Ferrous – Fastmarkets AMM reports that their “…hot-rolled coil index, fob mill US, was calculated at $28.36 per hundredweight ($567.20 per short ton) on Friday July 19, little changed from $28.41 per cwt the previous day and up 4.1% from $27.25 per cwt a week earlier.
Hot band prices were above $28 per cwt for three consecutive days” amid reports of sheet price hikes from Nucor and ArcelorMittal. This reverses the trend in U.S. and global hot-rolled coil prices that we’ve seen so far this year. Macquarie analysts attributed much of the downturn in global steel pricing to the decline in auto sales, but shifting infrastructure spending patterns are also playing a role. Deloitte Advisory states that despite over $400 billion on routine public infrastructure spent in the U.S., annual infrastructure funding falls short of capital and maintenance requirements.
On an auto-related note, Subaru will be recalling and scrapping over 2,100 new cars. The sheet metal welds separating the engine bay and passenger compartments were reportedly compromised and could fail over time. As more automated processes are integrated into industrial production, there’s always the possibility that failures in the system can also scale up. The issue at Subaru was attributed to a dirty welding machine, according to press reports.
In the U.S., the American Iron and Steel Institute reported yesterday that for the week ending July 20th “domestic raw steel production was 1,872,000 net tons while the capability utilization rate was 80.4 percent. Production was 1,838,000 net tons in the week ending July 20, 2018 while the capability utilization then was 78.4 percent. The current week production represents a 0.3 percent increase from the same period in the previous year. Production for the week ending July 20, 2019 is up 1.1 percent from the previous week ending July 13, 2019 when production was 1,867,000 net tons and the rate of capability utilization was 80.2 percent.”
Nonferrous – Nickel futures at the London Metal Exchange reportedly traded as high as $15,115 per metric ton late last week but have subsequently pulled back below $14,400/mt. But that’s still up significantly from the beginning of the year when nickel prices were trading around $10,500/mt and the best performance among the major base metals so far this year:
The recent rise in nickel prices comes despite reports of lower stainless steel output in China and globally early in the year. According to figures from the International Stainless Steel Forum, global stainless steel melt shop production declined 2.5% year-on-year in the first quarter of 2019 to 12.46 million tons as Chinese production slipped 1.5%, output in the rest of Asia was off 5.7%, and stainless production in the U.S. was reportedly down 2.0% Y-o-Y in the first quarter.
Looking forward, Macquarie expects “…a stabilization of growth to follow from a Chinese economic stimulus before the end of the year and the normalization of industry stock levels still remains on track to occur over the next 18 months as total market stocks continue to track lower. … A recovery in the stainless market from 2020 onwards, combined with ongoing strong growth in nickel use in batteries for electric vehicles, should push the market back into deficit during 2020-24, leading to higher nickel prices.” They’re projecting average nickel prices of $13,250/mt in 2020, $15,550/mt in 2021, and $17,375/mt in 2022.
Paper and Plastic – Fastmarkets RISI reports that recycled containerboard and linerboard prices are dropping with downward pressures showing no signs of relenting. BMO Capital Markets reports that U.S. box demand remains weak but still above expectations. Soft board prices in China may not be why box demand has been weakening in the U.S. but they’re likely still being driven by weakening consumer demand and U.S.-China trade relations. Despite weakening demand, containerboard projects continue get the greenlight as Crossroads Paper announced plans to build a recycled containerboard mill near Salt Lake City, UT. This is an interesting project in that containerboard capacity in the Rocky Mountains region is in short supply despite having available recycled feedstock. At 1,000 tons per day capacity, this mill would certainly be able to handle a considerable amount of feedstock and may provide another warehousing hub for last mile delivery services.
Some PET sheet producers are seeking help from the U.S. Government to pursue anti-dumping cases on PET imports from Oman, South Korea, and Mexico. This may be an uphill climb as the prices of virgin resins are key drivers for price suppression. Plastics News reports that private investment in plastics production is slowing down. Venture capitalists are looking for strategic purchases to control specific strata of the plastics supply chain. As more environmental concerns take hold in the public mind, brands are expected to be pushed to absorb more of the production of plastic packaging into their own operations. Last but not least, in case you were concerned that the U.S. is the only exporter being impacted by the shifting global plastic scrap marketplace, here’s the trend in EU plastic scrap exports:
