February 2020

Gay Huey Evans

on her path to
becoming
LME chair

Steel developments
Price risk
management
Copper trends
Bauxite and
alumina markets
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February
Features
18 18 36 47
Cover story India rebalances coal BFA and WFA
Gay Huey Evans on what supply markets decouple
has driven her career and India is diversifying its Brown fused (BFA) and
priorities at the LME sources of coal white fused (WFA) alumina
markets are decoupling
Steel Risk management
24 38 49
LME

Impacts of China’s
Industry challenges Progress in the use environmental push
in Mexico of steel derivatives China’s strict
Analysts are cautiously Experts offer their views environmental restrictions
optimistic that conditions on progress in steel price for the winter impact
will improve for Mexican risk management industrial mineral
steel markets demand and supply
Bauxite and alumina
28 42 Market spotlight
The dynamics of scrap
in SE Asia Rebalancing bauxite
and alumina markets
50
Multiple factors are A brighter year for copper?
bearing on the pattern of Global metallurgical A cocktail of market
ferrous scrap markets in bauxite and alumina drivers is influencing price
southeast Asia markets look set to prospects for copper
continue rebalancing
32 32
this year End-user spotlight
A long-term vision for
manufacturing 45 54
CloudNC is striving to Refractory-grade Autonomous vehicles
revolutionize the business bauxite supply gain further traction
of manufacturing Supply tightness is The spread of autonomous
counterbalancing vehicles has implications
weakening refractories for vehicle design and
CLOUDNC

business materials choice

42 50
SHUTTERSTOCK
NORSK HYDRO

February 2020 | Metal Market Magazine | 3

TIME TO REFLECT.

A new year is a time to tackle new challenges, and to

reflect on time past. For over 50 years, Nucor teammates
have been mastering the art of recycling steel. In the next
50, we want to help our customers reach new heights.

In 2020, electric vehicles will continue to find more

spaces in American driveways. Nucor will be there every
mile, producing a growing catalog of high-strength,
light-weight automotive offerings to better serve our
customers. After all, what’s more fitting for electric
vehicles than Nucor’s sustainable steel?

Electric cars made with electric steel - now that’s

something to reflect on.

www.nucor.com AUTOMOTIVE
February
News and analysis Regulars 8
8 7
Non-ferrous Comment
news review Multiple markets
A summary of recent
key developments in
the international non- 57

SHUTTERSTOCK
ferrous industries Innovations
New developments
in steel and metals
10 technology, processes
10
Steel news review and products
A round-up of important

SHUTTERSTOCK
recent developments
in the global iron and 58
steel sectors End-user
Advances and market 13
developments in
14 applications
Base metals and
steel analysis
Fastmarkets MB research
analysts study the drivers
of the base metals, steel
JSPL

and steel raw materials

markets 58
TATA STEEL

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February 2020 | Metal Market Magazine | 5

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Comment
Multiple markets
ur February 2020 issue covers trends
in a very wide range of ferrous and
non-ferrous markets.
In an exclusive interview with
Fastmarkets’ special correspondent
Andrea Hotter, the new chair of the
London Metal Exchange, Gay Huey Evans, gives
fascinating insights into her distinguished career in
financial services, international capital markets
and regulation, and her views on priorities for
the exchange.
Our steel section surveys developments in the
Mexican steel industry, including the impacts of
domestic policy and the influence of its neighbors in
the United States.
Across the Pacific, the nature and geographical
structure of steel production in Asia is changing.
Another feature article considers the opportunities
and consequences for the patterns of scrap supply in
the region, while a third looks at India’s needs for, and
sources of, coal for its steel industry.
Looking downstream, an interview with
Theo Saville, the CEO of innovative UK-based
company CloudNC, outlines his vision for the
future of manufacturing and the steps the business
has already taken towards achieving it.
Complementary to the physical markets for steel
and steelmaking raw materials, steel derivatives
continue to progress along the path of acceptance by
the physical industry along the full length of the steel
supply chain as a means to manage price risk. Experts
on the markets give their views on that progress and
the prospects for more.
No less than four articles in our bauxite & alumina
section cover important developments for both
metallurgical and non-metallurgical material.
The market spotlight on copper reviews the drivers
of supply and demand to build a picture of a
potentially brighter outlook for the red metal over the
next year or two.
Our end-user spotlight focuses on the widening
spread of autonomous vehicle applications and what
that development is likely to mean for the designs and
modes of operation of vehicles in the future, some of
which will have implications for the choices of
materials used to make them.
Our regular pages of news reviews, end-use
applications and technical innovations – as well as
detailed Fastmarkets MB analysis of base metal,
steelmaking raw material and steel markets –
complete our wide-ranging issue.
Find us at: www.metalbulletin.com; www.amm.com; www.indmin.com
Magazine
Published by Fastmarkets. US reporters: Rijuta Dey Bera, Bill
8 Bouverie Street,London EC4Y 8AX. Beck, Marina Vertemburg Bozkurt,
UK registration number: 00142215 Michael Cowden, Robert England,
Tel: +44 20 7827 9977 Patrick Fitzgerald, Lisa Gordon,
Fax: +44 20 7928 6892 and +44 20
7827 6495
James Lawrence, Michael Roh, Liz
Ramanand, Orla O’Sullivan, Muyao
E-mail: Editorial@fastmarkets.com
Website: www.fastmarkets.com
Shen, Jenny Stewart, Mei Ling Toh,
Dom Yanchunas
Fastmarkets IM
Metal Market Magazine:
Editor: Richard Barrett Industrial Minerals Editor Europe:
Davide Ghilotti
Associate editor: Seema Chaudhary
Advertising Sales: Senior Reporter: William Clarke
Market Reporters: Michael
Publisher: Mary Connors
Tel: 646 274 6250 Greenfield, Sybil Pan, Carrie Shi
E-mail: Mconnors@fastmarkets.com
Global newsdesk editor: Mark Shaw
Global senior advertising manager,
Europe/Turkey: Arzu Gungor
US newsdesk leader: Sean Mayer
Senior sub-editors: Cecil Fung, Sara
Tel: +44 20 7827 5268
E-mail:arzu.gungor@fastmarkets.com
Kelly (US), Wei Jun Lau, Renate Foster
Mas (US), Tony Pettengell, Jeff Porter
Senior sales manager, Midwest, West
Coast, North America: Jessica Kelliher
Sub-editors: Francesca Brindle,
Kyle Docherty, Hannah Corwin,
Tel: 312 929 4195
E-mail: Jessica.Kelliher@
Laura Kirk
fastmarkets.com
CEO: Raju Daswani
Regional sales manager, Middle
“Steel East/Africa, Asia, UK: Quincy Takyi
Offices:
London: Fastmarkets, 8 Bouverie
derivatives
Tel: +44 20 7779 8735
E-mail: quincy.takyi@fastmarkets.com
Street, London, EC4Y 8AX, UK. Tel:
+44 20 7827 9977
Regional sales manager, East Coast, New York: Fastmarkets, 1120 Avenue
continue to North America: George Reeves
Tel: 212 224 3938
of the Americas, 6th floor, New York,
NY 10036, USA. Tel: +1 (212) 213 6202.
progress along E-mail: George.reeves@
fastmarkets.com
Toll free: 1 800 METAL 25, Fax: +1
(212) 213 6617
the path of Events and client services marketing
manager: Adelaida Montilla
Pittsburgh: 707 Grant Street, Suite 1340,
Pittsburgh, PA 15210, USA.
acceptance by Tel: 212 224 3937
E-mail: Adelaida.montilla@
Tel: +1 (412) 765 2580
Singapore: Quadrant at Cecil, 3F,
the physical fastmarkets.com
Advertising sales administrator:
19 Cecil Street, Singapore, 049704
Shanghai: Fastmarkets, Room 305,
industry” Eva Cichon 3/F, Azia Center, 1233 Lujiazui Ring
Road, Shanghai 200120.
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E-mail: ecichon@fastmarkets.com Tel: +86 21 5877 0857. Fax: +86 21
Production designer: Paul Rackstraw 5877 0856
São Paulo: Rua Prof. Atílio Innocenti
Fastmarkets MB: 165, 7th floor, Rooms 106-107, São
Paulo, SP, 04538, Sao Paulo, Brazil.
Group editorial director: Alex Harrison
Global ores, alloys, minor metals Tel: +55 11 3197 8750
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and industrial minerals editor:
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metals editor: Charlotte Radford
Subscription enquiries:
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Fastmarkets is a part of Euromoney
Archie Hunter
Global steel editor: Andrew Wells
Global Limited: 8 Bouverie Street,
London EC4Y 8AX.
EMEA, CIS, Turkey steel editor: RossYeo
Special correspondents:
Directors: Leslie Van de Walle
(chairman), Andrew Rashbass (ceo),
Andrea Hotter, Janie Davies Wendy Pallot, Colin Day, Tristan
UK and Europe correspondents Hillgarth, Imogen Joss, Tim Collier,
and reporters: Cristina Belda, Carrie Kevin Beatty, Jan Babiak, Lorna Tilbian
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publication (text, data or graphic)
may be reproduced, stored in a data
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editor: Susan Zou
Asia steel editor: Paul Lim
photocopying, recording or
otherwise) without obtaining
Asia steelmaking raw materials
editor: Deepali Sharma
Fastmarkets’ prior written consent.
Unauthorised and/ or unlicensed
Senior correspondents (Asia): copying of any part of this publication
is in violation of copyright law.
Lee Allen, Ken Kiat Lee, Karen Ng
Analysts (Asia): Huaqing Fu, Hui Li, Violators may be subject to
legal proceedings and liable for
Violet Li, Ruby Liu, Siyi Liu, Sally Zhang,
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and legal fees. Brief extracts may be
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commentary or review only provided
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that the source is acknowledged.
ISSN 0002-9998. Printed in the UK
Chris Kavanagh
Managing editor, Americas:
and US. In the UK by Buxton Press Ltd,
Buxton, Derbyshire SK17 6AE. In the
Thorsten Schier
North American steel editor:
US by Sheridan NH, 69 Lyme Road,
Hanover, NH 03755.
Grace Lavigne Asenov
North America scrap editor:
Sean Barry
February 2020 | Metal Market Magazine | 7
Newsreview:non-ferrous
Levitated Metals begins
flotation plant build
Levitated Metals has begun
construction on a new heavy
media aluminium flotation
plant in the United States, the
specialty metals recycling
company said on January 15.
The 10-acre facility – located
in the East Montgomery County
Industrial Park in New Caney,
Texas – is expected to begin
operations this coming
September.
The facility will use Levitated
Metals’ method of “density
flotation” to separate scrap
metal, which is then sold to
consumers in the automotive
and cast aluminium industries.
This will be the second plant of
SHUTTERSTOCK

its type built in the US in over a

decade, according to a January
15 press release from East The US-China phase-one trade agreement fails to address the Section 232 tariffs, leaving US
Montgomery County aluminium producers to urge focus on China’s overcapacity in further negotiations
Improvement District.
Municipal Government said Tshipi studying 50% Mn Novelis’ Aleris
in late December. ore output expansion acquisition delayed
Atlantic Nickel makes The company signed a
first Ni concentrate sale strategic cooperation frame Jupiter Mines is starting a Novelis Inc will not complete
Atlantic Nickel and Appian agreement with Yunnan feasibility study into an its acquisition of Aleris Corp by
Capital Advisory have sold the provincial government on expansion project that aims to the previously announced
first nickel concentrate from December 5, and the silicon increase manganese ore output January 21 deadline, a company
nickel sulfide restart project project in Zhaotong forms the from Tshipi Borwa by 50% to spokesperson confirmed to
Santa Rita in Brazil to trading key part of the deal. 4.5 million tonnes per year over Fastmarkets AMM on January 14.
company Trafigura, the Brazilian three years, the company “Novelis will no longer be able
miner said on January 6. Al reaction to phase-1 announced on January 7. to meet the January 21, 2020,
The sale forms part of a A concept study into the target date to close the acquisition
three-year offtake agreement US-China deal muted expansion has just been of Aleris as a result of the European
and financing facility worth The United States and China completed, Jupiter said, adding Commission’s request for
$40.8 million with Trafigura, signed a phase-one trade that the total capital spend additional time to review Liberty
and comes following the agreement on January 15, but required for the expansion is House Group as the buyer of
recommencement of mining the US aluminium market’s estimated at ZAR1.03 billion Aleris’ plant in Duffel, Belgium,”
operations at Bahia-based reaction was subdued due to ($72.45 million). the spokesperson said via email.
Santa Rita in July 2019. the US administration’s In October 2019, the
The first shipment of failure to address the Section Audubon plans $50mln European Commission granted
concentrate is expected in 232 tariffs. Novelis conditional approval
January 2020. “We congratulate President Al smelter in Texas for the merger, but that
Trump and his administration Audubon Metals is one step approval was contingent upon
on this important first step closer to building a secondary the sale of Aleris’ plant in Duffel.
Hoshine to invest toward a more balanced trading aluminium ingot smelter in
$3bln in silicon project relationship between the US Corsicana, Texas, with the city
in Yunnan and China. As the parties move council scheduled to discuss tax
SQM faces fresh legal
Hoshine Silicon, the largest to the next phase of negotiations, abatements for the project at a setback in Atacama
industrial silicon manufacturer we strongly urge negotiators to public hearing on January 13. lithium expansion
in China, will build an 800,000- focus on addressing the unfairly Construction on the smelter A Chilean court has upheld an
tpy organosilicon monomer subsidized overcapacity that is expected to begin early this environmental complaint by
and siloxane deep processing is hurting US aluminium year, while production is local indigenous communities
project in Zhaotong, Yunnan producers – and impacting the expected to begin in early to against a major expansion by
province, with a total global aluminium market,” the mid-2021, Audubon Metals’ lithium producer SQM.
investment of 20 billion yuan Aluminum Association said on president Brian Hawkes told On December 26, the
($2.9 billion), the Zhaotong January 15. Fastmarkets on January 9. Antofagasta environmental

8 | Metal Market Magazine | February 2020

court suspended approval for
an expansion of SQM’s brine
lithium production in the
Atacama Desert, reversing a
decision made in April 2019.
New minor metal
exchange opens
in Ganzhou
The Chinese city of Ganzhou
has launched an exchange for
physical trading of rare earths
and other minor metals.
The Ganzhou Rare Metal
Exchange was launched on
December 31, 2019, according
to the Association of China
Rare Earth Industry.
The Ganzhou exchange will
trade cobalt, rare earths,
molybdenum, tungsten, tin and
other metals.
Glencore poised
for Rustenburg
restructuring amid
dull FeCr market
Glencore plans to restructure
its Rustenburg ferro-chrome
smelter in South Africa due to
deteriorating conditions in the
ferro-chrome market and high
power costs, the trader-miner
announced on January 17.
The company has issued a
Section 189 notice – a South
African legal requirement
representing an intention to
retrench staff.
Ferro-chrome prices in
various global regions have
been trading at multi-year lows
due to poor downstream
demand and excess supply.
China grants CMOC
tungsten export license
China has allowed China
Molybdenum Co (CMOC), the
winner of the recent auction of
ammonium paratungstate
(APT) stocks held by the
defunct Fanya Metal Exchange,
to export tungsten in 2020-21,
according to the Ministry of
Commerce.
CMOC won 28,336 tonnes
of Fanya’s APT stocks in an
auction held last September.
Iran metal companies
face new US sanctions
The US Department of the
Treasury’s Office of Foreign
Assets Control (OFAC) has
targeted 17 Iranian metal
producers and mining companies
– as well as other foreign entities
– with fresh sanctions amid
increased tension between the
two countries, according to a
statement on January 10.
“The United States is targeting
senior Iranian officials for their
involvement and complicity in
Tuesday’s ballistic missile strikes,”
Secretary of the Treasury Steven
T. Mnuchin said in the statement.
“We are also designating
Iran’s largest metals
manufacturers and imposing
sanctions on new sectors of the
Iranian economy including
construction, manufacturing
and mining. These sanctions
will continue until the regime
stops the funding of global
terrorism and commits to never
having nuclear weapons.”
GFG Alliance combine
portfolio with new
green Ali group Alvance
Industrial conglomerate GFG
Alliance’s existing aluminium
Glencore plans to restructure its Rustenburg ferro-chrome smelter
on poor downstream demand and high power costs
portfolio will be consolidated
with a focus on sustainable
production under Alvance
Aluminium Group,
headquartered in Paris.
The nuclear and hydro
powered Dunkerque
aluminium smelter, the largest
aluminium smelter in Europe
with around 280,000 tonnes
per year of capacity, located in
North France will now fall
under the Alvance vertical. Its
Fort William smelter in
Scotland, run by hydropower,
will also be under the new
vertical.
The vertical will also include
an aluminium wheels plant in
Chateauroux, France. The new
group will also be bringing in
the Duffel aluminium rolling
mill, which is undergoing an
approval process with the
European Commission.
Rio Tinto Q4 copper
production falls on
lower ore grades
Rio Tinto’s fourth-quarter
copper production sank due
to lower ore grades, especially
at its Kennecott copper mine,
while aluminium production
took a hit due to unexpected
outages in Iceland and
GLENCORE
Canada during the second half
of 2019.
Rio Tinto’s 2019 mined
copper production of 577,400
tonnes was 5% lower than in
2018, reflecting lower copper
grades, which impacted the
fourth quarter production at
the Kennecott copper mine in
Utah in particular.
Samancor explores
restructuring, amid
‘drastic’ chrome
price lows
Samancor Chrome has
provisionally decided to
restructure its mining and
smelting operations in a move
that will reduce staff and
production levels due to the
deteriorating chrome markets
and rising power costs,
Fastmarkets has learned.
South Africa’s largest
ferro-chrome producer wrote
to employees and unions on
January 17, in letters seen by
Fastmarkets, warning that it
had made the provisional
decision to restructure and
reduce mining and smelting
staff due to a “drastic” decline
in chrome ore and ferro-
chrome prices, especially over
the past three months.
Padnos eyeing third
auto shredding site
Padnos is making plans to
invest in its third automotive
shredding operation at the site
of a Michigan business it
purchased last summer.
The Holland, Michigan-
based recycler is going before
the Howell zoning board of
appeals (ZBA) on January 22 to
seek three variances for the
project, a Howell city employee
confirmed to Fastmarkets.
One of those variances
would allow Padnos to operate
an auto shredder outdoors as
opposed to being required to
enclose the shredder inside a
large building. The second and
third variances would allow it to
gravel two areas of the property
instead of paving those areas.
February 2020 | Metal Market Magazine | 9
Newsreview:steel
Cascade Steel and Scrap been listed for sale by Dutch
sees income down on asset acquisition firm Hilco
Industrial Acquisitions after
planned outages the former reorganized its
Operating income at Cascade business to focus on steel
Steel and Scrap (CSS) is sections.
expected to decline by about Capacity is 500,000 tonnes
$1 million in the current per year. The location is Ba
quarter, mostly due to planned Ria-Vung Tau Province.
outages, an executive at parent
company Schnitzer Steel
Industries Inc said on January 8.
Make-or-break time for
The decline in quarterly Midland plant: ATI
operating income at CSS stems The fate of Allegheny
from planned down time, Technology Inc’s (ATI)
SHUTTERSTOCK

including maintenance, and stainless steel plant in

not any deterioration in Midland, Pennsylvania, hangs
markets, Richard Peach, chief Brazilian car association Anfavea reported a decline in vehicle in the balance, according to
financial officer and chief of production year on year for December 2019 company president and chief
corporate operations, said executive officer Robert S.
during the company’s earnings the ramp-up curve,” an Steel cheers Senate’s Wetherbee.
conference call. ArcelorMittal spokesperson passage of USMCA Its survival is threatened by
told Fastmarkets via email on the 25% tariff under Section
January 16. “The recovery The United States Senate 232 imposed on imports of
Brazilian car output from the IH 4SP [Indiana voted to pass the US-Mexico- nickel-rich steel slabs from
down in December Harbor No4 steel producing] Canada Agreement (USMCA) Indonesia that are used in the
Brazilian vehicle output outage is on plan and will allow on January 16, a bipartisan mill to make cold-rolled 60-inch
shrank by 3.9% year-on-year us to continue meeting customer deal widely celebrated by steel stainless steel sheet coils.
during December 2019 demand as anticipated.” executives and other industry “We’re hemorrhaging cash,”
because higher domestic groups. Wetherbee told Fastmarkets.
registrations were not enough “Through the USMCA, our Relief must come soon, he
to offset the continuing tumble
Vale suspends job creators will continue to said, or ATI will be forced to
in export volumes, local operations at Ferrous compete and grow as we create close the facility to stop the
automakers’ association Resources mine more opportunities to sell our mounting losses from the
Anfavea said on January 7. Brazilian producer Vale has American goods and services tariffs, which have been in
The country produced halted operations at an iron ore to more customers, allowing place since the mill re-opened
170,501 units in the last mine at its subsidiary Ferrous them to add jobs and spurring nearly two years ago.
month of 2019, compared Resources to allow for safety economic growth here at
with 177,503 units a year works, it said on January 16. home,” Kevin Brady, The US
before. These were the lowest Vale stopped operations of a representative for Texas’ 8th
Argentina’s crude steel
monthly figures since 144,300 waste and tailings pile at its congressional district and the output down 22% in
units in February 2016, the Esperança mine as soon as it lead Republican on the House November
association added. took control of Ferrous Ways and Means Committee, Crude steel production in
Local vehicle registrations Resources, the company said said in a statement. Argentina dropped by 21.60%
totaled 233,063 units in in response to a story year-on-year in November
December, rising by 13.1% published in national business 2019, according to recent
from 206,089 units in the newspaper Valor Econômico.
Posco SS Vina rebar mill figures from the country’s steel
corresponding period of 2018. It concluded the acquisition in Vietnam for sale association, Acero Argentino.
Meanwhile, exports were of Ferrous Resources in July Posco SS Vina’s reinforcing Output came to 357,500
28,998 units, an 8.5% year-on- 2019, at a cost of $550 million. bar rolling mill in Vietnam has tonnes in November, against
year decrease from 31,709
units in December 2018.

Indiana Harbor
ops resume after
December explosion
Production at ArcelorMittal’s
Indiana Harbor facilities resumed
on January 8 after an explosion
SHUTTERSTOCK

on December 27, 2019.

“Operations are expected to
continue progressing through The Argentinian steel association, Acero Argentina, reported low construction activity in November

10 | Metal Market Magazine | February 2020

456,000 tonnes a year earlier,
the association said late last
week.
The performance of the
main steel-consuming sectors
in Argentina remained weak
during the month, with the
country going through a
period of uncertainty after a
recent change in government.
“Activity in the construction
sector was at its lowest level for
the year [in November], with
many construction projects
being concluded,” the
association said.
Liberty sets temp layoffs
at Illinois rod mill
Starting on January 6, Liberty
Steel & Wire temporarily laid
off workers at its rod mill in
Bartonville, Illinois, due
to a shortage of electrodes
and zinc, according to
Independent Steelworkers
Alliance union representatives,
who hoped the situation would
resolve within one week.
“It’s not a lack of orders, the
facility has plenty of orders to
run on the book,” union
representatives told
Fastmarkets on January 7.
“It’s just the lack of materials,
not orders.”
‘Challenging market’
spurs Liberty UK layoffs
Liberty Steel Group will cut
355 jobs at its UK steelworks
in Stockbridge, South
Yorkshire, and Newport,
South Wales, due to
“challenging market
conditions,” the company said
on January 9.
This follows a move late in
2019 when GFG Alliance
announced plans to
consolidate all of its steel
businesses into one global
organization named Liberty
Steel Group.
The company said it has
decided to reduce its
workforce at certain plants to
ensure the long-term viability
and competitiveness following
a review of its UK business in
response to challenging
market conditions and a
lingering reduction in demand
for UK steel products.
It added that it sees
opportunities to prosper in the
UK market through
homegrown manufacturing of
steel products, investment in
new metals technology and
application of its Greensteel
strategy.
SDI eyes robust steel
demand in 2020
Steel Dynamics Inc (SDI)
anticipates bullish end-market
demand to drive business in
the year ahead and beyond, the
company’s top executive told
analysts during the fourth-
quarter 2019 earnings call on
January 23.
“We are incredibly
constructive on the market
heading into 2020, and 2021
for that matter,” president
and chief executive officer
Mark Millett said during the
call. “Underlying demand last
year didn’t dissipate; the
whole price drop was a
drawdown, a destocking of
customer inventory, and that
obviously has reversed here
in the last couple of months
of the year and going into
2020.”
Significant highlights for the
company’s full-year 2019
performance include record
steel shipments of 10.8 million
tons, as well as record steel
fabrication shipments of
6,444,110 tons.
CMC upbeat on
construction demand
Commercial Metals Co (CMC)
is optimistic that construction
and infrastructure demand will
remain strong, but
acknowledged that its fiscal
second quarter will be affected
by a seasonal slowdown in
activity.
“We are positioned to
continue benefiting from the
positive trends in our core
markets and remain optimistic
about the construction market,
as many of the macro
indicators we monitor point to
resilience ahead,” CMC board
chairman, president and chief
executive officer Barbara R.
Smith said on January 6,
during a conference call on the
company’s earnings results for
the fiscal first quarter ended
November 30.
Tangshan mill sells
capacity to Inner
Mongolia
Songting Steel, a mill in
northern China’s steel hub of
Tangshan, has sold its capacity
to a steelmaker in Inner
Mongolia, according to the
Hebei Industry and
Information Technology
Department.
The capacity sold was 1.15
million tonnes per year (crude
steel) to buyer Inner Mongolia
Xuri Steel in Chifeng city,
Inner Mongolia.
ArcelorMittal
Spain restarts BF
ArcelorMittal was due to
resume production from blast
furnace (BF) B at its Asturias
plant in Spain on January 11,
the company said on January 7.
The BF had been stopped
for maintenance since
November 6, 2019.
Ukraine’s DMKD restarts
No12 furnace, increases
pig iron output
Ukrainian steel billet producer
Dneprovskiy Dzerzhinsky
Metallurgical Plant (DMKD)
has restarted its
900,000-tonnes-per-year
No12 blast furnace at its
steelmaking facility in the port
city of Kamianske on the
Dneiper river.
Trial pig iron production
was started at the end of 2019
and normal operations
resumed on January 4, the
company said on January 10.
Currently, the daily pig iron
output at blast furnace No12 is
1,600 tonnes and the producer
plans to increase this to 2,200
tonnes by the middle of January.
Nucor Memphis to
build heat-treating
facility
Nucor Steel Memphis in
Tennessee will construct a
23,000-square-foot facility to
house new heat-treating
equipment, according to a
statement posted on the
website of the Economic
Development Growth Engine
for Memphis and Shelby
County.
“Nucor Steel Memphis
Inc has purchased
heat-treating equipment
from Energy Alloys, which is
located in Conroe, Texas,” a
Nucor spokesperson told
Fastmarkets via email on
January 10. Pending
regulatory approvals, Nucor
plans to relocate the
equipment to its special
bar quality steel mill in
Memphis as part of a new
heat-treat facility to be
built onsite.
According to local media,
the total investment will total
roughly $10 million.
Jingye clears another
hurdle for British Steel
takeover
Chinese steelmaker Hebei
Jingye Group has moved a step
closer to acquiring British
Steel following an agreement
made with the trade unions
that could result in 500 job
losses.
The proposals from Jingye
on terms of employment now
need to be agreed by British
Steel staff following the
negotiations by the various
trade unions.
Other outstanding hurdles
to the deal include Jingye
reaching an agreement with its
suppliers, and gaining
approval from the French
authorities for the sale of the
company’s French plant in
Hayange.
Jingye plans to invest
£1.2 billion ($1.57 billion) into
the steelworks following the
sale, which was agreed in
November last year, saving
February 2020 | Metal Market Magazine | 11
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Newsreview:steel
4,000 jobs. British Steel was
placed in compulsory
liquidation on May 22, 2018.
China mart unfazed
by potential US
steel exports
Market participants in China
said they were not worried by
the potential increase in steel
imports from the United
States, even after the two
JSPL
major economic powers
signed the phase-one
economic and trade agreement
on January 15.
While the agreement does
not set out the increase in
quantity of US-origin steel
exports China will accept,
Chinese market participants
do not expect the increased
volumes to influence domestic
prices and supply.
China’s Xinda Steel
installing new converter
Xinda Iron & Steel, in northern
China’s steel hub of Tangshan,
is installing a new 100-tonne
converter this year under a
capacity replacement program
in Hebei, the province’s
Industry and Information
Technology Department said
earlier this week.
The new capacity will be
1.15 million tonnes per year of
crude steel.
Production will commence in
June 2020.
Worthington
grows Samuel
Steel Pickling stake
Worthington Industries has
acquired a majority ownership
of Samuel Steel Pickling Co – a
joint venture Worthington has
had with Samuel, Son & Co
since 2010 – to expand its
pickling business, the
company announced on
January 6.
Worthington now has a 63%
interest in the joint venture,
and Samuel, Son & Co holds
the remaining 37%.
The terms of the transaction
were not disclosed.
Bumper sales of steel rail allowed India’s JSPL to raise overall group sales by 30% and steel output
by 22% year on year in quarter four
Mexico’s Ahmsa shuts
blast furnace on tough
conditions
Mexico’s largest integrated
steelmaker, Altos Hornos de
México (Ahmsa), has shut
down its blast furnace No6 in
the country’s northern city of
Monclova due to poor market
conditions, it said.
It will now concentrate
production in blast furnace
No5 and its electric-arc
furnace. Operations of blast
furnace No6 will resume only
when market conditions allow,
Ahmsa said.
Sandvik completes
Summerill Tube
acquisition
Swedish engineering group
Sandvik has finalized the
acquisition of United States-
based high precision tubes
manufacturer Summerill Tube
Corp, the company said on
January 14.
Pennsylvania-based
Summerill Tube specializes in
seamless and welded tubing in
stainless steel and nickel alloys
for the aerospace, transportation
and petrochemical industries,
Sandvik said.
India’s JSPL targets
further steel output
Indian steel producer has
reopened a major direct-
reduced iron (DRI) plant to
boost its steel output by a
further 1.5 million tonnes in
the period from April 2020 to
March 2021, the firm said on
January 14.
JSPL bucked the general
trend of output cuts among
India’s steel producers in late
2019, the company said in its
quarterly results on January 2.
Bumper sales of steel rail
allowed the firm to raise
overall group sales by 30%
year on year and steel output
by 22% year on year in the
final quarter.
JSW Steel US ops see
$38mln Ebitda loss
JSW Steel Limited’s United
States operations fell in the red
during the company’s third
quarter on low steel prices, low
capacity utilization and
inventory writedowns.
JSW Steel is a subsidiary of
JSW, an Indian conglomerate
with interests in steel, energy
and infrastructure.
Its US operations reported a
quarterly earnings before
interest, tax, depreciation and
amortization (Ebitda) loss of
$37.79 million, according to
figures released with earnings
data on January 24.
MMK steel sales down
4% in 2019, export
shipments down 47%
Steel product sales by Russia’s
Magnitogorsk Iron & Steel
Works (MMK) were down by
4% in 2019 to 10.96 million
tonnes because of repair works
at the hot-rolling mill, the
company said in its latest
report on January 21.
Hot-rolled coil sales slipped
by 8.1% in 2019 to 4.8 million
tonnes, against 5.2 million
tonnes in 2018.
Cold-rolled coil sales
dropped by 10.9% in the same
comparison, to 1.27 million
tonnes against 1.43 million
tonnes. This was because the
supply of semi-finished rolled
products was limited by the
reconstruction of the
hot-rolling mill.
Given these constraints, the
producer concentrated its efforts
on the domestic market where it
found better demand and pricing.
EU new car sales
jump 22% year on
year in December
Demand for passenger cars in
Europe moved up by a
remarkable 21.65% year-on-
year in December 2019,
making it the fourth
consecutive month of growth.
New car sales in Europe
totaled 1,215,076 vehicles in
December last year, compared
with 998,791 units sold in the
corresponding month of 2018,
the European Automotive
Manufacturers Association
(ACEA) said on January 16.
The rise was “partially the
result of a low base of
comparison, because
registrations fell by 8.40% in
December 2018. However,
specific market changes also
contributed to this exceptional
growth,” ACEA said.
The EU’s five biggest car
markets recorded solid growth
rates in December.
February 2020 | Metal Market Magazine | 13
Market analysis
Aluminium Lead
Positive mostly priced in above $1,800 per tonne Rebound unlikely to achieve technical targets
LME aluminium prices have LME cash price, $/t In our last report, we noted LME cash price, $/t
been oscillating steadily higher 2,500 how lead was consolidating in 2,750
since their October low of December after November’s 2,500
$1,705 per tonne. They even 2,250 sell-off had taken the market
2,250
managed to close 2019 2,000 back below $1,900 per tonne
comfortably above $1,800 per for the first time since July. 2,000
tonne, and extended the trend to 1,750
LME/Fastmarkets
We said the next move would 1,750
LME/Fastmarkets
$1,836 per tonne in early 1,500 likely be to the upside, given 1,500
Sep 17
Nov 17
Jan 18
Mar 18
May 18
Jul 18
Sep 18
Nov 18
Jan 19
Mar 19
May 19
Jul 19
Sep 19

Sep 17
Nov 17
Jan 18
Mar 18
May 18
Jul 18
Sep 18
Nov 18
Jan 19
Mar 19
May 19
Jul 19
Sep 19
Nov 19
Jan 20f

January, ending the technically
bearish year-long sequence of
lower highs and lower lows. The
first phase US-China trade deal
announced in December and
signed in January, together with
signs that the global
manufacturing downturn has
bottomed, has brightened the
macroeconomic and demand
outlook for 2020, triggering the
normalization of what was
previously an excessively bearish
speculative position in this
market. But the positives may
already be priced in, technical
resistance has been encountered
and the focus has turned to
testing trendline support.
Off-market stocks of primary
and semis are high and the global
supply deficit will all but
disappear this year. Our base
case cash price forecast is $1,780
per tonne for Q1 2020 and
$1,808 per tonne for the full year.
technical and fundamental
indicators. That proved to be
the case with prices jumping
in January to nearly $2,050
per tonne. This pattern of a
consolidation then rebound
after a ~$400 per tonne price
fall was seen in May-June
2019, and if this symmetry
continues then lead prices
have more upside in the
coming months, potentially
beyond $2,300 per tonne.
Currently it is hard to see the
Nov 19
Jan 20f
fundamentals supporting this
bullish, purely technical,
scenario. In the absence of
supply disruptions of the scale
we saw in 2019, notably at
Nyrstar’s Port Pirie smelter in
Australia, we forecast refined
lead market fundamentals
swinging back into surplus in
2020. Against this, our Q1
price forecast of $2,090 is
asking a lot.

Copper Nickel
Expect more price strength in Q1 Short-term prices could go either way
In line with our expectations, LME cash price, $/t Since December, LME nickel LME cash price, $/t
the LME copper price 8,000 prices have been 20,000
rebounded well in December consolidating the long sell-off 18,000
and early January, extending 7,000 that followed the September 16,000
above $6,300 per tonne at its high of $18,850 per tonne. 14,000
highest. We maintain our 6,000 This is ongoing and is centred 12,000
constructive outlook on LME/Fastmarkets on the $14,000 per tonne 10,000 LME/Fastmarkets
copper prices in the near term, 5,000 level. It could be a basing 8,000
Sep 17
Nov 17
Jan 18
Mar 18
May 18
Jul 18
Sep 18
Nov 18
Jan 19
Mar 19
May 19
Jul 19
Sep 19
Nov 19
Jan 20f
Sep 17
Nov 17
Jan 18
Mar 18
May 18
Jul 18
Sep 18
Nov 18
Jan 19
Mar 19
May 19
Jul 19
Sep 19
Nov 19
Jan 20f

due to a number of positive pattern (bullish, by providing

forces, including (1) the
improved macro background
that should facilitate an
acceleration in global refined
copper consumption growth
to 2.0% this year from 1.0%
last year; (2) friendly
seasonality, whereby Q1 tends
to be the strongest quarter of
the year for copper prices;
(3) and the likely tightening
of refined market conditions
once restocking activity kicks
in, especially in China after the
Lunar New Year. With
speculative positioning neutral
– which we would consider
light given the positives
dominating the outlook for
copper in Q1 and indeed the
full year – financial demand
could exacerbate the rebound
in copper prices this quarter
and into Q2. Our Q1 2020
base case target is for LME
cash prices to average $6,400
per tonne.
a floor from which the next
uptrend launches) or a
continuation pattern (bearish,
by being the precursor to the
resumption of the sell-off that
preceded it). At times in
January, it looked like the
upside was being tested, with
buyers supported by easing
macroeconomic and
geopolitical tensions, plus
hints of better demand in the
form of rising LME warrant
cancellations. At other times,
the focus of prices has been
to the downside. Sellers have
no doubt gained confidence
from a weaker stainless steel
market outlook and by
LME stocks tripling since
November’s multi-year lows
near 60,000 tonnes. While we
believe nickel’s long-term
direction for prices is upward,
the short term is unclear. Our
Q1 price forecast is $13,900
per tonne.

In this regular section, Fastmarkets MB’s research team summarize their in-depth
reports to highlight key factors driving the markets and their short-term price
forecasts. The weekly service, Base Metals Market Tracker, provides independent
analysis and forecasts for base metal markets and prices.

14 | Metal Market Magazine | February 2020


Tin
Prices in a catch-up phase
After underperforming in 2019,
LME tin prices have
experienced a strong rally this
year, driven by supportive
seasonal patterns and positive
macro factors. We think the
market is positioning for a
deeper supply deficit of 7,000
tonnes this year (from a
5,000-tonne deficit in 2019),
which is due to a rebound in
global refined tin consumption,
in part owing to a stronger
solder demand outlook on a
revival in global
semiconductors, itself driven by
brighter economic conditions
and abating trade tensions. We
expect refined tin output to
rebound by a little less than 1%,
as the current price
environment is unlikely to
Zinc
Rally hits resistance band
The low absolute level of
exchange stocks and
improving macroeconomic
sentiment remain supportive
for zinc despite a small
fundamental supply surplus
forecast for Q1 2020 and a
balanced market this year
after four straight deficit
years. But after rallying from
around $2,200 per tonne in
early December, prices have
started to look overbought at
their January high of $2,458,
and they have run into major
resistance. Our Q1 base case
cash price forecast is for an
average of $2,400, which
only allows room for a little
appreciation from the current
average of $2,371 per tonne
as it is not likely to be easy to
break down the band of
Analysis by Andy Cole, Fastmarkets MB
Request your free sample at www.fastmarkets.com
World leading market analysis
www.fastmarkets.com
Steel
Turkish rebar market: cautious optimism,
LME cash price, $/t but challenges remain
23,000
Turkish rebar producers had a Fastmarkets steel indices
21,000 difficult year in 2019, faced 120 Jan 2012 = 100
19,000 with falling prices and fierce
competition in international 110
17,000
LME/Fastmarkets
markets. Turkish export rebar 100
15,000
Sep 17 prices averaged $451 per
Nov 17
Jan 18
Mar 18
May 18
Jul 18
Sep 18
Nov 18
Jan 19
Mar 19
May 19
Jul 19
Sep 19
Nov 19
Jan 20f
tonne last year, down by $85 90
from the average in 2018. 80
prompt smelters to restart While this fall was fully
capacity. We forecast an average reflected in the price of 70
LME cash tin price of $17,650 imported billet, which also 60
per tonne in Q1, compared with declined by $85, the price of
a current quarter-to-date imported scrap (North 50
Jan 12
Sep 12
Jan 13
Sep 13
Jan 14
Sep 14
Jan 15
Sep 15
Jan 16
Sep 16
Jan 17
Sep 17
Jan 18
Sep 18
Jan 19
Sep 19
Jan 20
average of $17,260. The risks to European material) fell by $54,
Global flat products index
this forecast is skewed to the squeezing mills’ margins. The Global long products index
upside considering our friendly rebar to scrap spread averaged Steel price index Fastmarkets MB
view on the macro backdrop and at just $169 last year, 12.9%
Exports of Turkish rebar to Mena,
tin’s own fundamentals. Our below the long-term value of
Asia increased
high-case scenario for Q1 is $194. Last time Turkish mills’ 100% 7.5
$18,800 per tonne. margins were similarly low was 7.0
Million tonnes
80%
6.5
in 2016, but producers were 60% 6.0
€/tonne
able to significantly increase 40% 5.5
rebar prices and improve their
margins in the following year
20%
0%
5.0
4.5
4.0
thanks to a booming local 2015 2016
US
2017 2018 2019*
EU Mena
construction market. Asia Others Total exports [RHS]
LME cash price, $/t This year domestic demand *2019 – export shares for Jan-Oct period, volume estimated
for the whole year
4,000 in Turkey is also expected to Source: ISSB, Fastmarkets MB research
3,500 improve, but growth will be
subdued. Construction output mills, but as growth will
3,000
in the country has been on a remain modest at best, they
2,500 decline for the past two years, will still have to rely on the
2,000
LME/Fastmarkets
falling by 9.7% year on year in export market.
1,500 2019. This resulted in a 30.7% Turkish rebar exports rose
Sep 17
Nov 17
Jan 18
Mar 18
May 18
Jul 18
Sep 18
Nov 18
Jan 19
Mar 19
May 19
Jul 19
Sep 19
Nov 19
Jan 20f
year-on-year drop in apparent by 1.3% in the first ten months
long steel consumption in the of last year, but exporters had
resistance that extends up to January-November period of to find new markets to
$2,555 per tonne. Visible 2019, Turkish Steel Producers compensate for shrinking
stocks will need to rise Association said. Oxford demand from Europe and the
sustainably before prices risk Economics forecasts that the US. These two markets used to
breaching the September/ industry will return to growth account for around 20% of
December double-bottom this year, although it will Turkey’s foreign rebar
near the $2,200 per tonne remain anemic at 0.1%. shipments in 2015-2017, but
and set fresh cycle lows. We Non-residential and civil after an introduction of
are not envisaging that engineering sub-sectors will Section 232 in the US and
scenario yet, rather while see another year of shrinking safeguard import measures in
stocks stay near decade lows, activity, but residential the EU only 11.0% of rebar
the price volatility will stay construction is expected to exports in the January-
upward. tick up by 0.5%. A recovery in October period of 2019 went
demand this year will certainly there. Turkish mills had to
be welcomed by Turkish steel redirect material to other
February 2020 | Metal Market Magazine | 15
Market analysis
destinations, increasing
shipments to Middle Eastern,
North African and Asian
countries. But competition in
those markets had been fierce,
particularly in Southeast Asia,
where Turkish mills had to
compete with Chinese, Indian,
CIS and Qatari sellers among
others.
Faced with a fall in demand
and shrinking margins,
Turkish steel producers were
forced to cut their output. In
the first 11 months of 2019,
EAF output in the country
declined by 12.6% year on
year, a steeper fall compared
with a 10.4% decline in total
crude steel production. Those
producers who could switched
from producing long to flat
steel: billet output decreased
by 16.7%, while slab
production rose by 2.1%
during the period.
Turkish steel producers did
not manage to increase rebar
prices at the start of 2020, as
weak domestic and export
demand forced them to lower
their offers; this has been
followed by a fall in import
scrap prices. But Fastmarkets
MB research expects that
rebar prices in Turkey should
start trending up in the coming
months. A stabilization of the
construction industry at home
should provide a steady flow of
domestic orders, and an
expected return to growth in
major markets around the
world is expected to help
exporters. Demand from
European buyers will be
limited by the quota limits, but
a re-opening of quotas in July
2020 will give a temporary
boost to demand, while
exports to the US started to
recover after Section 232
tariffs were reduced from 50%
to 25%.
Analysis by Marina Maliushkina,
Fastmarkets MB
In this section, Fastmarkets MB’s research team summarize their in-depth reports to highlight key factors driving the
markets and their short-term price forecasts. We provide several regular services dedicated to the ferrous markets,
providing independent analysis, price forecasts and supply and demand forecasts.
Request your free sample of these services – www.fastmarkets.com
Steel raw materials
Tighter supply-demand balance provides some upside support to
seaborne iron ore, although downside risks remain
Prices for iron ore products
across the range climbed
gradually on a weekly average
basis in the first three weeks of
this year. The Fastmarkets’
indices peaked on January 17 at
$97.58 per tonne cfr Qingdao
for 62% Fe iron ore and on
January 21 at $111.90 for 65%
Fe fines, before retreating
modestly on a daily basis by the
end of the month. The recent
fears about supply disruptions
fueled prices, particularly
boosting the premium for
Brazil-origin higher-grade fines.
In the last week of January, the
Brazil-origin fines premium
reached a ten-month high at
about $15 per tonne above the
62% Fe fines index.
In addition to the recent
supply worries, Brazilian iron
ore export volumes have not
recovered to pre-disaster levels
yet, while China saw weaker
domestic crude iron ore
production in December. Brazil
exported 83.12 million tonnes
of iron ore in the fourth quarter,
down from 89.71 million tonnes
in the third quarter of 2019 and
from 104.37 million tonnes in
the fourth quarter of 2018. The
lowest level was seen in the
second quarter of last year,
following the Vale dam disaster
in late January, at 77.60 million
tonnes, down further from
84.27 million tonnes in the first
quarter of 2019.
In the meantime, growing hot
metal production in China has
boosted demand for
steelmaking raw materials and
supported prices. Pig iron
production had been declining
month on month since June,
with an uptick only in August
last year. Yet, there was a 4% rise
in pig iron output in December
Fastmarkets MB steelmaking raw have reported that the
materials indices country’s economy grew at its
140 Jan 2012 = 100
Fastmarkets
slowest rate in 30 years last year
100 with GDP at 6.1%, down from
60 6.9% in 2018. A slowdown has
been expected, but may still be
20
Jan 12
Sep 12
Jan 13
Sep 13
Jan 14
Sep 14
Jan 15
Sep 15
Jan 16
Sep 16
Jan 17
Sep 17
Jan 18
Sep 18
Jan 19
Sep 19
Sep 20
indicative of what lies ahead for
Asian import HMS No1 cfr steel and steelmaking raw
Fines 63.5% cfr main China ports ($/tonne) material demand.
Australian hard coking spot fob price (metric) In the metallurgical coal
market, the moderate price
Steelmaking raw material prices were gains we have seen so far this
supported by rising demand from
growing pig iron production in China
year are likely to persist amid
in December widening coke margins.
75 Domestic coke margins in
70 China have recovered to levels
Million tonnes
65
above $40 per tonne, considered
a breakeven level, and
60
remained above the threshold
55 for the last six consecutive
50 weeks by January 17.
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
We anticipate coking coal
2016 2017 2018 2019
Source: Fastmarkets MB research, prices to remain on an uptrend
China's National Bureau of Statistics (NBS) and climb gradually during the
rest of the current quarter and
as total production grew from into the beginning of the second
64.8 million tonnes to 67.1 quarter. With China still
million tonnes. As the chart pricing higher quality coals at a
shows, this is the first significant sizeable premium over and
month-on-month rise in above seaborne first-tier
December in at least three years. material – $55 per tonne on
December has been the month average so far this year compared
which has shown the sharpest with around $20 per tonne
month-on-month drop in historical average (after tax)
average daily production rates – Australian spot sellers have
for the past three years, but little reason to provide discounts.
2019 broke the trend. That said, potential restrictions
Going forward, January and on imports may put a cap on
April have usually been the most any significant price rises.
bullish months with the On the supply side, coal
strongest month-on-month exports from the North
growth in average daily pig iron Queensland’s ports in Australia
output and if this trend have been fairly steady with
continues, it can provide further shipments in the fourth quarter
support to the already elevated reaching 37.63 million tonnes,
iron ore prices. up from 36.91 million tonnes in
Looking further ahead, the preceding quarter and
however, the slowing demand stable year on year.
growth in China poses the most
crucial downside risk to the iron Analysis by Alona Yunda,
ore market. Chinese authorities Fastmarkets MB
February 2020 | Metal Market Magazine | 17
Profile

LME

18 | Metal Market Magazine | February 2020

Gay Huey Evans
‘The LME is a
unique market’
New LME chair Gay Huey Evans has a great depth of experience and
wide range of interests. Andrea Hotter asks her what has driven her
career and what priorities she has at the exchange
When Gay Huey Evans attended
her first London Metal Exchange
dinner in 1999, she was head of
markets at former UK regulator
the Financial Services Authority
(FSA). Some 20 years later she was
there as LME chair elect, the first
woman appointed to the role.
“As a regulator I would send my
markets people and occasionally
come to learn a little bit more about
commodities. I remember sitting
in the back row of an event during
LME Week just listening and
fascinated,” she told Metal Market
Magazine. “The regulator was
always invited to the LME dinner,
and as the FSA head of markets, I
would attend.”
Her first LME dinner “was a sea
of men,” something she had
become used to since starting her
career. Huey Evans was the only
woman on the top table the first
year; there were six women out of
38 people at her table at the dinner
last October.
Huey Evans’ appointment to the
exchange follows the retirement of
Sir Brian Bender in December,
after his almost a decade in the role,
and a more than 30-year career for
Huey Evans in financial services,
international capital markets and
regulation.
Pennsylvania, USA-born Huey
Evans started her working life at
investment bank and brokerage
firm PaineWebber & Co, although
she had initially planned a career in
medicine. “I started as pre-med
and took organic chemistry the
first semester, got my first C in my
entire life, and thought, ‘I’m not
sure I’m going to make it into med
school.’ You could have been talking
to a surgeon right now!” she laughed.
“My father said, ‘whatever you
do, do it well.’ I had no idea really
what I wanted to do, as long as it
was different and interesting,” she
added. She decided to take
international economics, which she
found easy by comparison.
Graduating from Bucknell
University in Lewisburg,
Pennsylvania, with a BA in
economics, Huey Evans moved,
age 22, to New York and started
work at PaineWebber. She was one
of two women on the trading floor;
her female colleague did corporate
sales. It was the beginning of the
fixed income market, when
financial futures contracts were
just being introduced.
“People really didn’t know how
to trade interest rate futures
against cash at that time. It was
fascinating. Then PaineWebber
wanted to set up a money markets
department; that’s how I started,”
she recalled.
Back then, the financial markets
were “a wild world,” she said, but
“you didn’t think about it because
you just loved it. It was a job that
was interesting, not a career. New
York in the 1970s was a fun place to
be, particularly if you were young.
You played and worked hard,”
she added.
‘Getting to Early career
From PaineWebber she moved to
know how Bankers Trust, where she worked
people can in the capital markets division.
get stuck in “That was the new world –
derivatives. Nobody knew what a
positions and swap or an option was. It was an
don’t want exciting but challenging place –
to recognize Bankers Trust didn’t create the
swap but I don’t think they get
losses is enough credit for the ingenuity and
an age-old intellectual rigor it gave to growing
problem’ that business and trying to
February 2020 | Metal Market Magazine | 19
Profile
define the risks behind it,” Huey
Evans said.
Covering mostly US financial
institutions on the US east coast as
well as foreign, in particular
Japanese, institutions, Huey Evans
says she “still didn’t think of it as a
career. It was a job. At that time, I
did not think I was going to work in
banking my entire life.”
While she was trading FX and
currency derivatives at Bankers
Trust, the bank developed commodity
derivatives. “We set up Enron’s
venture into commodities, initially
as a joint venture and then Enron
took the whole project,” she added.
In 1985, Huey Evans was
offered an internal transfer with
Bankers Trust to a new role in
London, but turned it down
because her former husband could
not get relocated. She continued in
New York until 1990, when
Bankers Trust lost a portion of its
team to Credit Suisse Financial
Products, and another London
opportunity reared its head.
Having raised her hand to run
the company’s London swaps or
options desk, Huey Evans’ boss
initially turned her down because
he questioned her ability to move
her four-year-old daughter from
New York.
“My husband wasn’t working at
that point and was happy to be
relocated, and I was happy to move
my daughter to the UK. You
couldn’t lose! It took six months for
the company to grasp that I was
serious,” she said.
It was in London that Huey
Evans recognized how much she
enjoyed working. “It took a long
time to get there, and when I did, I
wanted to do the right job but
definitely to also keep working.
Then I realized I probably had a
career,” she added.
Huey Evans had been on the
board of the International Swaps
and Derivatives Association (ISDA),
a trade association for derivatives
dealers and other market
participants, since 1990. She was
asked to co-chair it, but ended up
becoming its chair in 1994.
It was a baptism of fire: shortly
afterwards, her former employer
Bankers Trust was sued by Procter
& Gamble after the consumer
goods multinational reported large
20 | Metal Market Magazine | February 2020
OTC derivatives was almost $3.5
Multiple interests trillion; when I finished in 1998 it
Huey Evans is a member of the US Council on Foreign was estimated to be close to $60
Relations, a non-executive member of the UK HM trillion and now it’s over $500
Treasury Board, and a senior adviser to Chatham House. trillion. This explosion of OTC
She is also a Trustee of the Beacon Collaborative and derivatives is rarely mirrored in
former Chair of Beacon Awards, set up to encourage and other industries,” she said.
celebrate philanthropy in the UK. Similarly, she is a
Trustee of Wellbeing of Women, a charity dedicated to Path to the LME
improving the health of women and babies. Then in 1998, Huey Evans was
She enjoys playing tennis and skiing, and is a keen approached by Howard Davies,
hiker, including taking an annual trip with her daughter. then chairman of the newly
She also has a creative streak: having sat on the board of established FSA, to join him at
concert venue The Wigmore Hall for many years, Huey the regulator.
Evans is a music lover and is currently taking jazz singing “I said, ‘I’m not a regulator, I’m a
lessons for the first time. “That’s something I really like market practitioner. I work with
– it’s very relaxing,” she says. “Maybe I’ll sing at next clients, I manage risks and find
year’s LME Dinner!” she joked. solutions.’ But Howard is such a
She was a co-opted trustee at the Tate for nine years clever man, and I thought, to work
and mentors several people who run big arts with him would be a great
organizations. “If I had done what I really wanted to do, it opportunity, so why not?” she added.
would probably never have been in finance,” she added. She was tasked with setting up
the FSA markets division, where
she stayed until 2005. Its work
losses from interest rate derivatives involved regulation of markets,
transactions. The dispute was including exchanges, and provided
settled between the two companies her with an ongoing involvement
before it was due for trial. with the LME. “The first thing I
“My appointment was learned about the LME was the
challenged by some as my former Hamanaka crisis, which had
company, Bankers Trust, was happened in 1996 but was still
‘problematic’ [in their view] – but being cleaned up,” Huey Evans
Bankers Trust was only one of said, referring to a metal trading
several organizations that were scandal involving the chief copper
involved in high-profile trader of Japanese trading house
derivatives-related losses,” she said. Sumitomo.
ISDA addressed, and continues “Getting to know how people
to address, problems – either can get stuck in positions and don’t
through codes of conduct, improved want to recognize losses is an
documentation, reducing or age-old problem that happens over
eliminating legal risks, developing and over again in all markets. Why
protection against counterparty there were no risk systems around
bankruptcy, maintaining good it to monitor it, I have no idea. It
industry relationships with just tells you that even then,
regulators, and responding to commodities were in a different
regulatory and legislative concerns, world,” she added.
including testifying in Washington, She was also involved in the
she added. discussions related to regulation in
It was what Huey Evans Europe, including the Markets in
describes as a “growing-up period” Financial Instruments Directive of
in her life. “I learned much about 2004, a European Union law that
different stakeholders and people’s provides harmonized regulation
interests, including politicians and for investment services across the
lawyers,” she reflected. 31 member states of the European
She spent time during that Economic Area. Huey Evans also
period trying to explain why attended International
positions should be netted down, ‘If you’re Organization of Securities
something she believes was “the principles- Commissions (IOSCO) meetings
right thing at the time because the based, you are as a substitute for Davies.
size and magnitude of our business “The FSA role was broad, which
grew from there.”
motivated to do I enjoyed. I learned so much about
“In the early 1990s, the the right thing regulation, government and
outstanding notional amount of at all times’ myself,” she said. During her
tenure the FSA created the Market
Abuse Regime, which preceded
the EU Market Abuse Directive
and was designed to prevent,
detect and punish market abuse.
Huey Evans believes that while
most people want to do the right
thing, there are always some who
are motivated otherwise, and
“those are the ones that should be
locked up, fined or banned.”
“I’m a principles-based person
rather than a rules-based person. A
lot of people need rules, but you
can get around rules, especially by
hiring a very good lawyer,” she said.
“If you’re principles-based, you are
motivated to do the right thing at
all times. I know rules are necessary
to give people structure, but a rule
compels you to do what someone
else has deemed right,” she added.
While at the FSA, Huey Evans
also learned a lot about the
regulation and operational aspects
of exchanges and achieving fair and
accurate price formation. “Markets
create prices by establishing an
equilibrium between supply and
demand and these prices do impact
the public. So you don’t want
somebody manipulating the
market by creating an artificial or
false representation of what that
reference price will be,” she said.
After leaving the FSA in 2005,
Huey Evans moved to Citi for three
years, where she had roles
including head of governance, Citi
Alternative Investments EMEA.
In 2008, she became Barclays
Capital vice chair of investment
banking and investment
management, and was responsible
for Barclays’ relationships with
sovereign funds globally.
The approach for the LME role
came through a headhunter. Huey
Evans had met Laura Cha, chair of
the LME’s owner, Hong Kong
Exchanges & Clearing (HKEX),
when they were both regulators
two decades before, and sat on the
Financial Reporting Council with
outgoing chairman Sir Brian
Bender, although the latter did not
play a part in her selection.
Huey Evans had turned down
several opportunities before the
LME job emerged because the
roles did not entice her. But
attracted by the tangible nature of
commodities, Huey Evans said the
‘We have a real draw for her in taking the LME
chair role was the people she would
multitude of be working with. “There’s a great
people who team at the LME – I don’t go
want to hedge anywhere that I don’t like and
respect the people. I have learned
for five, ten, 20 that over the years,” she noted.
years, and they “I understood exchanges
want to do it reasonably well, although that
from today’ would have evolved, and markets is
one aspect of my background. The
LME is a unique market and it will
be a challenge to understand all the
nuances – clearly it will keep the
brain going and make me think
about what the future of our
exchange is,” she added.
Challenges for the LME
Technology will play a critical role
in the LME’s future, Huey Evans
said, with an upgrade of the
exchange’s infrastructure on the
immediate horizon.
“Technology is a key challenge
because we’ve got to do a trading
infrastructure refresh and need to
be on top of those projects,” she
told Metal Market Magazine. “It’s
always the most boring but you
cannot let it go wrong – the risks
are too great. A lot of time will be
spent on that,” she added.
Longer-term, technology is also
at the center of the debate over
the fate of the LME open outcry
trading floor, which continues to
pit proponents of the ring and its
prompt dates system against
modernizers favoring electronic
trade in cash-cleared, monthly
contracts.
The LME has been trialing
different ways of using electronic
closing prices, including via a
volume weighted average price
(VWAP) function, with a decision
on the latter expected soon. “All of
the VWAP, and other trials we’ve
been looking at, are worth trying to
see where you get the best price at
the end of the day. What the
outcome is going to be, it’s too soon
to tell,” Huey Evans said.
“There are a lot of financial
participants who play the economy
but will never play in the ring. They
just want a three-month futures
contract, it’s what they know, it’s
easy, and that’s the way they trade
commodities. We also have a
multitude of people who want to
hedge for five, ten, 20 years, and
they want to do it from today,”
she added.
While the advent of technology
has brought many benefits, it has
meant the relationships aspect of
trading, including knowing your
client and their needs, has faded,
Huey Evans noted. “Before
electronic trading, you knew who
your client was, whether you
trusted them or not, why they were
doing the trade. It was all about
relationships,” she said. “When I
started my business teaching
people about swaps, I went out to
boards of banks and talked about
asset liability management to show
the benefit of offsetting their assets
and their liabilities. That’s kind of
gone away,” she added.
Noting that most markets have
gone electronic, Huey Evans said
that transition has been injurious to
the market in some places while in
other places it is easier to get
transactions done because there is
more transparency. “As much as I
believe in right conduct and I hope
the world is moving toward better
conduct, I’m not so sure it brings
out the best in people when you can
hide behind an electronic system,”
she added.
Similarly the advent of
algorithmic trading has brought
changes to the trading environment,
Huey Evans noted. “Algo traders
have become part of the market
and while they have a role to play,
you can’t allow them to drive the
markets because that’s not a real
market. If you have more volume
from algo trading than actual
underlying business based on
supply and demand, then we’re
doing something wrong,” she said.
Regulation
In the years since the global
financial crisis of 2008-09,
financial markets have seen a
plethora of rules and regulations
designed to prevent a similar crisis
from developing again. But many
markets lament what they see as
over-regulation, a perception that
Huey Evans tends to agree with.
“I do think regulation has gone
overboard. However, I can’t
understand why we didn’t clean
things up sooner. Why does it take
a regulator to tell a company,
‘you’re not doing this well’?
February 2020 | Metal Market Magazine | 21

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Profile
Companies should already have good
governance and processes around
everything they do,” she said.
“Regulators recognized changes
were not made quickly enough.
Therefore, regulators are imposing
more and more rules on the basis that
you can take risk in accordance with
the capital base you have,” she added.
But as additional capital
adequacy requirements have been
imposed, liquidity has reduced in
the markets, she noted. “Those
firms who still run sizeable value at
risk (VAR) positions are making
more money than most and are
becoming dominant players,” she
said. “Trading floors are less risk
taking now than previously, with
risk laid off immediately and a
lot more diversification in terms
of how it is laid off and with
which market participants,”
she added.
But according to Huey Evans,
who is agnostic about which venue
LME members use to trade, the
fate of the floor is not intrinsically
linked to regulation. “Regulation is
unlikely to have anything to do
with the fate of the LME trading
floor; the future of the floor is going
to be determined by the type of
members and participants it has. I
don’t know what the correct future
model is, but I do know that right
now you’ve got floor members
acting both as agent and as
principal for producers,
consumers, hedgers – their
customer base is vast,” she said.
“I’m indifferent really to what
venue is used. What I care about is
price transparency and price
formation, so that when we have an
official close and a closing price,
those prices really represent all
market participants,” she added.
Responsible sourcing
Responsible sourcing, a key topic
for the exchange over the past year
and set to remain so in the future, is
something Huey Evans is prioritizing.
“I believe we all have to do our bit.
Buying something that’s irresponsibly
sourced is the wrong thing to do.
Environmental, social and
corporate governance (ESG) costs
money, but it is essential,” she said.
It is a subject that she is familiar
with; Huey Evans sits on the board
of ConocoPhillips as well as its
‘Regulators audit and public policy committees,
and has worked on various projects
are imposing to drive improved community
more and more relationships and the oil and gas
rules on the major’s sustainability footprint.
“Many of the big mining
basis that you companies are doing the same thing
can take risk [as in oil and gas], but not enough.
in accordance A lot of them are dealing in countries
with the capital that are problematic, and the
monies aren’t going back into the
base you have’ communities, to the artisanal miners,
to the indigenous people,” she said.
“Miners and oil companies need
to have a social license to do business
and they have to pay for it. They
often pay for it to governments, and
then the governments should be
giving back. But also they should be
doing something directly themselves,”
she told Metal Market Magazine.
“I’m truly passionate about it
and I see it works, but we can all do
more. The LME has to put the
pressure on,” she added.
Gender diversity
As the LME’s first woman in the
role of chair, Huey Evans believes
gender diversity is about giving
women a stronger voice in a world
that has been dominated by men. “I
am very keen to address the issue of
how to bring more women into
commodities, starting with the
practical elements of attracting
women with the desired skill-sets
to commodities in the first
instance,” she said.
“Once we have attracted more
women to the industry, we then
have to keep them there – since the
more women we have in leadership
roles the more of an impact it will
have – so we need to look at
sponsorship, mentorship and
succession planning. I’m certain
that greater diversity in
commodities – and of course it
goes beyond gender diversity – will
quite simply lead to greater
success,” she added.
The male-dominated
management of mining companies
typically require senior staff to live
and work at operating assets
around the world – something that
Huey Evans said is a further
constraint on women’s careers.
“There’s a debate – people whose
careers have come up that way
think it’s absolutely essential to
know how your operations work,
and you can’t just do it from central
office. It’s not always convenient,
it’s not always safe, but it’s still part
of the mindset,” she noted.
“So boards have to say, ‘do we
really think that is necessary?’ It
requires women who are willing to
travel, and families that can go with
them or be split up. That discussion
is part of the problem still,” she added.
Huey Evans carved her own path
through hard work and sheer
determination, and admits it is
“super hard to do it on your own,
and far better to have someone to
support you.”
“I felt strongly enough about
getting home at a certain hour – it
was still super late – but at least I
could put my daughter to bed and
try to read her a story when I was
home. Then I’d get back on the phone
and work from home at night,” she
recalled. “People would say, ‘but
you’re not sticking around at the
office, you’re leaving early.’ It
didn’t matter that I worked until
very late at home. That was the
pressure. It probably half killed me,
but I did it. Should I have done it?
I don’t know. It was a lot of hard
work,” she added.
Huey Evans said that at some
point as a child her daughter
Alexandra, now a script writer in
Los Angeles, resented that she was
not around as much as other
parents. “In hindsight my daughter
has said she really appreciates what
I did. That recognition came when
she got to around 15. When you’re
younger it’s not so easy,” she added.
She is hopeful that she can help
spearhead diversity and inclusion
because she is in a position where
the LME can do something about
it. The exchange recently held its
first ever Women in Commodities
lunch, bringing together women
from across the industry.
“I’m extremely supported by our
chief executive officer Matt
Chamberlain, who’s done a great
job within the LME of making sure
it has a balance of women. The
LME gender pay gap is done well,
although yes, we can always raise it
and look for more parity, so more
senior women are needed in
certain positions,” she said.
“Chairman or chairwoman? I
don’t care what you call me, the job
is still the same,” she added.
February 2020 | Metal Market Magazine | 23
Steel
Industry challenges
in Mexico
The Mexican steel market faces a variety of
headwinds, but industry observers have a degree
of optimism that conditions will improve this year,
reports Myra Pinkham
While the Mexican steel market
continues to face a number of
challenges, some industry
observers are expressing at least a
measure of optimism that things
will improve with the expected
ratification of the US-Mexico-
Canada Agreement (USMCA)
upgrade of the North American
Free Trade Agreement (Nafta)
trade pact. Even so, it is very
likely that any improvement
will be gradual.
“It is very common for the
Mexican steel industry to have
ebbs and flows,” Al Zapanta,
president and CEO of the
US-Mexico Chamber of
Commerce, said, given that many
Mexican metals producers,
including steel producers, tend to
24 | Metal Market Magazine | February 2020
be relatively small by comparison
with those elsewhere in the world.
In addition, many of the smaller
producers have been acquired by
larger, foreign companies.
Over the last few years, some
forecasts indicated that the
Mexican steel market would be
booming, bolstered by the auto
market, which is one of its key
end- use sectors, Christopher
Plummer, managing director of
Metal Strategies Inc., noted, but
those predictions have not
materialized.
Instead, after peaking in 2017,
both Mexican steel production
and demand have been declining
since then. Canacero, the Mexican
steel trade association, reports
that in 2019 the country’s raw
SHUTTERSTOCK
steel production declined by 7.7%
to 18.7 million tonnes, its finished
steel production fell by 9.3% to
17.7 million tonnes, and its
apparent steel consumption fell by
5.7% to 26.9 million tonnes on the
back of a 6.1% decline in the
apparent consumption of
products containing finished steel.
Marina Maliushkina, a senior
analyst for Fastmarkets MB
research, said the decline in
Mexican steel output included an
11% decline in flat-rolled
products. She said there was also a
sharp fall in long-product output,
down by 10% during the same
period, but that sector has been
supported to some extent by an
increase in rebar exports to the
Uncertainties over US. This has been helped by the
the future levels combination of the removal of
of investment antidumping duties on some rebar
in Mexico’s producers and of Mexican steel
infrastructure are Section 232 tariffs last year. She
one factor weighing noted, however, that while
on the outlook Mexican steel exports to the US
for country’s have picked up with the removal
steel markets of the Section 232 tariffs, the
increase has not been dramatic
as there is a mechanism by
which those tariffs could be
re-introduced if there is a surge
in imports.
According to Canacero, total
Mexican finished steel imports
were down by 1.6% last year to
10.0 million tonnes, while total
Mexican steel exports were 3.4
million tonnes, a 10.6% decline.
Maliushkina said that the
weakness in the Mexican steel
market is not that surprising,
given that during the first half of
2019 the Mexican economy had
fallen into a recession for the first
time since the global financial
crisis. While there was some
growth later in the year, it is
believed that for the full year 2019
Mexican GDP was essentially flat.
Potential improvements
Zapanta said that both the
Mexican economy and the
Mexican steel market are likely to
improve once the USMCA is
ratified. It has already been
accepted by the US and Mexico,
and was also expected to get a
green light in Canada shortly after
its parliament resumes business at
the end of January. He said that is
largely because of the trade
agreement’s expected positive
impact upon the Mexican
automotive market and the
amount of domestic steel used in
light vehicles produced in Mexico.
Benjamín Zermeño Zirión,
president of the Mexico-based
Serviacero Worthington steel
service center joint venture,
agreed, stating that he believes
that once the USMCA is ratified it
will result in more confidence in
the Mexican economy and that, in
turn, will result in greater
investment in Mexico –not only
in its automotive sector, but in
other steel-consuming industrial
markets as well. He said that is one
reason that the Mexican
government is predicting 2% GDP
growth this year.
It remains to be seen whether
such GDP growth will indeed
occur, especially amid concerns
held by some observers that the
administration of the new
Mexican president, Andrés
Manuel López Obrador, may not
‘There is a be particularly business friendly.
Plummer noted that it has been
question of described as being more
how much nationalist or socialist than the
the Mexican previous administration. Zapanta
government will pointed out that the Obrador
administration has stopped
allow private several major infrastructure
investors to go construction projects, including
into the energy the building of a new airport in
Mexico City. Zirión said, “There is
sector going a question of how much the
forward’ Mexican government will allow
private investors to go into the
energy sector going forward.”
Plummer said that given these
factors and certain trends in the
major end-use markets, he
believes that Mexican steel
apparent consumption could
decline moderately again this
year, possibly by about 3%.
Despite the possible positive
impact of the USMCA,
Maliushkina said that the growth
of Mexican manufacturing
activity is expected to remain at
just below 1% in 2020. This is a
deceleration from the rate of
growth seen between 2014 and
2018. She also noted that the IHS
Markit Mexican manufacturing
purchasing managers index (PMI)
was pointing to a contraction of
the manufacturing sector at the
end of 2019.
While the PMI had been below
50% for seven of the past 12
months, it fell to 47.1% in
December – its lowest level since
2011. In a press statement on the
PMI data, Pollyanna De Lima,
IHS Markit’s principal economist
at IHS Markit said, “So far, it’s
difficult to see a light at the end of
the tunnel and any meaningful
rebound in 2020. In fact,
businesses are at their least
optimistic towards growth
prospects in the series history,
with many concerned about
lingering uncertainty, a lack of
investments and ongoing troubles
in the automotive sector.”
Maliushkina said that last year
there was also a 5% decline in
Mexican construction activity –
the sector which accounts for
about 60% of domestic steel use.
She said that included a 6%
decline in public works
construction and a 4.5% fall in
residential construction.
A large contributing factor to
the weakness in public works
construction was the cancellation
of the Mexico City airport project,
which Zirión said reduced
demand for steel long products.
“This year, however, construction
activity will either pick up
somewhat or at least it won’t be
quite as bad as it was in 2019,”
he predicted.
That depends upon whether the
Mexican government begins
working more with the private
sector to promote incremental
investment in the nation’s
infrastructure, which has been
declining over the past six to seven
years, Máximo Vedoya, Ternium
S.A.’s chief executive officer, said
during the company’s third-
quarter earnings conference call.
He said that while it remains
uncertain whether infrastructure
investment will pick up in 2020, it
should do so by 2021.
Automotive is another major
Mexican steel end-use market,
which, according to Canacero’s
website, accounted for 10.6% of
Mexican steel use in 2018. Even
though Mexican automotive
production was down by 4%
year-to-date through November,
Plummer said the impact upon
steel use was partially offset by
the mix of vehicles produced,
given that Mexican light truck
output – which contains 80-90%
more steel – was up by 2.8%
year-to-date.
Plummer said that the fact that
in November total Mexican auto
output was down 13.7% year-on-
year bodes poorly for the short- to
medium-term outlook.
Maliushkina said that not only
have Mexican local sales
continued to be weak, buy also
auto exports, which had been
propping up Mexican auto
production earlier last year, have
been declining on an annual basis
since August.
Plummer said that given that
about 80% of the light vehicles
produced in Mexico are exported,
the automotive supply chain,
including for steel and other
metals and components, is very
complex and is affected by trade
issues and other global
uncertainties.
February 2020 | Metal Market Magazine | 25
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Steel
USMCA impacts
The expected imminent
ratification of the USMCA is
expected to have a positive impact
upon Mexican steel market,
Zapanta said, especially given that
it mandates that 75% of the
content for autos and other
transportation equipment is
sourced from North America.
However, Zirión said it might be
hard for Mexico to comply with
the domestic content
requirements, given the
percentage of scrap and steel slabs
that are imported into Mexico.
Scrap might be the lesser problem,
Plummer said, given that about
75% of Mexican crude steel is
produced by EAFs and some mills
use as much as 95% direct reduced
iron in their charge – most of
which is sourced locally.
Slab imports could be more of a
challenge. Zirión said they could
necessitate the building of
additional new steelmaking
capacity to produce more
domestic slabs, although he said
there have not been any such
announcements yet.
Maliushkina said that the
ratification of the USMCA could
also result in more auto-related
investments in Mexico, because it
will be removing the uncertainty
that automakers faced while the
deal was still under negotiation.
But given the complexity of the
auto supply chain, including
multi-year and multi-decade
supply chain arrangements,
Plummer said that it will take a
while for this to benefit the
Mexican auto market and steel
suppliers to that market.
Maliushkina agreed, stating that
while Mexican auto output is
forecast to drop by 3% again this
year, it could start picking up
in 2021.
At the same time, she observed
that some US steel mills located,
or locating, close to the border are
hoping to benefit from the
long-term growth prospects of the
Mexican auto market. That
includes the recently announced
Sinton, Texas, flat-rolled steel mill
to be built by Steel Dynamics Inc.
(SDI), which is expected to start
up in mid-2021. Mark Millett,
SDI’s president and CEO, said
‘Mexican during the company’s third-
quarter earnings conference call
steel demand, that “meaningful increases in
however, Mexico’s manufacturing base” is
will remain one of the factors supporting his
challenging in company’s US and Mexico
growth strategy.
2020 for both Plummer estimated that about
flat and long 30-40% of the Sinton mill’s
products’ output, much as is already the case
with the existing Calvert joint
venture mill of ArcelorMittal and
Nippon Steel in Alabama, will be
targeting Mexican automotive
and other high-end markets. The
same could be true if Big River
Steel decided to build a second
facility in Brownsville, Texas, as
many speculate will happen.
Domestic capacity grows
There have also been some
investments in additional
Mexican steelmaking capacity,
largely based on the belief that the
Mexican automotive sector will
grow over the long term. Plummer
observed that Ternium recently
brought a second, 430,000 tonne
per year, hot-dip galvanizing
(HDG) line online at its Tenigal
automotive joint venture site, and
it is in the midst of building a new
4.1 million tonne per year hot
strip mill in Pesqueria, near
Monterrey. It is slated to come
online in late 2020 or early 2021,
to supply Tenigal with hot-band
feedstock, replacing the hot-rolled
coil that would otherwise come
from Japan.
ArcelorMittal is building a new
2.5 million tonne per year hot
strip mill in Lazaro Cardenas,
which is expected to come online
mid-year. Plummer estimated
that somewhere between 1.5
million and 2 million tonnes of
that output is targeted for the
automotive market. In addition,
Grupo Simec is in the process of
bringing online a 600,000 tonne
per year special bar and wire rod
plant in Apizaco, Tlaxcala, and the
Nucor-JFE Steel Mexico joint
venture recently commissioned a
400,000 tonne per year hot-dip
galvanizing line at its new plant in
Silao, Guanajuato.
Over the past three years
several steel service centers made
significant investments in Mexico,
anticipating that by 2021 Mexican
auto output, which is currently a
little over 3.7 million light vehicles
per year, would increase to close
to 5 million units per year. But
Zirión said that since the growth
in that market has been less than
anticipated, many Mexican
service centers and processors are
experiencing overcapacity.
The energy sector
The Mexican energy sector has
recently seen limited investment,
although the country’s drill rig
count was up by 158% year on
year in 2018 and up by another
31% year to date through October.
Plummer said that it has helped
that over the past two years, under
its previous administration, the
Mexican government had opened
up drilling through Petroleos
Mexicanos (Pemex), the state-
owned petroleum company, to
international bidders for the
first time.
“But there are concerns that the
Obrador administration could put
significant constraints both on
private investment on that and on
the building of energy
transmission pipelines,” Zirión
said. Plummer said that would be a
mistake given that, with both oil
and natural gas prices being much
more expensive in Mexico than in
the US, there is a clear need for
more pipelines between the two
countries. Plummer said that
Mexican pipe and tube
production only accounts for 1.5%
of the country’s apparent finished
steel consumption since about
79% of the tubular products
produced in the country are
exported.
Maliushkina said that while
2019 was a tough year for the
Mexican steel market because of
all the uncertainty related to
demand and trade issues, it helped
that steel exports began to pick up
in the second half. “That should
continue this year with US steel
prices – especially flat-roll prices
– maintaining their upward
momentum in early 2020,” she
said. “Mexican steel demand,
however, will remain challenging
in 2020 for both flat and long
products with both construction
activity and automotive output
expected to decline.”
February 2020 | Metal Market Magazine | 27
Steel
The dynamics of
scrap in SE Asia
Multiple factors are bearing on the dynamics of
ferrous scrap markets in southeast Asia, which scrap
trader Hoffman Iron & Steel is looking to as a key
area of growth for its business. Paul Lim asked CEO
Philip Hoffman about the outlook for the region
“There’s a lot going on in Southeast
Asia, such as expanding electric-arc
furnace (EAF) and Induction
Furnace (IF) capacities in Vietnam
and other IF capacity sent from
China to countries such as Indonesia
and the Philippines, so there has
been and will continue to be an
increase in demand for ferrous scrap
in the near term,” Philip Hoffman,
CEO of ferrous scrap trader
Hoffman Iron & Steel told
Fastmarkets MB.
Vietnam imported 5.65 million
tonnes of ferrous scrap in 2018, up
by 19.6% year on year as a result of
capacity expansions in the country,
notably at EAF-based steel mills
such as Vina Kyoei Steel (VKS),
POSCO and Tung Ho Steel
Vietnam, and IF-based mill Anh
Hung Tuong Steel.
Chinese sellers have also sent
dismantled IFs to be rebuilt in
Southeast Asia after the Chinese
government shut down illegally run
IFs in the country amid an ongoing
drive to cut excess capacity and
increase the quality of finished steel
for the country’s domestic markets.
Hoffman Iron & Steel is
capitalizing on the new
opportunities by partnering with
major Japanese scrapyard
Shimabun Corporation to expand
its sales volumes in Malaysia,
Indonesia, Thailand, Vietnam and
Bangladesh from 2019 onwards.
“Japanese scrap has a strong
position in the market and some
28 | Metal Market Magazine | February 2020
mills prefer Japanese scrap
compared with other imported
scrap. While there are different
Japanese exporters and producers
with varying qualities of product,
Shimabun Corporation has a good
mix of high-quality scrap, including
heavy melting scrap (HMS) 1&2,
shredded and Shindachi scrap,”
Hoffman said.
Their scrap processing facilities
and export material also sit on top of
concrete, which reduces the dirt and
dust on the ferrous scrap, thereby
reducing the number of claims a
trader may face from buyers unhappy
with the quality of scrap received.
“In addition, while ferrous scrap
from other origins such as Hong
Kong may be cheaper, they need
more processing such as additional
cutting,” Hoffman said.
Shimabun Corporation produces
about 200,000 tonnes of ferrous
scrap a month, or an estimated 2.4-3
million tonnes per year, through
scrap processing facilities at Kobe,
Kure and Kagawa, and storage
facilities at Hyogo, Chiba,
Kanagawa, Fukui, Kyoto and
Kagawa and Yokohama Port.
Competition from BF mills
While some market observers may
expect the new demand for scrap to
support prices in the near-term, the
increasing emergence of blast
furnace (BF)-based steelmakers in
the region will also put a cap on
downstream finished steel prices.
New BF-based long steel
production capacities include
Pomina Steel Corp in Vung Tau,
Vietnam, Gunung Garuda in
Cikarang, Indonesia, and Formosa
Ha Tinh Steel Corp in Ha Tinh
Vietnam, which is gradually
increasing its steel production.
There are plans for more integrated
BF-based steel mills in Malaysia and
Indonesia.
“There is equal pressure on the
finished steel side by BF-based
operators,” said Hoffman. He noted
that Vietnam’s Formosa Ha Tinh
Steel Corp and Hoa Phat Group are
supplying billet in the domestic
Vietnam market at very economical
HOFFMAN IRON & STEEL
prices to compete with EAF-based
producers such as VKS, Tung Ho
and An Hung Tuong Steel. “They
are also exporting long steel
products to the Philippines,”
“We know the Hoffman said.
Asian scrap business “While the new BF-based
very well,” said capacities may not be all that
Philip Hoffman significant in the overall production
numbers, these new capacities will
still have an impact on the Asian
ferrous scrap markets and put a cap
on scrap prices,” he said.
Possible new investments
Hoffman Iron & Steel is optimistic
about growth in the region and plans
to continue very much focusing on
the Southeast Asian markets despite
the twin challenges of competitive
iron-ore based hot metal costs and
weak demand from downstream
finished steel markets.
It has studied setting up its own
new scrap processing capacity in
light of the growing opportunities it
sees in the region and is investing in
scrap equipment and a new yard in
Southeast Asia, due to be running by
the end of February. “There is big
potential for this [and] we already
know the Asian markets very well,”
Hoffman said.
On top of the new partnership
with Shimabun Corporation,
Hoffman Iron & Steel is also
continuing to expand its current
business of moving US-origin scrap
to the region by increasing the
quantity of its US-origin scrap
exports to other countries and
diversify the number of Asian
destinations to which it can move
ferrous scrap cargoes.
“We know the Asian scrap
business very well; we know the
quality of scrap from suppliers and
we supervise the loading and
discharge of ferrous scrap cargoes
personally. We don’t simply just
pick up the phone and try to
make deals, and that’s why
Shimabun gave us the new
business,” Hoffman said.
Bangladesh is another big market
the company wants to focus on.
“Bangladesh is increasing its steel
capacity with at least one new steel
mill and existing mills that are
expanding. The country is also
paying high prices for ferrous scrap
now because of logistical
complications shippers face, for
example, the possibility of
demurrage and opaque payment
terms. So, it is quite good business
for traders,” he said.
China’s impact
China is unlikely to have an
immediate impact on ferrous scrap
trade flows in the mid-term,
Hoffman said, because of its ongoing
drive to “modernize” its scrap
markets. For example, in 2017
significant tonnages of Chinese
scrap was being sold on the black
market into Vietnam and other
countries, but the Chinese
government soon got wind of the
tax-avoidance scheme and arrested
over 100 Chinese sellers and traders.
“China is developing its ferrous
scrap markets to be more
modernized and market-driven and
the Chinese government considers
scrap metal a strategic raw material,
so I don’t see China exporting
significant amounts of scrap in the
near term,” Hoffman said.
‘China is There is also ample room for
BF-based steel mills in China to
developing increase the amount of scrap they
its ferrous can feed into their furnaces. “There
scrap markets can be at least a 5% more increase in
to be more ferrous scrap usage in the short term
from the current 15%, depending on
modernized which part of China you are looking
and market- at,” Hoffman said.
driven’ The new policy rulings of
replacing BFs with EAFs will ensure
that China continues to consume
ferrous scrap, with the Chinese
government likely to consider it a
strategic material and limit exports.
“What’s more, China wants to move
up the supply value chain and export
value-added products, and employ
more people in doing so, instead of
exporting raw materials,” Hoffman
continued.
However, ongoing trade tensions,
as well as multiple trade defenses
faced by both steel exporting and
importing countries, continue to
cast a bearish pall on the global
economy and steel markets. “And
with more steel capacity coming to
Southeast Asia, there will likely be
more trade defenses coming to keep
Chinese steel imports out, so I
foresee more duties on China-origin
steel in the coming years,”
Hoffman said.
Indonesian regulations
New regulations in Indonesia on
ferrous scrap are another influence
over the region’s markets.
Confirmed by the Indonesian
government, they stipulate that
ferrous scrap imports must be
shipped directly from the exporting
country. While transshipments are
allowed, the seals on containers
must not be broken at transit ports.
The threshold on impurities has
also been increased to 2%, according
to market sources. Sellers must also
have registered subsidiaries in
countries where the ferrous scrap
originates from.
The new regulations also mean
that some companies will have to
scramble to register subsidiaries in
the countries where their ferrous
scrap supply originates from.
“There may be Asian trading
companies without subsidiaries in
the United States, or Indian trading
companies which do not have
subsidiaries in Japan. They may have
to jump through hoops to get
themselves registered quickly,”
Hoffman said.
In the meantime, market shares
may shift in favor of companies that
are already registered entities with
the Indonesian ministry of trade and
have a handle on their own scrap
supply. “Certainly, these companies
will see an increase in market share.
In fact, trading has already resumed
and sellers have started closing
deals, especially as the IF-based
steelmakers in Indonesia need
high-quality scrap to melt,”
Hoffman said.
Clawing back market share by
others who are late to attain the new
regulatory standards may be
achieved by offering sweeter
financing deals compared with
competitors. “There’s still a way to
attract customers even if you are late
getting back into the game. Some
trading companies allow their
customers to pay on a telegraphic
transfer basis, which is more
attractive compared to repayment
terms on an letter of credit basis,”
Hoffman said.
The outlook for the Indonesian
scrap and steel market continues to
be fluid, especially for the second
half of 2019. “No one knows how
the situation will pan out, but it is
likely that the regular buying
volumes will resume eventually.
There’s no way the Indonesian steel
mills, especially the IF-based ones,
will be able to stay away from buying
imported scrap,” Hoffman said.
The stable demand from the
downstream steelmaking industry
will also support prices for imported
material. “China is unlikely to export
large quantities in 2020, especially
as China is continuing to clamp
down on capacity expansions. So,
Indonesian steelmakers will
continue to face stable demand from
domestic buyers,” Hoffman said.
He cited the example of
Indonesia’s plan to shift its capital
from Jakarta to East Kalimantan
province on Borneo Island. “A good
amount of steel will be used in the
shifting of the capital, as well as in
other infrastructural projects which
are slated to start in the near future,
such as improving waste water
treatment and flood prevention
aqueducts in Jakarta. So steel
demand will continue to increase,”
Hoffman concluded.
February 2020 | Metal Market Magazine | 29
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Steel
A long-term vision
for manufacturing
Many metal components are made by machining
away material to deliver the finished part, but it is
time-consuming to create optimal programs for
the modern machine tools used. CloudNC is
striving to revolutionize the business of machining
at its one-year-old factory in Chelmsford, UK,
where Richard Barrett met Theo Saville,
co-founder and CEO, to discuss progress
Picture a solid block of high-quality
stainless steel, which might be half a
cubic meter or more in volume,
costing many thousands of dollars.
Now imagine that your task is to
drill multiple holes in all six surfaces
of that cube, of various precise
diameters – some threaded and
others plain – making sure in the
process that some connect up to
create channels, but also
guaranteeing that others are separated
from their neighbours by a pre-set
minimum thickness of steel.
Such complex components are
needed for applications in
industrial-scale hydraulic or
gas-mixer blocks, through which
gases or fluids pass at high pressure.
Finished component failure in use
is clearly unthinkable.
The creation of components like
these – and a myriad of others that
are beyond the capabilities of
foundry-casting or 3D printing
technology – still depends on the
milling, turning, drilling and
grinding processes used to make
them for decades.
While the speed, accuracy and
reliability of the CNC machines
that remove metal to create a
finished part have steadily advanced
in recent years, programming them
to undertake a sequence of steps to
arrive at the desired products has,
until recently, remained the domain
32 | Metal Market Magazine | February 2020
of skilled human programmers.
While their experience will create a
machining program to do the job,
its creation can take many hours
and the physical production of the
part itself many hours more of
machining time.
At the core of CloudNC’s
business is its development of
software using complex
mathematics and artificial
intelligence to consider the huge
number of different sequences of
machining steps that could be used
to create a given part in order to
find an optimal one, consequently
reducing both the programming
and machining time needed to
make any given component.
CloudNC CEO Theo Saville said
that even the best and most
experienced human machine-tool
programmers will not find the
optimal order in which to use the
tools. “They will not. It is too
difficult. If you take the best CAM
programmer in the world and give
them three months to create the
perfect CAM program for a
component, that is something that
