 5.6 million tonnes in 2017, of which 0.8 million tonnes were imported.

Of that, Russia supplied a total of 410,000 tonnes and another 240,000 tonnes were shipped from Kazakhstan. Their sales mostly consisted of hot-rolled coil less than 2mm thick which was not produced in Iran at a time, according to CRU.

Puneet Paliwal, a senior analyst with CRU, said that the cut in imports should not have a big effect on Iran, where the less than 2mm thick HR coil is used in the pipes and profiles segment, a large steel end-use sector in the country.

In June, the state-owned Mobarakeh Steel Company (MSC) began commercial production of 1.8mm HR coil, “which will substantially reduce import dependence of the country for the less than 2mm thick HR coil.”

“The company claims that it will ramp up production to completely substitute imports within an year,” Paliwal said.

“Thus, imposition of trade barriers (both Iran import tariffs and U.S. sanctions), alongside fresh domestic production in Iran, is likely to result in a sharp reduction in HR coil imports from the CIS nations.”

Bahadour Ahramian, a board member of the Iranian Steel Producers’ Association, said it was largely expected – even before the U.S. decision to re-install the curbs – that Iran’s imports would fall this year thanks to the new MSC mill.

“Exports might be hit by the sanctions, perhaps that’s (more so) something to watch,” said Ahramian.

The United States on Monday brought cases against China, the European Union, Canada, Mexico and Turkey to the World Trade Organisation for retaliating against American tariffs on imported steel and aluminium.

Washington imposed tariffs of 25 per cent on steel and 10 per cent on aluminium on the grounds that the imported metals pose a threat to national security. China, the EU, Canada, Mexico and Turkey have counterpunched with taxes on more than US$24 billion worth of US exports.

US Trade Representative Robert Lighthizer said the retaliation violated the rules of the Geneva-based WTO, which mediates trade disputes.

“Instead of working with us to address a common problem, some of our trading partners have elected to respond with retaliatory tariffs designed to punish American workers, farmers and companies,” he said.

If the WTO agrees that the retaliatory duties violate its rules, it would assess the damage and calculate the tariffs that the United States would be entitled to impose in response – retaliation for the retaliation. But WTO proceedings can drag on for years.

In taxing imported steel and aluminium from some countries in March and others in June, US President Donald Trump deployed a little-used weapon in American trade policy: Under the Trade Expansion Act of 1962, presidents are empowered to impose unlimited tariffs on imports that the commerce Department asserts are threats to America’s national security.

The WTO gives countries broad leeway to determine national security interests. But there was long an unwritten agreement that WTO member countries would use the national security justification only very sparingly to avoid abuses.

Trump’s steel and aluminium tariffs broke that taboo. Now the commerce department is pursuing another, bigger national security case against car imports. Hearings on the proposed those tariffs are set for Thursday and Friday in Washington.

Separately, Trump is engaged in a trade dispute with China over the tactics Beijing has used to challenge US technological dominance. According to the Trump administration, these include outright cybertheft and forcing US companies to hand over trade secrets in exchange for access to the Chinese market.

Last week, Washington announced 10 per cent tariffs on US$200 billion worth of Chinese goods, that will not take effect until at least September. On Monday, China said that it filed a WTO challenge against those proposed US tariffs.

Trade and Industry Minister Rob Davies yesterday reiterated that South Africa’s steel and aluminium did not pose any threat to the US national security.

Davies said this while attending the 17th African Growth Opportunity Act (Agoa) Forum in Washington, DC, which brought together trade ministers from Agoa-eligible countries, the US government, the private sector and from civil society to discuss the implementation of Agoa under the theme “Forging New Strategies for US-Africa Trade and Investment Forum”.

This was after reports that South African producers said they could possibly consider litigation against the US if it imposed new tariffs on aluminium-based exports. Davies said South Africa’s steel exports to the US accounted for less than 1percent of total US imports. Although this represented a small fraction of US imports, South African exports of steel to the US accounted for 5percent of South African production, equating to 7500 jobs in the steel value chain. The minister said South Africa’s exports of aluminium were about 1.6percent of total US aluminium imports and that the country supplied specialised aluminium sheet, coil and plate for automotive, battery, and aerospace industries in the US.

“It is clear that South Africa does not pose a threat to US national security and the steel and aluminium industries, but it is a source of strategic primary and secondary steel used in further value-added manufacturing in the US,” he said.

The US earlier decided to impose Section 232 duties on imports of steel and aluminium, including South Africa, on the basis of national security objectives. Davies expressed concern on the Section 232 investigation on vehicles and vehicle components. The minister indicated that if Section 232 duties were to be imposed on vehicle exports from South Africa, the country’s Agoa benefits would be significantly eroded.

China’s steel mills churned out record amounts of the construction material in June as producers rushed to cash in on hefty margins, even as a trade spat between Beijing and Washington intensified.

China, which accounts for half the world’s capacity, produced 80.2 million tonnes of crude steel last month, National Bureau of Statistics data showed on Friday. That’s just shy of the 81.6 million tonnes the United States produced in the whole of 2017, according to World Steel Association data.

June output was below May’s record 81.13 million tonnes, but June has one less day, setting a new daily average production record for a third month in a row at 2.67 million tonnes, according to Reuters’ calculations.

“Steel mills were dashing to reap as much of the bumper profits as they could despite environmental checks,” said Richard Lu, analyst at CRU in Beijing.

The data may further inflame a bitter Sino-U.S. trade row. The United States and Europe have accused China of exporting its surplus metal cheap, hurting international rivals.

China’s steel exports rose last month to 6.94 million tonnes, their highest since July 2017, even after Washington imposed import duties to protect U.S. industries.

The production increase also comes as China has shuttered some mills to help curb choking pollution and ramped up environmental inspections, suggesting that newer mills have ramped up operations to cash in on fat margins.

China’s steel output in the first half rose 6 percent to 451.2 million tonnes.

BUMPER MARGINS

Steel prices SRBcv1 have soared over the past year due to firm demand and on concerns about tightening supplies of metal, used in construction and automotives, as Beijing seeks to close inefficient mills and clamps down on smoke-stack industries to clean the nation’s skies.

Lu estimated that mills were earning a profit margin of about 800 yuan ($119.50) per tonne of steel, while analysts at Huatai Futures put profit margins for mills in northern China at over 1,000 yuan a tonne, one of the highest on record.

Monthly utilization rates at mills reached 71.6 percent in June, the highest since October before winter production curbs had taken effect, according to Reuters calculation based on data from Mysteel consultancy.

Analysts say it’s not clear if China will continue its record-setting run.

Some particularly smoggy cities and provinces are also implementing ad hoc measures to beat bouts of pollution. Last week, top steelmaking city Tangshan ordered mills to cut production for 6 weeks over summer.

“Steel output may not necessarily go down even though stricter restrictions are on the way,” said Lu. “Steel mills in Xuzhou city could reopen soon, which will to some extent offset the production curbs in Tangshan.”

Producers are also racing to make as much metal as possible before a new round of production curbs are imposed in November ahead of China’s winter, when pollution is at its worst.

Last winter, government forced mills and heavy industry in 28 of the most polluted northern cities to shut up to half of their capacity between November and March. More are expected to adopt similar curbs this winter.