S&P Global Platts to launch new Low-Carbon, Zero-Carbon Aluminum Prices

Total primary aluminum imports of P1020 or greater purity fell 30.57% year on year in February to 106,096 mt, US Census Bureau data showed April 9.

Shipments of typically higher purity from further destinations like the UAE, India and Russia fell 85% year on year as logistical issues and regional tightness due to premiums persisted.

The same data showed total primary aluminum imports under HTS code 7601 were 244,042 mt, down 6.66% year over year.

Shipments of P1020 or greater purity from Canada reached 95,101 mt, down 7.82% year on year but up almost 43% from January. Shipments by water from Quebec totaled 46,353 mt and Ontario totaled 1,499 mt by water as well.

Canadian P1020 imports accounted for just about 90% of US imports and 66.5% of the previous 10-year average for February.

Imports of ingots from Australia and New Zealand which usually supply the West Coast and South were down around 22% and 100%, respectively, year over year. New Zealand especially accounted for a large flow of high purity ingots, P0404, to the West Coast.

Exports of P1020 from British Columbia were only 2,834 mt, down almost 72% year over year as total exports from the province fell 53% overall during the same time period.

Canadian exports from Quebec by water ticked back up to total 46,353 mt, according to Canada Statistics.

Recent off-warrant stocks reporting by the London Metal Exchange showed a drop of 5% in February to 153,298.

The Platts US Midwest premium reached 22.10 cents/lb on April 9, a 35-month high.

Imports of value-added products such as billet, foundry alloys and slabs were up 26.98% year over year in February, as demand continued to firm. Shipments from Canada, UAE, Bahrain and Qatar rounded out the top four spots as February totaled 137,946 mt.

Canadian exports of billet and slabs to the US totaled 91,181 mt, up 62.44% year over year, as alloyed aluminum from Canada could flow into the US duty-free and wouldn’t fall under the USTR quotas that were set for 2020.

Imports of billet from Russia fell to only 20 mt in February, down from 18,278 mt in January.

The Aluminum Association reported that shipments of extruded products in February totaled 411.6 million lb, down 4.7% month over month.

Platts US spot 6063 billet upcharge hit 21 cents/lb on April 1, a record high, and has held there since.

China consumes around 50% of world’s copper and will continue to play a critical role in the market this year. S&P Global Platts metals experts Keith Tan and Han Lu examine China’s appetite for copper concentrates as its economy recovers from the coronavirus pandemic. They also discuss what the market can expect in the second quarter, and give methodology and specification details on Platts clean copper concentrate assessments.

To know more about Platts clean copper concentrate assessments, email our team at platts_asia_copper@spglobal.com or download the Platts Global Nonferrous Metals methodology and specifications guide.

London — Tata Steel Europe will implement a fixed Eur12/mt carbon surcharge on all new steel contracts across Europe, with the plans introduced late last week, a company spokesman confirmed S&P Global Platts April 12.

The initiative is novel for the European steel market, as more market-leading mills strive toward efficient and greener means of steel production, with Tata Steel pledging to reduce its own carbon emissions by 40% by 2030, and to zero by 2050.

Tata Steel Europe’s emissions per tonne of crude steel tallied 1.98 in 2019-20, data from the company’s annual report showed, with the current cost of emission credits nearing the new Eur12/mt surcharge.

The fee will essentially pass on the cost of carbon emissions allowances to the buyer at a time when European HRC prices have reached record highs, exceeding Eur900/mt ex-works Ruhr, an increase of Eur450/mt since the previous year.

The decision comes at a time when sellers’ have had the upper hand, and buyers having little choice but to accept the additional charge due to the limited opportunities for buying material.

“The money [from the surcharge] will flow back into the steel industry to create a less polluted environment,” a European mill source said, adding, “the pushback is always there from customers, but they have a choice – you buy steel or you don’t buy steel. We are in a sellers’ market, because of limited availability, people are willing to buy it.”

The spokesman said the increasing shortages and rising prices of emission rights suggests there is a need for steel producers to adjust to the growing costs in production.

“In order to ensure a sustainable EU and UK-based steel industry for the future, we need to pass these costs on,” he told Platts.

Other European steel producers are expected to adopt similar surcharges, with discussions ongoing among mills.

“This is something the market is looking into. Emissions allowances are increasing – and the cost to produce is more for hot-dipped galvanized steel,” a second European mill source said. “We’d like to introduce this surcharge. I thought ArcelorMittal would start this, I did not expect this from Tata Steel Europe, which is a much smaller player.”

London — The Pedra de Ferro iron ore mine in in northeastern Brazil’s Bahia state, owned by Kazakhstan-based diversified miner Eurasian Resources Group, has won a bid to complete and operate a railway that will boost the development of the iron ore greenfield.

BAMIN, as the mine is known, won the auction on the Bovespa (São Paulo Stock Exchange) to finish and run the first 537 km (334 miles) stretch of Brazil’s FIOL, or East-West Integration, railway. The mine is ERG’s first project in Brazil.

The bid follows the start of operations at the mine and the beginning of construction of Porto Sul port facilities in late 2020.

Recent progress in developing FIOL made the commission of the Pedra de Ferro mine possible. BAMIN started commercial production in December, with an initial production capacity of 2 million mt/year of ore with a 65% Fe content while targeting output of 18 million mt/year.

FIOL will provide a low-cost transportation link between ERG’s mine in Caetite and its Porto Sul port in Ilheus, both in Bahia state.

Benedikt Sobotka, ERG CEO, said the auction win for the railway project represented a milestone for the company’s ambition to respond to growing demand for a host of commodities, including iron ore, sustainably and responsibly.

Sobotka said in a statement that the business plays a role in Bahia’s socioeconomic development, “and the addition of the FIOL railway marks an achievement for our integrated portfolio of mining, processing, energy, logistics and marketing operations.”

Erik Gaustad, BAMIN’s chairman, said, “FIOL Stage 1 together with our Porto Sul project will have a transformative impact on the region, providing environmentally safe and reliable logistics for mining, agriculture and a range of other industries.”

According to Gaustad, FIOL is key to enabling the expansion of Pedra de Ferro production to 18 million mt/year and to position the mine as a low-cost supplier of high-quality iron ore globally.

ERG produces iron ore and other minerals in Kazakhstan and non-ferrous metals in Africa.

Singapore — This report is part of the S&P Global Platts Metals Trade Review series, where we dig through datasets and digest some of the key trends in metallurgical coal, iron ore, scrap and alumina. We also explore what the next few months could bring, from supply and demand shifts, to new arbitrages, and to quality spread fluctuations.

Strong iron ore prices have been touted as a key indicator of an emerging post-pandemic commodity super-cycle since reaching a nine-year high of $178.45/dmt March 4, but volatility since then provides a sneak peek into how China’s emissions curbs could tilt iron ore prices off-course in the months to come.

Frequent and strict steel production curbs in China have dampened sustained price strength in recent weeks, despite a recovery in downstream domestic steel demand.

Stepped-up production curbs in the steelmaking hub of Tangshan to improve air quality and in response to a central government target of reducing crude steel output in 2021 have divided the market outlook on price direction, as crimping steel output can potentially result in opposing outcomes.

On one hand, steel production curbs could suppress iron ore demand, causing prices to fall. Proponents of this view note the Platts Iron Ore Index or IODEX recorded its largest single-day loss on record March 9, plunging $10.55/dmt on the day, after Tangshan mills were ordered to lower production to meet level 1 red alert response procedures due to heavy pollution. The last time the level 1 red alert response was activated was in 2017.

On the other hand, downstream steel demand recovery and reduced supply could drive prices and margins higher — encouraging higher steel production, and therefore boosting demand for iron ore.

Historically, the latter scenario has prevailed most often in China, largely due to the loose implementation and localized nature of steel production curbs. Some mills simply did not adhere to the cuts. During a spot check in March, four Tangshan mills were found operating at higher rates than allowed and falsifying records. However this time, the production curbs were subsequently made more stringent.

Tangshan accounts for around 14% of China’s crude steel output, and the curbs could prompt mills elsewhere to increase production, which could more than offset the reduction in Tangshan.

However, other regions could also potentially introduce similar curbs.

Spot premiums for Pilbara Blend Fines rose sharply in late March to reach a record high of $8.10/dmt on March 29.

Again market opinion was divided: Some market sources attributed the surge to speculators having short-sold physical cargoes earlier in the month as Tangshan intensified production curbs, while limited spot supply subsequently forced these speculators to pay unprecedented premiums to secure cargoes.

Others pointed instead to robust steel margins and tight supply as fueling the aggressive position-taking.

Whether the surge was due to a flurry of short coverings or establishing new longs, it highlighted the escalating price risks in the near term.

Price spread widens between grades

The spread between the 65%, 62% and 58% Fe iron ore indexes diverged twice, at the start and end of Q1, due to different drivers.

Rising coke prices drove the initial divergence; as the price of coke, which can remove impurities in iron ore, reached record highs, blast furnace economics started to favor higher iron content, lower-impurity ores, as their savings on coke more than offset the extra cost of higher-grade ore.

The indexes diverged again in late March, this time due to widening steel margins. As steel demand continued to recover, the curbs in Tangshan tightened supply, lifting steel prices and margins. Mills elsewhere in China reacted to these price signals by switching ore blends to higher grades to maximize output.

This was a double whammy for the 58% Fe index, both reducing demand for lower-grade ore and increasing prices for the 65% Fe index, in turn exerting further downward pressure on the 58% Fe index, as mills weighed the price of high-low grade combinations against the medium grade to optimize cost.

The spread between the indexes could remain wide in 2021 as curbs in Tangshan continue to support steel margins.

Some contaminants, such as alumina and silica, in iron ore need to be removed using coke during the iron-making process. The higher these contaminant levels are, the more coke is needed. Coke prices in China peaked around Lunar New Year — as did alumina and silica price adjustments to the IODEX, as steel mills’ tolerance of contaminants is inversely proportionate to the cost of coke.

Direct feed premiums typically come under pressure in March as heating season demand in China wanes after winter. However this year the tightened supply of Australian lump, stringent sintering curbs in Tangshan in early March and a strong rebound in demand outside of China lifted direct feed premiums, with the lump premium in particular reaching a record high of 54.25 cents/dmtu on March 23.

Direct feed premiums at crossroads

China’s production curbs and emission cuts favor demand for direct feeds over fines. Higher steel margins bolstered by the production curbs could encourage mills to use more high-grade materials, including direct feeds, in Q2. Direct feeds also produce less emissions, which is a focus of China’s current 14th Five-Year Plan.

However price downside is possible as the sinter feed ratio increases after winter, reducing demand for direct feeds. Mills have also started to free up lump supply from their contracted volumes due either to lower requirements or profitability considerations.

The steel production curbs have reduced Tangshan mills’ iron ore requirements, prompting the release of excess contract volumes, including lump, into the market. Some mills in northeast and south China have also started to on-sell their contracted lump cargoes and rely more on sintering fines instead. Australian lump supply may also increase in Q2 as cyclone season passes.