now we can get pretty close to, but
in the future we will be able to far
exceed. Because anything that a
human can do to make a CAM
program go faster, our software can
do every single time with no effort
required,” he said.
CLOUDNC
“The iteration cycle
for improvements,
which is what
we’re all about, is
incredibly fast,”
said Theo Saville,
CloudNC CEO
“And then we can go beyond
what people would think to do…
That is where the opportunity
comes from because there are so
many ways of doing it,” he added.
The factory floor
The new light and bright industrial
unit that CloudNC moved into a
year ago is very different from the
rather dark, cramped and oily
image engendered by factory
workshops of old. It serves as both a
test-bed to develop the company’s
CAM programming software and
as a commercial supplier of
metal components.
At the time of Metal Market
Magazine’s visit towards the end of
2019, CloudNC had 11 CNC
machines in operation and had
more on order. After set-up, each
drilling, milling and turning
machine whirs and hums away
unattended. While the machines’
human minders can observe
progress through the transparent
safety doors behind which each
machine gets on with work, each
workpiece is automatically
positioned during machining while
robotic arms take care of selecting
and replacing the tools needed at
each step of the sequence.
The company works with clients’
standard CAD files showing
tolerances and any supplementary
information. “We’d love it if
everybody used model-based
definition instead of 2D drawings,
and then the tolerances are in the
3D file, but nobody really uses it
yet,” said Saville.
Clients sometimes need
guidance from CloudNC’s
manufacturing engineers if they are
requesting machining steps that are
very difficult or impossible.
“Sometimes you get threads that
have gone all the way to the bottom
of a hole and you cannot do that – it
is basically not possible. Well, you
can do it, but it is awkward, difficult
and prone to error because you
have to do it by hand – you cannot
get it done by a machine,” Saville
gave as an example.
Each part starts life as a metal
blank on storage racks: squares,
billet, cylinders, plates, rounds –
some already water-jet cut if they
comprise chunky, hard-to-remove
material. The material is loaded on
to trolleys with the right cutting
tools, CAM program and inspection
plan assigned before it is released to
the shop floor for transfer to a
machine, which is then set up to run
that job, programmed and loaded.
The first part produced is checked
for quality, and occasionally
sampled, before it is ready to be
despatched to the customer.
“We try to narrow that chain of
events to be as tight as possible,”
said Saville. CloudNC has a few
different types of machine,
including robo-drills and lathes.
“Robo-drills can make things like
iPhone chassis for Apple. They are
very good mass-production
machines and are very quick. They
are not hugely versatile, but are
incredibly fast for what they do
within their capabilities,”
he explained.
Within the range of equipment
at its factory, CloudNC has 5-axis
DMG Mori DMU 60Evo
machines. “They are very advanced
and can make basically anything that
you want for any industry that you
want,” Saville said.
At the time of Metal Market
Magazine’s visit, an aerospace
component was one of the items
being machined, with an automated
changeover of cutting tools in process.
“The thing about these machines,
and what makes them so good, is
that they are unbelievably fast
considering their size and the amount
of weight they have to move
around,” Saville observed. Each of
the machines holds about 120
different tools, kept in a carousel for
rapid access and storage.
It might take one of the factory's
machines ten hours to make a
multi-channel gas-mixer block
from stainless steel if programmed
in conventional ways, “because
material like that is so hard to cut,”
Saville explained. “Our software
will reduce that time substantially. I
would expect that part to be
produced in half the time if
programmed by CloudNC, which
means you can double the yield of
the machine in a day, and eventually
quadruple it. That is the value-add
of the programs that we build –
take an off-the-shelf machine and
make it four to eight times more
productive than you would achieve
in a traditional factory. That means
Metal supply chain improvements needed
CloudNC machines standard alloys of aluminium material in time. I would like to be able to get
and steel, and occasionally titanium. “We will be any material within 24 hours in the right
getting into aerospace grade nickel-based size required.”
super-alloys over time,” said Saville, noting that CloudNC also does a certain amount of
the company has also machined copper and brass. processing of customers’ own material. “If you
“Ultimately it’s about what our customers want.” start working with the very high-end aerospace
He said that the company wants to do business and automotive companies, it becomes
with its supply chain upstream in the same way increasingly likely that they will give you the
that CloudNC wants to provide business to its material [to work with] because they don’t want
customers – in an automated and flexible way. the surprises,” Saville added.
“We want the purchasing of metals to be Material quality can also be poor. “For
completely effectively commoditized, so that example, we’ve had experience of billet turning
buying metal is like buying something off up with immense porosity inside it – you start
Amazon. I know that it is going to turn up. I know machining it and a huge hole opens up,” Saville
that the price is very good. I know that the quality recalled.
is going to be perfect as well.” He noted that, for the entire industry, 5% of the
Saville said that these things do not always revenue of a typical workshop goes to the cost of
happen. “The most important thing to us is the scrap. “If a part wanders out of tolerance, you
same thing for our customers, which is that could make 100 scrap units before you realise
material arrives on time and it is correct.” what is happening – if you don’t have the right
In CloudNC’s experience, material is sensors in place to check it.”
sometimes delivered that has been cut in a way He added that since software does not make
that actually makes it very difficult to process, or it mistakes, it will not create scrap components.
is not the size ordered. “There are good suppliers “More than 99% of the time, a scrapped
out there, but they inevitably have longer lead component is down to human error. A broken
times as they are the ones that do it right,” machine is down to human error. The machines
said Saville. do not go wrong very often. If a cutting tool
“We will get there as an industry, but it’s a implodes, that was probably a human error – it is
shame that they are not there yet. It makes it very rare that there was a defect within that
harder for us to deliver on the promises that we cutting tool. It all comes back to people and their
give to our customers if we are unable to get the decisions,” Saville concluded.
that we get to make more margin CloudNC has already produced
and our customers get lower prices.” hundreds of different types of
CloudNC’s biggest CNC machine component and thousands of units.
is a DMG Mori DMU 95 monoblock, Saville said that CloudNC’s factory
which can make parts almost a meter is nowhere near full. “This is 11
cubed, weighing over a tonne. machines and we could probably go
The company has hundreds of up to 40,” he noted. The machines
different cutting tools at its are leased rather than owned.
machines’ disposal. “We can use Moving a machine requires a
them in any order, with any specialized forklift truck and
machining parameters, at any recommissioning it takes a couple
depth, speed and coolant, so it is a of days. The factory layout was
huge problem to work out the best reconfigured in late-2019 within
way of using these to get to your the space of three days.
target component,” Saville stressed. “This building will probably be
“In terms of time saving, we’ve full in less than a year, but there is a
benchmarked the technology in its lot of space here,” Saville added.
current state on supported About 40-50% of the
components as being about twice as components being made by
fast, so the cycle time is halved and CloudNC now are already
you’d get double the number of amenable to automation – a
‘We want the components out of a machine in a percentage that Saville said will
purchasing of day than you would have done. We continue to grow as the company’s
metals to be will increase that by 3x and 4x and software increases its capabilities.
then, on some really complex He was unable to be specific
completely components, probably 8-10x. But about which of the components
effectively on average you’re talking about that CloudNC has produced to date
commoditized’ several times faster in the future.” gave him the greatest sense of
February 2020 | Metal Market Magazine | 33
Steel
pride, beyond saying that certain
aerospace and military applications
are amongst them. The company
has also made some components
for satellites.
“When we want to make
components that are outside the
usual envelope of automation, we
have very highly skilled people
here to do things that software
cannot,” he added.
On a mission
Saville sees CloudNC’s work as
part of a much broader, long-term
mission for the future of
manufacturing.
“When many people think
about the next industrial
revolution, they are talking about
the industrial internet of things,
sensors and putting machines on
line. They are thinking about 3D
printing and new manufacturing
processes,” said Saville.
“We see it a little bit differently.
The new industrial revolution will
come from the full automation of
all of the traditional manufacturing
equipment types: lathes, milling
machines, punches, presses,
bending and cutting machines. All
these different pieces of
manufacturing equipment that
many people already assume are
already automatic are anything
but,” he stressed. “They all require
a highly skilled human operator.”
“If you set foot in a factory, that
factory is going to be filled with
people making very complex
decisions on an hourly basis to keep
it running efficiently,” he added.
“I think that in a hundred years
from now this will all be completely
autonomous – you will set foot in a
factory and there will not be any
people in them. The only question
is how long it is actually going to
take to achieve that.”
He compared that vision with
the difficulties of trying to find a
good supplier of a run of, say, 100
metal components now, noting
that it could take as long as 5-10
days to get a quote. “It’s probably
going to take 6-12 weeks for the
parts to come, and possibly even
longer if the factory is very good
and in demand. We estimate that
there is roughly a 1 in 10 chance
that the order will not arrive on time,”
he added, also noting that indicators
34 | Metal Market Magazine | February 2020
CLOUDNC
CloudNC has a wide suggest that one in ten orders
range of tools at would have a quality issue in it.
its factory He said that the price is likely to
be higher than it needs to be. “So
I’m going to have a terrible
customer experience, probably I’m
going to be waiting a very long
time, paying more money than I
need to for a product that is lower
quality than it could be.”
For Saville, the future of
manufacturing should be: “I’ve got
a 3D design. Probably some
generative CAD designed it with
me – or designed it completely
automatically – and the whole
time it was speaking to a
manufacturing service, probably
through an API [application
programming interface], to fathom
out how much it is going to cost to
make, and optimized to make it
cheaper, better and in the right
factories.”
Someone wanting to buy that
component will then already have
a price, which they had for the
whole time they were designing it,
and a lead time. “I just need to
click, and then instantly a factory
– or a network of factories – is
spinning up and pulling all of the
materials and tools that they need
further down this automatic
supply chain into that factory to
produce and get it to me in days, or
even hours,” Saville envisaged.
He drew a parallel to other
industries, saying that web hosting
is a very good example. “Before
Amazon web services, there was an
incredibly fragmented market
where there were very many players,
it was expensive, a little bit unreliable
and difficult to access, generally
awkward and inconvenient,”
he noted.
“Then Amazon came on to the
scene with AWS. It is vertically
integrated. It is extremely cheap,
reliable, and incredibly flexible – if
you want to spin up one computer,
fine, if you want to spin up a
thousand you can do that. It was
better than anything that came
before it and that new kind of
service drove the consolidation of
that industry to what we see
today,” with Google and Microsoft
as two more major players. “It has
gone from an incredibly
fragmented market to near total
consolidation in the space of just
over a decade.”
“I think that the same thing will
happen to manufacturing over
time,” Saville added. He believes it
will probably be slower for
manufacturing, but that ultimately
the industry will consolidate, as
driven by technology. “Technology
is a great un-leveller in this kind of
thing. There comes a point when
certain technologies can be
developed that are disruptive
enough but also expensive enough
that they can let a few key players
dominate the field,” he explained.
Another comparison is with
web-based hotel-booking sites that
have undermined the pricing
power of individual hotels. By
contrast, “In manufacturing,
because quality and reliability of
delivery and price are so incredibly
inconsistent from supplier to
supplier, you can’t easily do a
marketplace approach; because if
you order the same part from ten
factories, you’ll get ten different
parts, levels of service and different
prices,” he observed. “A
marketplace with the current state
of affairs is very difficult,” he added.
“Now, if all the machines were
automatic and they all performed
consistently, regardless of which
factory you chose, then we would
be in a perfect scenario to have a
marketplace which had all of the
pricing power. The whole industry
would become commoditized and
a lot more competitive, but I don’t
see that happening without
technology of the likes that we are
building,” he stressed.
Cheaper too
CloudNC generally aims to be
10-25% cheaper than its
competitors, at the same sort of
level of quality and service.
“So, we don’t aim to be 25%
cheaper than ‘Fred in a shed’
knocking out washers on his
50-year-old lathe, but we do aim to
be 25% cheaper than a reasonably
advanced machine shop doing
work for aerospace, or oil & gas or
medical,” said Saville.
Noting that there are different
tiers of the market, he said that
ultimately, as the company’s
technology improves, CloudNC
will be able to be 25% cheaper than
‘Fred in the shed’, but explained
that the business is, at present,
focused very much on aerospace-
grade quality delivered extremely
reliably at a price point that is
below the competition.
CloudNC prefers orders to make
medium- to large-batches of
components. Its clients are in
aerospace, automotive, defense, oil
& gas and others, but he said, “Our
sweet-spot is not so much in [a
particular] industry – it’s the
customer size. If the customer is in
the £10-100 million ($13-130
million) revenue range and they
outsource CNC machining, they
are by definition our ideal customer.”
Making rapid progress
CloudNC is still at the investment
phase of its development at
present, “and it will be for years,”
said Saville. “We bring on new
backers around every 18 months as
we step up in terms of what kind of
company we are.”
CloudNC has already completed
several successful rounds of
fund-raising and will be raising
more capital in 2020. The
capitalization of the company was
around £20 million at the time of
Metal Market Magazine’s visit in
late-2019 and Saville expects it to
be nearer £50 million soon.
While acknowledging that some
others have looked at the concept
of using artificial intelligence in
machining, Saville said that, “As far
as we can see, excluding any
stealth-mode start-ups, we appear
to have been the only people in the
world to have made progress on
this technology.”
“It’s an incredibly challenging
problem technologically – it is not
something that you can solve with
an army of software engineers just
by throwing them at the problem
and saying ‘go fix it’.” He said that
progress has demanded a lot of
deep R&D and computer science
to push the boundaries of what
computers are able to do in order
to get traction on this problem.
“For the first three years and
eight months of the company we
could not realistically make
CLOUDNC
anything commercially with our
CloudNC’s factory software. It’s only recently, within
floor serves as the past few months, that we’ve
both a test-bed been able to start extracting value
to develop the out of this,” Saville said in
company’s CAM November last year.
programming “We started in this factory
software and as before the software actually
a commercial worked. We knew it was going to
supplier of metal take a while to work out how to
components build a manufacturing company at
the same time as well as a software
engineering company and then
when they both became ready we
could start melding them together,
and that inflection point was hit a
few months ago.”
Saville said that at the top end of
the machine tool market, machine
performance between different
machine builders is relatively close.
“They perform extremely well.
They are relatively
commoditized,” he said.
But while they are all good in
terms of hardware, he sees plenty
of room for improvement in
simplifying their ease of use through
better software. “Ultimately what
we want to produce here is the perfect
factory blueprint. You just rent
empty spaces, fill them with machines
and our system, and then it’s done
and making money and it’s
scalable. It doesn’t require much to
expand at incredible speed then.”
CloudNC doubled in size over
2019 to 80 employees. “Ultimately
this company is nothing without its
people, so we have built the
recruitment engine that brings in
the very best people in the world
and keeps them happy, keeps them
developed and focused on the right
things that they are retained –
because you can’t solve this
problem if your staff are changing
over every week,” said Saville.
“I sometimes think that it would
be easier if we were just a software
engineering company,” he smiled.
“This is one of the barriers to entry.
If you want to solve this problem,
you have to build software and you
have to own and operate factories
– that in itself is hard, but doing
those at the same time, whilst
scaling them up at the same time,
that is incredibly challenging.”
“The management is important:
it is critical to the success of a
company,” he stressed. “I think
that sometimes people look at
technology and think that
technology will save them, but
then the company is nothing but its
tech. No, if you take a tech
company and you remove all the
people the technology becomes
worthless,” he added.
There are two sides to
CloudNC’s factory: the production
teams, who actually run the
machines, generate revenue and
satisfy the company’s customers,
but also the software team and the
continuous improvement teams.
“The iteration cycle for
improvements, which is what
we’re all about, is incredibly fast,”
said Saville. “We can get towards
that future perfect factory layout
and perfect factory systems as
quickly as possible, and supporting
them is the software team. When it
is not enough to rearrange how a
process works physically, we can
layer in digitally over the top of it,”
he explained.
“It is a never-ending journey –
the search for manufacturing
perfection – but I think that we
will be well beyond world class at
that point,” he added.
What attracts customers to
CloudNC now? “Being able to
come here and see that we are
visibly different to anything else
that they have seen in this industry
really draws them in – that and the
price. The image and the price
brings them in, and then the
quality and reliability keeps them
here,” Saville answered.
He added that many people in
the industry already believed in the
approach that CloudNC is taking
even before the company existed:
“It should be automatic, it should
be faster, it should be better, it
should be cheaper,” and they
asked: “Why is the industry not
like this?”
“We are very impatient. That is
what drives us,” he concluded.
February 2020 | Metal Market Magazine | 35
Steel
India rebalances
coal supply
India is diversifying its sources of coal,
reports Kunal Bose
India’s coal supplies need to rise in tandem with the growth of its steel industry
Tata Steel managing director TV Narendran
has noted that India is “uniquely placed”
among all steel-producing countries where
“you have the benefit of locally available raw
materials, particularly good quality iron ore
and a domestic market to become bigger
and bigger.”
In contrast, Narendran added, “Brazil,
Russia and Australia have raw materials
aplenty but they don’t have a big market for
steel. We too have an edge over China
which, though it has a large market and
many times bigger steelmaking capacity
than ours, doesn’t have the quality of iron
ore found in our country.”
While Narendran’s analysis is correct, a
fact also remains that to the extent India
makes steel by using the blast furnace and
basic oxygen furnace (BF-BOF) route, it has
a growing dependence on imports of
metallurgical coal.
Coal minister Pralhad Joshi recently told
India’s Parliament that as the “supply of
high-quality low- ash coking coal from
domestic sources is limited, the country is
left with no option but to resort to coking
coal imports in very large quantities.” Tata
Steel and the government-owned Steel
Authority of India Limited (SAIL) have
their coking coal mines in the country, but
they too must import coal for blending with
what is locally available for BF use.
36 | Metal Market Magazine | February 2020
SHUTTERSTOCK
India’s imports of metallurgical coal are
rising yearly in step with the growing
production of steel through the BF-BOF
route. Imports were up, to 51.84 million
tonnes, in 2018-19 from 47 million tonnes
in the previous year. In the first six months
up to September of the current financial
year, imports amounted to 26.35 million
tonnes. The country also imports around 5
million tonnes of coke, principally for use by
pig iron producers and in mini-BFs. DRI
units and EAFs are also required to
supplement domestic supply of non-coking
coal by imports on a regular basis.
Domestic output
Joshi and his officers said the government is
nudging the state-owned monopoly Coal
India Limited (CIL) to step up production of
metallurgical coal on an urgent basis and at
the same time install nine new coal washeries
by 2021 to enhance the domestic supply of
better-quality fuel. The minister claimed
that as a result of the government’s push,
“supply of washed coking coal to the steel
industry will be up to 15 million tonnes in
the next three years from 1.6 million tonnes
now.” Around 85% of the country’s present
requirement of coking coal is met by imports.
The steel policy enacted in 2017 says that
every attempt has to be made to bring down
metallurgical coal import dependence to
65% by 2030-31 when the country aspires
to have steelmaking capacity of 300 million
tonnes per year, in order to be able to
produce 255 million tonnes of steel. In both
capacity and production, the BF-BOF route
will have a share of 60-65%.
The 2017 policy forecast for raw materials
requirements for the industry to produce
255 million tonnes of steel in 2030-31, on
the basis of a respective share of 65% for the
BF-BOF stream and 35% for EAF/induction
route are: coking coal, 161 million tonnes;
PCI, 31 million tonnes; DRI, 105 million
tonnes; and iron ore 437 million tonnes. In
the event that the country achieves the
challenging target of 35% self-reliance in
coking coal by 2030-31, import requirements
would be a hefty 104.65 million tonnes.
Moreover, pulverized coal needed for
injection in BFs will require large imports too.
Patterns of imports
Citing the examples of Japan and South
Korea, which are heavily import dependent
for all their steelmaking ingredients, Indian
industry officials said they do not anticipate
any problems in growing capacity of the
BF-BOF route of steelmaking at a rapid
pace based on the reality of mostly using
imported coking coal. Expressing similar
thoughts, Rasika Chaube, additional steel
secretary, said at a recent Delhi conference
on ‘Diversification of risk in coking coal
imports – the Russian option’, “The concern
has never been unavoidability of coking coal
imports. What worries us is our continuing
overdependence on a single source for
buying the fuel.”
It is widely known that until three years
ago as much as 88% of India’s imports
originated in Australia. However, resulting
from recent moves by steelmakers in India
to buy the fuel from Canada and the US as
well, Australia’s share in Indian imports was
down to 71%, or approximately 37 million
tonnes, in 2018-19. Coal ministry data show
that imports from Canada last year
amounted to 4.29 million tonnes, or 8.27%
of India-bound shipments from all sources.
Supplies from the US were 4.13 million
tonnes, or 8% of total imports.
India’s efforts to diversify coking coal
import sources are unsettling for the
Australian coal industry since India is an
important destination for its metallurgical
coal. New Delhi has declared that it will seek
long-term relationships with producers of
metallurgical coal in Russia and Mongolia.
That Canberra is not taking New Delhi’s
moves lightly is borne out by several
high-level visits, including Australian
ministers’ meetings with Indian steel
minister Dharmendra Pradhan.
 Quoting data from the Office of the Chief
Economist (OCE) of Australia, an official of
the Indian Chamber of Commerce (ICC)
said: “In Australia’s coking coal exports of
185 million tonnes in 2019, we happened to
be the most important destination. OCE has
forecast Australian exports of 195 million
tonnes in 2020 and 199 million tonnes in
the following year. As India’s steel capacity
and production are set to rise, so will its
import demand for coking coal. Expect
Australian coal producers to try very hard
not to let other producer-exporter nations
make any major dent in their share of the
Indian market.”
Wariness about India’s heavy
dependence on Australia as its biggest
source of coal comes in part from when
exports to India have been affected by
damage or delay to Australian rail lines and
ports caused by severe weather events.
Indian steel mills recall the unwelcome
consequences they faced last year when
cyclone Trevor, followed quickly by
Veronica, pummelled Queensland, which
has a high share of global seaborne supplies
of metallurgical coal. Before that, the raw
materials management of Indian
steelmakers was impacted when Australian
coal production centres fell victim to cyclone
Debbie and Yasie. An Indian industry
official said: “Such dislocation in supplies
always comes out of the blue. The only way
we can avoid production disruptions when
Australian mines are hit by natural disasters
is by maintaining very large coal inventories.
But that is an expensive proposition.”
This and also the general question of the
commercial wisdom of being overly
dependent on a dominant geographical
source of supply when other options are
available have stimulated India’s exploration
of import opportunities from Russia and
Mongolia, said the director general of Indian
Steel Association Dr Bhaskar Chatterjee.
Mongolian connections
Interestingly, prime minister Narendra
Modi himself initiated the country’s search
for new supply sources when he made a
commitment to build a railway line in
Mongolia to facilitate coal transportation
from mines to ports. Modi also announced a
$1bn line of credit for infrastructure
development in the far eastern region of
Russia, which could be valuable if India
starts importing coking coal from there in
growing quantities.
A Confederation of Indian Industry
official said: “China in its attempt to secure
access to natural resources in Africa gave
liberal financial and technological assistance
to quite a few countries in that continent to
build infrastructure, including road, rail line
and ports for low-cost evacuation of
minerals for export. What we are planning
to do in Mongolia and the Russian far east is
what China is doing in several resource-rich
countries with success.”
Pradhan is nudging Indian steel
companies to explore the possibility of
becoming regular buyers of coking coal
from Mongolia. Following the visit of
Mongolian president Khalmaagiin Battulga
accompanied by a high level business
delegation in September 2019, Pradhan
believes that Mongolia does not want to be
exclusively dependent on China for coking
coal exports and would like to “do business
with us.” Almost all of Mongolia’s coking
coal is exported to China at present. The
country has a share of about 43% of total
imports of coking coal by China. Mongolia
and Australia have an almost equal share of
China’s coal imports.
An Indian industry official who recently
studied the Mongolian coal industry said:
“The country primarily exports raw and
unwashed coking coal. As a result, it receives
much lower prices than Australia where coal
is washed and blended before exports. This,
however, should not be the case since Mongolia
too has a good range of coal products to
allow blending. Mongolian producers will as
much welcome Indian investment in
infrastructure building as our expertise in
blending. In our interaction with them we
have said that they stand to get much better
prices provided washed coal is blended
according to customer requirements.”
Officials of the Mongolian Coal Association
told Indian industry representatives that
coal, both non-coking and metallurgical,
which accounts for one-third of the
country’s overall export income, is facing
growing competition in the world market,
made worse by logistical handicaps to
exporting the material. As Ulaanbaatar has
received assistance from China to build
infrastructure linked to coal exports, it is
likely to expect similar aid from India.
Relations with Russia
“In his keenness to build new coking coal
import points, the minister [Pradhan] is
particularly targeting Mongolia and Russia,
both with rich endowment of resources.
Russia, which built Bhilai, Bokaro and more
recently Vizag steel plants, has a long
association with the Indian steel industry.
Historically, we have close political and
economic ties with Russia. Modi’s visit to
the resource-rich far eastern region of
Russia in September 2019, the first by an
Indian prime minister, laid the ground for
our initiating talks with Russian producer-
exporters of metallurgical coal. Discussions
held under the auspices of ISA between
Indian importers and Russian suppliers in
November have started yielding positive
results,” said Dr Chatterjee, adding that
some leading steelmakers are keen to have a
long-term relationship with the Russian
coal industry.
Russia has started sending coking coal to
India on an “experimental basis” and
steelmakers in India have achieved good
results by using blends of Indian and Russian
coal. “We are open to buying Russian coal
on a regular basis provided we have
assurances of supply security, competitive
prices and efficient logistics at the exporter
end. We will need hard coking coal,
semi-soft coking coal and PCI coal,” said a
Tata Steel official. He also said: “Tata Steel is
using Russian PCI at its European mills. So
we have some familiarity with Russian coal.”
Other Indian steelmakers, such as JSW
Steel, Vedanta Resources, JSPL and
government-owned SAIL and Vizag Steel,
are interested in doing business with Russia.
The CEO of the Far East Investment &
Export Agency, Leonid Petukhov, said on
the sidelines of the Delhi conference that he
would like to see equity participation of
Indian companies in Russian mining
groups. The funds thus secured would be
used to expand mining operations and
improve port facilities.
Indian steelmakers need ports to be
developed so as to be able to receive very
large ships and the efficient export of coal
from mines to ports. According to
Petukhov, “most Russian coal producers
have ports. But they need serious
investment in modernization and
expansion. So our compulsion [is] to seek
equity investment from Indian companies.”
Talks between Indian government and
industry officials with Russian counterparts
about issues relating to ports and
infrastructure development have taken
place and have made some progress.
A coal ministry official said that CIL is
negotiating with VostokCoal-Diskon about
letting the Indian company participate in
the extraction of coking coal at the Taymyr
coal basin in central Siberia for import.
VostokCoal has over the past four years
developed two deposits in the region with
potential to generate 30 million tonnes of
coal per year. A challenge will be the
transportation of the coal, since for part of
the year the sea route to India has floating
ice, which requires icebreaker vessels to
provide safe passage for coal-carrying ships.
Whatever the challenges, Mongolia and
Russia look set to emerge as significant
suppliers of metallurgical coal to India.
February 2020 | Metal Market Magazine | 37
Risk management

SHUTTERSTOCK
Progress in the use
of steel derivatives
As international exchanges continue to encourage supply chain integrating price risk
management tools into their
trade in their ferrous contracts, Richard Barrett asks business.” Pool is now working
with multiple steelmakers to help
market experts for their views on progress in steel them implement a strategy. As a
sector, steel mills are showing the
price risk management over the past year and biggest growth of new interest,
the outlook for 2020 Price noted.
That interest is coming from
EAF-based mills in particular.
Speaking with Metal Market number of new participants Price added that they are using
Magazine a year ago, Phillip making test trades, including one scrap derivatives at the feedstock
Price, steel derivatives expert, or two mills. end of their business, but are also
and since then founder of Pool, One year on, he said in January Customers for price generating more liquidity in the
said that he had seen a sea change 2020 that the trend and risk management LME’s rebar contract.
in the steel sector’s attitude momentum have continued: come from along Tim Stevenson, founding
towards price risk management, “There is an even wider range of the full ferrous partner of commodity advisory
hedging and derivatives, with a participants from across the supply chain firm Metal Edge Partners, said

38 | Metal Market Magazine | February 2020

that the first step taken by his firm
to help customers with price risk
management is to do a full risk
assessment of their business. “We
need to adequately understand
their risks and opportunities,
what they want to achieve from
price risk management, and then
quantify it.”
For steel, Metal Edge mainly
works with the North American
flat-rolled sector, which often
makes use of CME’s Midwest
hot-rolled coil contract, but
can work with any of the range
of ferrous derivative contracts
available.
Customers come from along
the full steel supply chain,
including service centers,
distributors and OEMs.
Acknowledging an ongoing
reticence by some participants in
the steel supply chain to embrace
the use of ferrous derivatives as a
tool for price risk management,
Stevenson recalled the similar
reluctance by major primary
aluminium companies years ago,
who now view the use of LME
aluminium prices as an integral
part of their business.
He confirmed that some US
steelmakers have embraced price
risk management now and that
volumes of trade in ferrous
futures contracts have increased
as a consequence. “It’s just a
matter of time before it is
understood and adopted,” said
Stevenson, noting that innovative
steelmaker Big River Steel has
been one of the US steel
producers to lead the way.
Some steelmakers focus on
managing price risk in their raw
material supply, but Stevenson
said that adoption of the process
on the revenue side of their
business – that is the steel
products sold – will come too.
“Some of the banks will encourage
them,” he noted, as reduced
price risk also de-risks the
lending profile.
Education still needed
US service center Priefert Steel
has a successful history of
providing fixed prices to some of
its customers on long-term
contracts by deploying price risk
management, and it has helped
Update on risk management in iron ore
To serve as an efficient risk management The recent changes in iron ore’s derivatives
venue, a derivatives market needs to focus markets is a reminder that this is still an
liquidity, whilst also minimizing basis risk. In industry undergoing a rapid evolution.
practical terms, this means balancing the Introduction of options trading and
need to mirror the physical market’s pricing expansion of physical delivery choices on
practices, whilst limiting the number of China’s DCE iron ore contract were also
contracts to avoid scattering interest. significant developments in 2019, following
Prior to the launch of the 65% Fe SGX the ‘internationalization’ of the renminbi-
derivative in December 2018, iron ore’s paper settled futures market a year earlier.
market had begun to look rather one-dimensional Indeed, the dynamic and respective roles of
when compared with the diversity of pricing the ‘onshore’ and ‘offshore’ derivative venues
mechanisms that had become adopted in is still something that the market is getting to
physical trade. In short, the market had grips with. The remarkable speculative
outgrown a derivatives ecosystem that still liquidity of the DCE contract undoubtedly
reflected the pricing landscape at the time of influences price action elsewhere in the
its inception nearly a decade earlier – that is, market. But it is the ‘offshore’ SGX contracts,
focused on the 62% Fe grade. which settle against the same indices used in
The new SGX contract changed this. Its seaborne trade, that are generally used by
introduction enabled industry participants to those looking to hedge real physical exposure.
properly hedge exposure to the high-grade Going forward, more adaptation in risk
portion of the market – a segment comprising management tools can be expected to be seen
fines, concentrates and pellets, and which as the market continues to evolve. The trend
Fastmarkets estimates accounts for nearly towards more product-aligned pricing in the
40% of total iron ore production. physical market will see exchanges called
Price spreads between different grades of upon to develop new contracts to help buyers
iron ore have become wider and more volatile and sellers better manage their exposure, and
in recent years in response to cyclical again the balance between liquidity and basis
fluctuations in mill profitability and a more risk will be tested.
structural tightening of environmental Illustrations of this are the growing physical
protection policies in China, increasing the volumes now linked to Fastmarkets MB’s
need for more product-aligned hedging tools. 62% Fe Low Alumina Index, as well as to its
The success of the high-grade contract is 66% Fe Concentrate Index. The relevance of
evidence of the market’s organic need for it. the latter in particular is set to grow over the
Around 20 million tonnes of futures have longer term as environmentally cleaner
been cleared in its first year since launch, and beneficiated ores increasingly replace tonnes
SGX reports that over 60 individual entities from ageing ‘direct-ship’ operations.
have been actively involved in its trading. Peter Hannah
those clients to understand the end of last year, with steel
its merits. imports held at bay by tariffs, US
Last year’s market conditions mills looked to raise prices. “Then
were not so conducive to making they call,” Shipp said. “There is
such arrangements however, hope for the future, with an uptick
noted Chris Shipp, Priefert Steel’s from November onwards,”
vice president supply chain. He he added.
said that 2019 was a challenge for Since the demand for fixed-
steel business: “When customers price contracts was impacted by
saw that steel price falls continued US steel market conditions in
throughout last year, apart from a 2019, Shipp’s sense is that the
short blip up in August, they were overall depth and breadth of
not so concerned with locking knowledge about price risk
prices in.” He noted that US steel management in the US steel
prices fell almost continuously for sector is similar to the level at the
14 months. beginning of last year.
“Providing education about The fact that long-term
price risk management to strategic price risk management is
customers in a falling market is a really about locking in margins,
challenge,” he explained, since regardless of price direction,
clients hold off buying in the suggests that there is still a need
expectation of lower prices. By for the kind of education that
February 2020 | Metal Market Magazine | 39
Risk management

As Price noted last year,

The growing importance of Asian ferrous scrap derivatives companies new to hedging also
As a Fastmarkets MB whitepaper on the The uniformity of ferrous scrap grades such need advice about choice of
evolution of Asia’s ferrous scrap markets as heavy melt No1 and No2 (80:20) also trading venue, clearing, interaction
identified – amid governmental policy makes this steelmaking raw material more with banks and the relative merits
changes and with economies in the region “commoditizable” than its downstream of trading electronically, by phone
continuing to develop rapidly against a products, which have a wide range of or over-the-counter.
backdrop of international trade tensions – specifications in terms of chemical Stevenson said that companies
Asia’s ferrous scrap import prices are prime composition and physical size. can bring in experienced risk
contenders for derivatives contracts for The ferrous scrap market is also more traders, analysts and a risk
traders and scrapyards to hedge their price developed in the use of term contracts, with manager, or sometimes the CFO
risks. Some market participants have called steel mills looking to ensure that their can dedicate some of their time to
for a derivatives contract based on meltshops have a steady supply of raw materials managing price risk.
Fastmarkets MB’s cfr Vietnam or cfr Taiwan by entering into short- and long-term contracts “Our value proposition is that
containerized scrap price assessment to be with traders and scrapyards or purchasing we can replace some or all of the
listed on regional exchanges for use as a spot cargoes using published price indices to skill sets of these three at a more
hedging mechanism. Fastmarkets intends to mitigate fluctuations in spot price. reasonable price,” Stevenson
increase its coverage of the Asian scrap This segment of the ferrous market is also explained. Metal Edge can
markets by launching more price assessments becoming more accepting of futures trading. educate sales, finance and trading
and analyses this year. For instance, scrapyards are increasingly staff and facilitate OTC trading.
Those requests were in addition to looking to hedge their price risks via “We help them set up,” he
discussions by market participants to use the exchange-listed derivatives to lock in their explained, providing, for
Fastmarkets MB cfr Vietnam bulk scrap margins and reduce the chances of losses example, a position statement and
import price in physical contracts for term when prices take an unfavorable turn. a value-at-risk statement. “All of
and spot cargoes sold into Vietnam and other Lastly, scrapyards and shippers need to our customers had no trader when
countries in Southeast Asia. export their cargoes to maintain cash flows we first met them,” he recalled.
The ferrous scrap markets are suitable for and reduce inventory levels. This is in stark Once they have made a start,
benchmarking and exchange-listing because contrast to major integrated steel mills, which clients are supported with
of constant, regular trade flows, where the can choose to keep their cargoes for their on-going analysis of supply,
presence of key markets such as Vietnam, domestic markets when the margins there are demand and production data to
Taiwan, Japan and South Korea set the comparatively higher or to export large give their own business the
benchmark prices for the region to follow. quantities when prices peak abroad. context of the big market picture.
For customers wanting it, Metal
Edge also provides trade
Priefert Steel can offer its clients. Relative value arbitrage execution.
The company is an active user of between the prices along the Priefert Steel is both a service
US Midwest hot-rolled coil supply chain then help to center and a steel fabricator/
futures – something the company facilitate comprehensive price manufacturer, “So we are our own
has continued to help some of its risk management. The LME’s customer,” Shipp noted. That
clients with, despite the market scrap and rebar contracts provide means that on-going education of
conditions over the past year. one example, and CME’s US Priefert’s own staff on how price
busheling scrap and hot-rolled risk management fits into the
Approaches taken coil contracts another, Price company’s business strategy
Price reminded that the concept noted, adding that geographical is valued.
of a “virtual steel mill” has been spread trading, such as between “We did it more for ourselves
around for a long time. In that hot-rolled coil prices in Europe, than for others last year,” said
concept, the main steps in the the US and Asia provide further Shipp. He explained that the
supply chain – from raw material opportunities. HRC and rebar company’s own hedging strategy
inputs, through semis to finished contracts offered in Shanghai enables it to fix its own product
products – are represented by can be used for physical market prices for a year or more. “Our
corresponding derivative hedging in the onshore markets ability to promote fixed prices for
products, which can be used in China too. stock gives us a competitive
for hedging. Industrial hedgers are advantage,” he pointed out.
“Unlike base metals, the steel interested too, Price noted, Price said that he is seeing a
sector is more complex in terms of extending existing hedging in raw shift towards industrial hedgers
how the supply chain works,” said materials, including coking coal getting the right people in place to
Price. No single instrument is and iron ore as well as scrap, to achieve price risk management:
enough on its own to achieve products with similar price “There is more openness towards
effective price risk management, volatility downstream. “As a the use of derivatives.” He sees a
he added. “What’s needed is a steelmaker, there is not much trend for steel companies to
virtual steel supply chain from point in solely hedging raw train their own staff in risk
mine to end-user in order to materials unless you are fixing management, rather than
fully hedge.” prices on products too.” bring in people from other sectors.

40 | Metal Market Magazine | February 2020

 He also observed growing
interest from commodity trading
companies that had previously
focused on non-ferrous metals
and energy in ferrous derivatives,
although it is still a step away for
some of these companies. With
the imperative of tackling their
physical price risks, steel
companies are making more
progress at present in Price’s
view.
Gaps in derivative markets
Are more steel derivatives
needed to enhance price risk
management?
The evolving markets and
structural changes in Asian steel
industry have stimulated
discussions about the growth in
provision of the derivative tools
needed to hedge steelmaking raw
materials in particular (see boxes).
Price sees the growing market
for containerized scrap shipments
to south and southeast Asia as one
ripe for a new derivative contract:
“There is pent-up demand for risk
mitigation and hedging there.
That’s a big one.” Such a contract
will also allow “arbitrage between
the deep sea and containerized
scrap markets and establish a
forward value for containerized
scrap,” he explained.
Another potential area for value
addition is the differential
between hot-rolled coil and
galvanized coil. “The best way to
do that is through a tradable
differential,” said Price. Contracts
based on such differentials could
be offered through the banking
community for commodities
along the length of the main steel
supply chain, including scrap,
iron ore, coking coal, rebar and
hot-rolled coil. He drew a parallel
with futures contracts already
offered for aluminium premiums,
adding that ferrous instruments
would not necessarily need to be
cleared if they were offered OTC.
Stevenson said that a way to
manage cold-rolled coil and/or
galvanized and coated steel is
needed, in addition to
complement the hot-rolled coil
contracts already available. He
envisages something like the
Midwest aluminium premium
contracts already available, which
‘There is pent- allow regional price risk to be
hedged on top of hedging the base
up demand for price for the metal.
risk mitigation For steel, a similar premium
and hedging’ contract for cold-rolled,
galvanized or polymer-coated
steel would not take away from
the existing good liquidity in
hot-rolled coil contracts.
Stevenson also saw merit in a
North American rebar contract.
“It would never be as big as the
hot-rolled coil contract, but there
would be demand for that too,” he
observed.
Shipp agreed that a new
derivative contract based on the
price differential between
hot-rolled coil and cold-rolled,
galvanized and polymer-coated
flat steel products would be
welcome. “The spread between
HRC and CRC has got quite high.
We buy a lot of cold-rolled and
galvanized steel, but we can only
hedge the hot-rolled coil. A new
premium contract would gain
traction,” he said.
Outlook for growth
Price expects that volumes of
trade in the LME’s scrap and
rebar markets will grow over the
coming year as trade in the deep
sea market for scrap climbs. He
also predicts growth in interest
from the construction industry in
price risk management for rebar,
but notes that an open interest
limit on the LME’s rebar contract
acts a cap on volumes in that
market. “Once a solution is
reached for that,” he sees volumes
of trade growing, which should
also feed through to volumes of
trade in the LME’s scrap contract.
Price also forecasts growth in
the US EAF sector, but sees the
Section 232 tariffs limiting that to
domestic operators. If those
tariffs were revised, the US
market would become the subject
of wider international interest
again, he noted. Price also
believes that exchanges
considering launching contracts
for containerized scrap should
have made progress on them by
the end of this year.
Priefert Steel has gained
customers in the automotive and
aerospace sectors by being able to
offer fixed prices, but the
outstanding market for growth
last year was providing tubular
steel framework for supporting
solar panels, particularly in Texas,
Shipp noted.
He explained that long-term,
6-month, contracts with larger
OEMs enabled Priefert to lock in
its own profit and to gain market
share, even in the relatively subdued
market conditions of 2019.
Solar energy was one of the
largest growing markets for
Priefert in 2019 and that sector
continues to look strong for 2020.
“We’ve started 2020 with a
little more optimism than in
2019,” said Shipp, but we’re still a
bit concerned about demand,” he
added. The ISM manufacturing
index has been declining for
almost a year, which is one cause
for concern when trying to
forecast demand, he explained.
While there “may be a little
bump in Q1,” Shipp is fairly
optimistic for Q2-Q4, although
he added: “We’re still just not
ready to say things are a lot
better.” The uncertainties of a US
presidential election year are
another factor making Priefert
Steel very cautious about what
it does.
Shipp recalled that many
service centers bought stock at
the low prices available at the end
of last year, which has left their
inventory levels high. He also
noted that some US steel mills are
reducing output to support steel
prices and that imports to the US
continue to be kept at bay.
He sees the scrap price as an
indicator of things to come,
noting that if ferrous scrap prices
are flat in February that would
signal a continuing challenging
market for steel ahead in Q2-Q4.
Stevenson said that price risk
management is best done as a
long-term strategy and that it is
good to start it when volatility is
low and markets are not faced by
dramatic price changes – bearing
in mind that it takes time to set
things up.
“It’s not for everyone,” he said,
“If you’re in a business where you
can raise your prices [and so pass
price risk on to your customers],
but a lot of customers want fixed
prices,” he concluded.
February 2020 | Metal Market Magazine | 41
Bauxite and alumina
Rebalancing bauxite
and alumina markets
The rebalancing in global bauxite and
alumina markets that began in 2019 was in
sharp contrast to the volatile conditions
that played out for them the year before.
“Alumina prices have fallen on a dollar per
tonne basis and relative to aluminium
prices in 2019. With alumina, 2019 was in
part a reset from the substantial price rise
seen in 2018, as the threat of US sanctions
affecting Rusal was resolved,” recalled
Duncan Hobbs, research director at
Concordia Resources.
Another important driver was Norwegian
aluminium producer Norsk Hydro’s receiving
permission to return to full production at
its big Alunorte alumina refinery in Brazil,
which continued to rebalance market
sentiment in the later part of 2019.
Hydro reports an upbeat stance
following the September 2019 milestone
of the final embargoes on Alunorte being
lifted, which have allowed the company to
resume installation and commissioning
Hydro continues to ramp up production
42 | Metal Market Magazine | February 2020
The global metallurgical bauxite and alumina
markets saw some challenges in 2019, but they
look set to continue rebalancing this year. Long-
term demand for bauxite and alumina is set to
grow in line with the increased need for primary
aluminium output, writes Seema Chaudhary
activities at the new and modern bauxite
residue deposit area, DRS2. “Ramp-up is
proceeding successfully, and we expect to
reach 85-95% capacity utilization in 2020.
Full capacity is expected from 2021,”
president and chief executive Hilde Merete
Aasheim said in the company’s third-
quarter results.
Alunorte is ramping back up to full
capacity and Hydro is seeing good growth
potential for applications for aluminium
NORSK HYDRO
downstream. Alunorte is the world’s
largest alumina refinery, and Hydro
continues to differentiate itself based on its
sustainable footprint.
At Hydro’s Paragominas bauxite mine,
which has a nameplate capacity of 9.9 million
tonnes per year, production is ramping up
to full capacity. The company expects to
return production to pre-curtailment levels
and expects that its fixed costs will be back at
around Q4 2017 levels with full production.
Alumina prices readjust
Meanwhile, alumina prices have corrected
on the expectation of the resumption of full
operation at Hydro’s facility. The Fastmarkets’
alumina index, fob Australia, stood at
$275.18 per tonne on January 17, 2020; a
lot lower than an all-time high of $707.75
per tonne back in April 2018, pushed up to
that level by Hydro’s initial announcement
that its production in Brazil would stop.
Fastmarkets analyst Yang Cao noted that
Australian alumina prices have remained
under pressure in 2020, trading below
$280 per tonne most of the time since last
November: “We believe the main reason is
demand remained weak across the
aluminium supply chain, and buying from
China, which had been supporting alumina
prices in recent weeks, has also slowed down.”
“The alumina market continues to be
oversupplied, and excess units have built
up following Hydro Aluminium’s return to
the market earlier last year. Press Metal’s
25% acquisition of Bintan Alumina
Indonesia (BAI) could add further bearish
pressure to the alumina market, as once the
alumina project is fully operational, Press
Metal will only have 30% of its alumina
needs exposed to the spot market,” said Cao.
In early January 2020, Australia alumina
prices reached parity with China domestic
alumina prices on an import basis. The fact
that Australian prices edged lower and
Chinese alumina prices edged up recently
means that the import arbitrage window
may open again, which is likely to
encourage Chinese imports and therefore
support Australia prices, Cao noted.
“Overall, we believe alumina market
fundamentals, combined with the
lackluster performance of the aluminium
price, is expected to keep alumina prices
under pressure in 2020,” he added.
Meanwhile, Fastmarkets’ bauxite, fob
Guinea, price on January 16 was steady at
$36 per dmtu, up from $35 per dmtu in
mid-October 2019, but still down from the
$37.5 per dmtu seen at the beginning of 2019.
Bauxite, fob Brazil, was largely flat at $36.50
during the first half of 2019, lifting to $37
per dmtu from the second half of last year.
Amidst the items expected to impact
Alcoa’s adjusted Ebitda for quarter one,
2020, in the bauxite segment, adjusted
Ebitda is expected to be $35 million lower,
mainly on lower sales prices and seasonally
lower volumes. In its alumina segment, the
company noted that “lower bauxite, energy
and caustic costs are expected to offset an
unfavorable mix of sales contracts, and lower
volume and higher operating costs due to
seasonal overhauls and maintenance in the
Western Australia refinery system;
additionally, portfolio decisions result in
$5 million sequential benefit.”
In an ongoing effort to streamline its
operating structure and cut costs by selling
assets, Alcoa is focusing on areas where it
has its best positions, including bauxite and
alumina – growing them from an existing
position of industry strength.
Hobbs highlighted the importance of the
balance between the rate of change in
smelter-grade alumina versus primary
aluminium output. Latest production data
estimates from the International Aluminium
Institute (IAI) show the former rising and
the latter falling last year, he said. “Smelter-
grade alumina production was up by 2% from
January to November 2019. If alumina output
rises faster than primary aluminium production,
effectively there is a softening of the market
balance for alumina. That means downward
pressure on alumina prices. Moreover, some
alumina input costs – including bauxite
and caustic soda – have come down.”
China’s aluminium capacity
Hobbs said that the dominant force in the
markets remains China, which has a huge
primary aluminium capacity that puts
pressure on the rest of world. If the country
takes real steps to curtail capacity, financial
markets will surely perceive this as a
positive for the future market balance. “In
the meantime, if margins are good then
China will produce primary aluminium,”
he stressed. “There is therefore not much
that movements at any one western
producer will do on its own in terms of
closures, since none have more than 5-6%
of the market.”
US aluminium industry members have
speculated on the impact of the signing of
the initial phase-one trade agreement on
January 15 between the United States and
China, because of the US administration’s
failure to address Section 232 tariffs. US
aluminium stakeholders continue to be
uncertain about the potential impact of the
phase-one agreement alone and about how
this will affect alumina and bauxite.
Meanwhile, the Aluminum Association
said on January 15: “We congratulate
President Trump and his administration on
this important first step toward a more
balanced trading relationship between
the US and China. As the parties move to
the next phase of negotiations, we strongly
urge negotiators to focus on addressing
the unfairly subsidized overcapacity
that is hurting US aluminium producers
– and impacting the global aluminium
market.”
Despite the uncertainties, overall US
industry sentiment is upbeat as China
pledges to import $78 billion worth of
additional US manufactured goods over
the next two years, including industrial
machinery, iron and steel, and vehicles.
Significant for bauxite/alumina demand
upstream is downstream purchases of
goods such as automobiles, auto parts,
agricultural machinery, medical devices
and semiconductors.
Cao noted that the global economic
slowdown and aluminium demand
weakness was the main theme in 2019,
keeping aluminium prices to below $1,800
per tonne. Now, as the phase-one deal was
signed between the US and China, Cao
believes the aluminium market should
return to balance.
He also said that the Chinese alumina
price has rebounded slightly on the news of
production cuts. Cao expects Chinese
alumina prices to show further modest
increases in the near term, but the recovery
should be limited on the back of the
expectation of oversupply.
In mid-January, Cao said, “Following
14 consecutive weekly declines, Chinese
alumina prices edged higher during the
past two weeks, as a result of the substantial
production cuts in the country. Prices
increased to 2,440 yuan per tonne ($355.7)
on January 16, up from 2,410 yuan per
tonne ($351.3) previously.”
He continued, “We believe the slight
increase in China domestic alumina prices
was due to expectations of some tightness
in the spot market following news of
significant production cuts both in
northern and southern China. Henan
province, for example, has shut 2 million
tonnes per year of alumina refining
capacity in total since November as market
prices fell below production costs.”
It was not alone. “Likewise a refinery in
south China’s Guangxi Zhuang
autonomous region has also recently
suspended a 600,000 tpy production line
due to poor spot prices – the plant was
operating at a capacity of 2.4 million tonnes
per year and now intends to only keep
1.8 million tonnes per year online,”
Cao added.
Mixed outlook
Hobbs noted that while the consensus
expectations for bauxite in 2020 are for a
modest surplus, assessing the supply-
demand balance in the material is quite
difficult because of uncertainties in the
supply-side data. He noted that in China, in
particular, a lack of official statistics leaves
everyone working with estimates only.
Freight costs are tangible and significant.
“The unit value of bauxite is low so the cost
of shipping as a proportion of the delivered
price is high,” Hobbs noted. The freight
cost of shipping bauxite from Guinea to
China might be $20 per tonne. “What this
means is that when thinking about bauxite
price balance, we have to be mindful of the
outlook of dry bulk freight rates, taking
into account the market balance in
shipping as well as the cost of bunker fuel
oil,” Hobbs noted.
Looking further ahead, the
environmental drivers of aluminium
demand look positive – by contrast with
plastics for containers for example – and
that bodes well for alumina too. “Can sheet
demand is good as consumers push back on
environmentally damaging packaging.
Those guys downstream will determine
what material will be used in the future,”
said Hobbs. The recyclability of aluminium
gives it an advantage.
In the shorter term, Fastmarkets Cao
noted that, overall, “We believe alumina
market fundamentals, combined with the
lackluster performance of the aluminium
price, is expected to keep alumina prices
under pressure in 2020.”
February 2020 | Metal Market Magazine | 43
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44 | Metal Market Magazine | February 2020
Bauxite and alumina
Refractory-grade bauxite supply
Weakening refractories business affected trade
flows of Chinese bauxite to international customers,
but the supply tightness in mining and processing
acted as a counterbalance, reports Sybil Pan
The performance of the refractory-
grade bauxite market was closely
linked to supply restrictions in China
in 2019, mainly due to reduced mining
capacity and rigid environmental
constraints. At the same time, a
sluggish end-user refractory market
counterbalanced the supply tightness
to some degree, resulting in a relatively
stable – albeit slightly downward
looking – market in recent months.
Mining of bauxite in Shanxi and
Henan provinces – two of the
major production hubs for
non-metallurgical-grade bauxite
ore in China – has faced regular
interruptions since 2016, as a result
of government efforts to bring an end
to unregulated mining.
In 2017, Beijing’s environmental
inspection body ruled that mines
with an annual bauxite output of less
than 300,000 tonnes would be shut
down, to remove the outdated,
small-scale capacity. That move was
echoed by the government in
Henan province.
In Shanxi province, unauthorized
and unregistered mining operations
were also under the spotlight and
faced a rigid inspection regime, with
action taken at a policy level to
tighten the control of illegal mining.
While governmental efforts to
improve order in the industry is one
reason for bauxite’s supply tightness,
there is also the matter of a reduction
in exploitable resources after years of
unregulated mining. As one bauxite
ore producer in Shanxi province said:
“At least one large-scale mine in
Xiaoyi city [one of Shanxi’s bauxite
mining hubs] experienced depletion.”
The threat of bauxite ore supply
problems is a big cause for concern
for downstream calcination factories.
“At the moment, we can ensure
supply of the 85% and 86% grades of
calcined bauxite. But it’s true that it’s
difficult to source,” a refractory-grade
The price of bauxite, refractory-
grade, 85%/2.0/3.15-3.2 (0-6mm),
fob Xingang, stood at an average of
$420 per tonne at the start of January
in 2019, 8.3% lower than the average
of $455 per tonne at the start of 2018.
The price fell due to sluggish
demand from the refractory sector
Bauxite, refractory-grade, 85%/2.0/3.15-3.2 (0-6mm), into the summer months, and
fob Xingang, $/tonne subsequently flattened for most of
440
the third and fourth quarter on slow
Low price High price
trading conditions.
430
Fastmarkets’ assessment for that
420
grade stood at $385-395 per tonne
410
on January 23, 2020, up slightly
400 following an appreciation of the
390 Chinese yuan compared to the
380 US dollar.
370 The price movement of higher-
9
19
19
19
/19
/19
/19
1/1
2/1
3/1
4/1
5/1
7/1
purity bauxite, refractory-grade,
6/
8/
9/
/10
/11
/12
/0
/0
/0
/0
/0
/0
/0
/0
/0
10
10
10
10
10
10
10
10
10
10
10
10
Source: Fastmarkets IM 86%/2.0/3.15-3.2 (0-6mm), fob
Xingang, was substantially similar to
bauxite producer in China told the lower 85% grade. It started 2019
Fastmarkets, adding that the at an average price of $440 per tonne,
availability of higher purity 87% and 7% down from the average price of
88% grades had been compromised $475 at the beginning of 2018.
by a lack of raw materials for Fastmarkets’ latest assessment for
calcination and a shift in client that grade was $395-420 per tonne
demand to lower grades. on January 23, also up at the beginning
In addition, stricter environmental of the year due to the stronger yuan,
regulations have been interrupting as well as the supply tightness.
calcination operations. “Normal
operation was just for a very short Supply shocks
period [in 2019]. For the remainder “The market as we see it has reached
of the year, we are either upgrading a stable point given the concerns over
the calcination kilns or in production supply and calcination processing,” a
suspension when the air quality refractories trader in China said,
became worse and triggered echoing other views citing broad
emergency response protocols,” a stability in short-term market
second producer said. fundamentals.
Other sources, however, warned
Tight supply and weak demand that the supply disruptions could
The combination of mining create supply shocks as and when
restrictions, resource depletion and demand improved. “On the supply
production shutdowns should have side, some mines in Shanxi are
driven the price of calcined bauxite running out of resources. Meanwhile,
on an upward course, yet prices on the calcination side, the difficulties
slowly ticked down or stayed flat in sourcing raw materials and
throughout 2019. increasing energy costs for natural
Bauxite prices started 2019 at a gas calcination (since calcination with
relatively low level, compared with coal is restricted), would drastically
the start of 2018, after a significant affect the output of the material,” a
price appreciation during the second second refractories trader told
half 2017 due to shortages in China. Fastmarkets.
As it turned out, a weak performance A distributor in Europe said that
by the steel sector outside China in “any pick-up in demand right now
2019 affected demand in most could create short-term supply shocks”
international markets. and that would support market prices.
February 2020 | Metal Market Magazine | 45
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Bauxite and alumina
BFA and WFA
markets decouple
The market for fused alumina has been
characterized by an increasing separation of
brown fused (BFA) and white fused (WFA)
alumina. As these factors strengthen, the
decoupling is expected to drive these
markets further apart in the near term,
writes Davide Ghilotti
The industrial minerals industry has long
been accustomed to seeing the markets for
brown and white fused alumina (BFA,
WFA) moving on largely parallel tracks,
rising and falling based on common
influences affecting the dynamics of both
sectors. But diverging elements have been
at work over the past year, resulting in a
gradual breakdown of that former pattern
and instead supporting independent
directions for BFA and WFA.
Historically, there was a substantial and
ever-present price differential between
cheaper brown fused and more expensive
white fused alumina out of China, the
largest producer of both mineral
commodities.
While the spread between the two has
been quite elastic over the years, based on
supply and demand patterns, WFA has
commonly traded at a premium of $50-100
per tonne over BFA. This was due to the
specifications of the material – WFA has
higher purity than BFA – as well as
processing, with WFA produced out of
smelter-grade alumina (SGA) while BFA
uses calcined bauxite as feedstock.
The years went by with the two markets
moving mostly in parallel, although at an
arm’s length from each other – until
recently, when this relationship rapidly
fell apart.
In December-January 2019, Fastmarkets
was assessing the price of refractory-grade
BFA around $780-800 per tonne fob
China. At that time, the price of refractory-
grade WFA was equivalent to $830-850
per tonne, netted back to an fob China basis.
Fastmarkets assesses the price of WFA
on a cif Europe basis and in euros, to take
into account non-Chinese producers.
That assessment in January 2019 was
€770-840 ($849-926) per tonne delivered
EU port. So at the beginning of last year, the
relationship between cheaper brown and
costlier white fused alumina was
still holding.
Both markets were then affected through
the year by weak performances in
consuming industries, refractories and
industrial production.
Fast-forward to December, and
Fastmarkets’ price assessment for BFA was
down to $710-720 per tonne fob China. At
the same time, quotes for WFA were heard
as low as $680-690 per tonne fob China.
This means that WFA went from a
premium of $50 per tonne over BFA to a
discount of $30 per tonne in the space of
11-12 months.
Diverging dynamics
The driving factor behind this fundamental
change in the fused alumina market was
primarily related to the supply dynamics
affecting production of WFA and BFA,
and the feedstock on which the two
materials rely.
BFA, whose global supply is controlled
by China, is manufactured by processing
high-grade calcined bauxite. This feedstock
is sourced almost entirely domestically in
the East Asian country, in the mining
provinces of Shanxi and Henan. Imported
metallurgical grade bauxite is unsuitable
because its Al2O3 content is far too low.
Beijing put severe restrictions on its
bauxite mining during 2019, as part of its
drive to curb its environmental effects and
to limit illegal mining. The stricter
regulation of mining drastically affected the
availability of material for calcination and,
in turn, the output of feedstock to BFA
plants. This added to other restrictions
imposed on calcination kilns, with many
facilities unable to operate for week-long
stretches over recent months.
All told, BFA production flows have been
intermittent, and able to meet demand only
because order volumes were low
throughout 2019.
Meanwhile, WFA is not derived from
high-grade bauxite, but from smelter-grade
(or Bayer) alumina feedstock, whose supply
situation has been diametrically different.
Bayer alumina has been more readily
available and cheaper to source within
China, owing to oversupply internationally
and sluggish domestic demand. The
country had an estimated 620,000 tonnes
of alumina surplus by November last year.
Additionally, imports of metallurgical-
grade bauxite into China have been on the
rise. In the first six months of 2019, China
imported 52.6 million tonnes of bauxite, an
increase of 30.2% year-on-year. Met-grade
bauxite is refined into smelter-grade
alumina through the Bayer process.
Crucially, this meant that WFA
producers had relatively easy access to
feedstock for their production lines, while
BFA producers struggled to source
expensive, high-grade calcined bauxite for
their plants.
Decoupling to intensify
Although the price of both commodities fell
by a similar order of magnitude during
2019, the historical premium that WFA
had over BFA has been wiped out, and it
now looks to be more competitive in the
eyes of users than the latter material.
Because of the supply patterns and lower
costs, several factories in China switched
production from BFA to WFA where
possible during the third and fourth
quarters of 2019, as Fastmarkets has
previously reported. This would support
the output of white fused material at the
expense of brown, and would put WFA in a
better position to withstand higher demand
flows when the market improves.
With WFA more connected to imported
bauxite, and BFA instead remaining closely
linked to the intermittent availability of
domestic high-grade bauxite, the
decoupling of these two markets is likely to
become more marked. In the near to
medium term, the industry could see more
disjointed supply and pricing patterns
governing white and brown fused alumina,
and these two markets moving along
increasingly separate channels.
February 2020 | Metal Market Magazine | 47
Bauxite and alumina
Impacts of China’s
environmental push
Most provinces in China are still facing strict
environmental restrictions during the winter
months, with raw materials production and
demand from the downstream sector affected
to some degree, report Carrie Shi and Sybil Pan
China’s central government has imposed
strict environmental restrictions and
carried out inspections on heavy
industries since 2019 in provinces
including Shanxi, Liaoning and
Shandong, as part of China’s ‘Blue Sky
Protection Campaign’. This is a three-
year plan, which started in July 2018,
aimed at curbing environmental pollution
and improving the air quality in China.
The government has continued its
environmental push during the 2019-20
autumn-winter season, from November
2019 to March 2020, to support the
results achieved in the past two years.
Most of China’s northern provinces are
now subject to restrictions on key
polluting industries such as steel,
cement, glass and others.
These restrictions by the Chinese
authorities on polluting industries are
now hitting downstream demand for
some refractory raw materials, and have
negatively affected their production. The
markets of these raw materials became
quieter ahead of the Lunar New Year,
with most market participants leaving for
the holidays.
Magnesia in Liaoning
Magnesia is a key raw material for
refractories, which is widely used in kilns
for smelting steel. Production curbs on
end-markets including steel and cement
during the winter heating season have led
to a deterioration of the upstream
magnesia market.
With the Chinese New Year starting on
January 24, factories were due to be
closed until the Lantern Festival, which is
celebrated on the fifteenth day of the first
month in the lunar calendar, marking the
last day of the Chinese New Year
celebrations.
“Demand for magnesia has been affected
by the slow downstream demand due to
the environmental restrictions, and
magnesia prices have been falling sharply
since 2019 until now. With the approach
of the Lunar New Year holiday, the market
has become stagnant with no transactions
seen,” a producer source told Fastmarkets.
Fastmarkets’ price assessment for
magnesia, dead burned, 97.5% MgO,
lump, fob China, was $400-450 per
tonne on January 21, unchanged since
December 17, but down from $1,100-
1,300 per tonne at the start of 2019.
The stricter norms have led to
remarkable signs of innovation in the
magnesia industry. According to the
Anshan Ecological Environment Bureau,
some 1,246 magnesia kilns operated by
116 magnesia companies have been
installed in Haicheng, Liaoning province,
with on-line monitoring equipment. The
data shows that the emission of
pollutants from all these kilns is within
the accepted thresholds.
“The air condition in Haicheng is
better than it was before due to the
environmental inspections, and I think
the environmental inspections will
remain strict in 2020,” a second producer
source said.
Fused alumina and bauxite
Since the Code Red emergency response
protocol at the beginning of November in
Luoyang, Henan province, China’s fused
alumina production hub has been under
rigid environmental regulations.
Factories were closed for the Chinese
New Year holidays, but according to
fused alumina producers in Henan
province, normal production might be
delayed until the end of the winter
shutdown season.
In principle, a mass operation
shutdown will result in a shortage of
supply, which will support prices. But
weak demand from the refractories
sector has offset the tight supply for
brown fused alumina (BFA) and its
feedstock of refractory grade bauxite,
leading to a relatively stable price trend
for both.
Fastmarkets’ fortnightly assessment of
alumina, fused brown, min 95% Al2O3,
refractory sized (0-6mm), fob China, was
at $720-730 per tonne on January 9, up
$10 per tonne or 1.4% from its previously
stable price of $710-720 per tonne.
Meanwhile, bauxite, refractory-grade,
85%/2.0/3.15-3.2 (0-6mm), fob
Xingang, was assessed at $385-395 per
tonne, up $5 per tonne or 1.3% from
$380-390 per tonne, a level it has held at
since the end of October. This price
movement was mainly due to the
appreciation of the Chinese yuan,
according to market participants.
Shandong graphite production
At the beginning of the winter season,
the air quality in Shandong province was
better than that in Henan, but that
situation had changed by the end of the
year. Graphite production in Shandong
was not significantly affected by the
environmental regulations until the
end of December when local air quality
deteriorated, according to market
participants.
This resulted in a suspension of
production until the Chinese New Year
holiday season. But some sources believe
that the environmental curbs were not
the only reason behind the closure of
graphite factories.
“Most graphite producers in
Shandong stopped their production of
the raw material in the second half of
2019 because of a weak end-market
and a depletion of local resources,” a
graphite flake producer in Shandong
province said.
The production suspension, as well as
the seasonal halt in Heilongjiang
province, have contributed to supply
tightness of certain grades of graphite
flake, which has helped offset the
headwind brought about by a weak
end-market.
Fastmarkets’ assessment of graphite
flake 94% C, +100 mesh, fob China,
stood at $690 per tonne on January 16,
unchanged since the middle of
November. Prior to this, the price ticked
up by $10 per tonne or 1.5% on
supply tightness.
February 2020 | Metal Market Magazine | 49
 Market spotlight: Copper
A brighter year
for copper?
A cocktail of market drivers is influencing price prospects for copper.
Myra Pinkham considers the ingredients and discusses their role in
determining an overall picture for the red metal’s outlook
After a challenging year in 2019,
there is some hope that the copper
market could improve in 2020,
helped by somewhat better
market sentiment. That is
supported by what appears to be a
de-escalation of trade tensions on
the back of the US-China Phase 1
trade deal and expectations that
global manufacturing activity,
including in certain copper-
intensive end markets, could
be improving.
50 | Metal Market Magazine | February 2020
Copper supply continues to be
tight – albeit not as tight as it was
last year, given optimism that
there will be fewer mine disruptions
this year. This has led some industry
observers to say that it is likely
that the current market deficit
could grow this year and place at
least modest upward pressure upon
copper prices, assuming there are
not any unforeseen circumstances
that will change the balance or the
market sentiment.
“Even though it was in deficit,
2019 was a real disappointing
year for the global copper
market,” especially in the second
half of the year, John Mothersole,
director of research for IHS
Markit’s pricing and purchasing
service, said. He noted that it was
marked by a combination of both
soft manufacturing activity and a
high degree of inventory
destocking. That, Fastmarkets
MB analysts report in the Base
Metals Tracker, was at least
partially the result of the lingering
US-China trade conflict.
Demand drivers
As a result, according to the latest
data from the International
Copper Study Group (ICSG),
global refined copper usage was
essentially flat – only up 0.15%
– year to date through October,
after increasing by 3.3% to 24.5
SHUTTERSTOCK
million tonnes for the full year in
2018. Carlos Risopatron, ICSG’s
director of economics and
environment, pointed out that
A copper supply refined copper usage has also been
deficit in 2020 could negatively impacted by the
help to support prices increased availability and
for the red metal lower-price copper scrap outside
of China, given the inability to
export most grades of scrap
into China.
Geordie Wilkes, head of
research for Sucden Financial,
said that refined copper
consumption is expected to
increase by about 1% in 2020,
helped by Chinese investment
in 5G wireless technology and
such infrastructure as high-speed
rail, both of which are very copper
intensive. China is said to account
for 50-55% of global refined
copper consumption.
While there are clearly
differences by region, Michael
Widmer, a commodities
strategist for Bank of America
Merrill Lynch, said that copper
demand growth was weaker than
desired in most of the major
regions of the world last year. In
fact, while China had difficulties
stimulating its economy, and
therefore copper consumption,
copper demand actually
contracted in Europe and growth
in the US was also slower year
on year.
Fastmarkets MB analysts said
that, even though the recent
recovery in the global
manufacturing purchasing
managers index (PMI) has been
somewhat shallow, it is
encouraging that it ended last
year in positive territory with a
reading of 50.3% after it
bottomed out at 49.3% in July
– its lowest level since October
2012, with the Phase 1 trade deal
seemingly boosting business
confidence. This, Widmer
observed, comes as the Chinese
manufacturing PMI moved up to
50.2% in December, which he
said is a good sign, as it had been
below the 50% breakeven point
between contraction and
expansion for a good part of
last year.
In 2019, Chinese copper
demand was 12 million tonnes,
Wilkes says. “That could increase
to about 12.5 million tonnes this
year, even though Chinese
GDP growth has been somewhat
disappointing – only 6.1% in
the fourth quarter. He said the
rate of growth will depend upon
China’s investment in the grid
and housing completions, calling
5G investment perhaps the
biggest driver. Also, he said
that last year the Chinese
government used infrastructure
investment to attempt to
elevate its economic growth and
plans to continue doing so
this year.
One thing that was especially
disappointing last year, and that
had a negative impact upon
copper demand, Mothersole
pointed out, was China’s
investment in the state electricity
grid. ICSG’s Risopatron agreed,
noting that most of copper use is
for wire and cable.
But while there has been a lot of
caution in China about spending
on the grid, Widmer said the
spending has actually been
patchy, first increasing 30% year
on year in November 2018 and
then contracting by about 15%
year on year by the second quarter
of 2019.
Wilkes said that Chinese
investments in the state grid were
down last year, which weighed on
copper demand in 2019. He
added that this year’s state grid
investment will be a leading
indicator for Chinese copper
demand, noting that some reports
suggest that such investment
could be down $19 billion in
2020. He said that in coming
years, however, such investment,
which is aimed to assist with
increases in renewable energy, is
likely to pick up, given China’s
desire to transition away from a
fossil-fuel-based economy.
Automotive trends
Wilkes observed that last year was
not a good year for Chinese auto
sales, with destocking limiting the
need for new vehicle output.
Mothersole maintained that the
real disappointment in the
Chinese auto sector was for
electric vehicles (EVs), which
saw a drop in sales because of a
decline in state subsidies for
those vehicles.
Mothersole said that move was
in response to the recognition by
policymakers that the Chinese
auto market is too fragmented
and is in need of consolidation to
make it more efficient and better
able to meet some of the social
initiatives that the government
has staked out. Those include the
desire to increase EV production
and sales as a way of combating
climate change and reducing oil
imports. He said, “While the
Chinese government has been
promoting the building of some of
‘US copper the infrastructure associated with
EVs, such as charging stations,
demand has direct subsidies have been
held up better reduced and/or eliminated.”
than that in Wilkes observed that pure EVs
many other contain an average of 80 kg of
copper, by contrast with about 23
regions given kg for an internal combustion
the resilience engine vehicle and that, according
of its economy’ to the Energy Information
Administration China, accounted
for about half of the EVs
worldwide as of 2018.
Mothersole said the growing
disfavor for diesel-powered
vehicles has been hurting the
European – particularly German
– auto sector and European
copper consumption overall,
which he estimated to have
declined by as much as 5-7%
in 2019.
Regional uncertainties
Wilkes said that European copper
demand has been down, given
that the region’s economy has
been weak and is not expected to
gain much traction in the near
term, although stimulus by the
European Central Bank (ECB)
could help. He noted that the
European manufacturing PMI
was in contraction for most of last
year and was only at 46.3% in
December. He noted that while it
is not quite as bad as it had been,
the German automotive market
remains in decline and is not likely
to see a strong turnaround soon.
But while European copper
demand will likely remain soft in
the first half of this year,
Mothersole predicted that it
could improve, albeit only
modestly, later in the year, helped
by more clarity about Brexit and
the slow positive cumulative
effect of quantitative easing.
“The US copper demand has
held up better than that in many
other regions given the resilience
of its economy,” Wilkes observed,
adding that has been helped by a
recent surge in US housing starts.
“Also, the removal of some of the
uncertainty on the trade front
with the Phase 1 deal could help
to improve business confidence
and consumer confidence,” he
maintained, although he doubted
that it will be followed up with a
Phase 2 deal anytime soon.
February 2020 | Metal Market Magazine | 51
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Market spotlight: Copper
Also, since 2017 US auto market
sales have been declining and it is
unknown how quickly production
will transfer from internal
combustion vehicles to EVs.
Given that the Institute for
Supply Management’s US
manufacturing PMI has been in
negative territory for five
consecutive months, falling to
47.2% in December – its lowest
level since June 2009 –
Mothersole said he believes that
US copper consumption growth
will be a little slower; under 1% in
2020, by contrast with 1.8%
in 2019.
Impacts of supply
Meanwhile, ICSG’s Risopatron
said he believes that one of the
most important developments in
the copper market is not related
to demand, but the fact that
global copper mine production
declined by 0.3% year to date
through October, as he said it is
rare for mine production to
contract. However, he said that he
does not believe that will be
repeated this year. Rather, the
most recent ICSG forecast,
which came out in October, was
for mine production to grow by
2% in 2020 and for global refined
production, which was down
0.3% year to date through
October, to increase about 4.2%
this year.
Widmer said the largest loss of
mine output last year was the
150,000-200,000 tonne decline
in Indonesia due to the
transitioning of Freeport-
McMoRan’s Grasberg Mine from
an open pit to an underground
mine, with another major factor
being mine disruptions that were
the result of political unrest in
Latin America, particularly Peru
and Chile. There were also some
disruptions in the Central Africa
copper belt, particularly in Congo
and Zambia.
The reasons for the disruptions
are quite different from each
other. For example, in Peru they
were due to local discontent over
trucking issues. In October,
miners MMG and Citic Metals
declared force majeure on copper
concentrate supply contracts
from their Las Bambas Mine after
the roads leading to the mine
were blocked.
Meanwhile in Chile, where
copper mine production is down
by about 7% year on year, it is a
very different story. “It isn’t as
much due to discontent with
copper operations, but general
political discontent, including
that related to inequality,”
Widmer said.
“If this situation continues this
year the copper concentrate
market could tighten further,” he
noted, adding that this has also
resulted in increased Chinese
copper concentrate imports and
lower Chinese smelter
profitability. While, at least in the
near term, China’s smelters
continue to operate, Wilkes
said that some could be at risk
going forward.
Mothersole pointed out that
there have also been declines in
Central Africa, with mine
production in Zambia falling
5-8% last year after that country
instituted a new royalty and tax
regime that made mine
operational economics
problematic, and mine
production in the Democratic
Republic of Congo falling by 3%
because of the fragile political
situation there.
Refinery factors
Meanwhile, it is a mixed picture
for refined copper supply.
Widmer observed that there has
been a lot of refining capacity
being built in China, with the
mismatch of mine supply growth
and melting and refining capacity
keeping capacity utilization
rates very low at smelters and
refineries. “That is one reason
that treatment and refining
charges have been quite low,”
he said.
There are other factors as well
affecting refined copper,
Risopatron pointed out, including
that last year there were some
unplanned outages at several
smelters, including in India,
South Korea and Chile, as well as
some problems with
electrowinning plants.
Given these disruptions,
Risopatron said the refined
market is more dependent upon
‘We won’t run Chinese smelters, which could
possibly result in a growing
out of copper, refined copper deficit, depending
as there is upon what happens with demand,
still a lot of and how much copper scrap
copper lying competes with refined copper
outside of China, with scrap
around both availability there increasing on
in and outside the back of declines in exports
of China, but to China.
Also, while they adjust in fits
the deficit will and starts, Mothersole said that
likely grow’ refined copper inventories
continue to be worked down and
are likely to continue to be tight
for at least the first two quarters of
2020, given the continued supply
side weakness. Widmer agreed,
noting that while inventories –
both visible and unreported – are
at a near record low, they will
likely go lower: “We won’t run out
of copper, as there is still a lot of
copper lying around both in and
outside of China, but the deficit
will likely grow, possibly to about
153,000 tonnes from about
70,000 tonnes in 2019.” The
deficit, however, could narrow
somewhat in 2021 as more
mine capacity comes online,
Wilkes said.
Despite the deficit,
Mothersole said copper prices
were quite disappointing for
much of 2019, even though there
was some early optimism, linked
to expectations of an easing of
trade tensions, which helped to
lift LME prices to $6,400-
$6,500/tonne in the first quarter.
Subsequently, prices dipped as
low as $5,600/tonne in the third
quarter, before moving back up to
$6,000-$6,300/tonne in
December and January.
Fastmarkets MB forecasts that it
could average $6,400/tonne in
the first quarter. That, however,
could be affected by some future
developments, including the
potential impact of the
Coronavirus in China and
elsewhere in the world.
“Overall, the physical
conditions in the copper market
should improve in 2020 and 2021
with better, although not great,
consumption growth,”
Mothersole said. “That and
continued sluggish supply-side
growth argues for upward pricing
pressure going forward.”
February 2020 | Metal Market Magazine | 53
 End-user spotlight: Automotive
Autonomous vehicles
gain further traction
The steady but inexorable spread of
autonomous vehicle usage, already deployed
in commercial and industrial settings, has
implications for vehicle designs and their
modes of use that in turn have ramifications
for the choice of materials used to make them,
reports Gregory DL Morris
In November 2019 heavy-equipment
maker Komatsu announced plans to deploy
37 autonomous 930E ultra-class electric
dump trucks as part of an autonomous
haulage system (AHS) at the Carajás iron
mine operated by the big Brazilian resource
company Vale. The trucks will use
Komatsu’s AHS “FrontRunner”
technology, and the initial deployment
started late last year with the goal of
operating 37 trucks autonomously by 2024.
Komatsu opened an AHS training center
near the mine in August 2019 that provides
operations and maintenance training to
local workers. The company said it has
AHS vehicles in operation at ten mine sites
in four countries already.
Beyond mining, autonomous vehicles
(AVs) are expected to catalyse major changes
on mobility and infrastructure, and even the
economy. What is not expected to change
much, at least not yet, is the supply chain for
vehicle construction that relies upon steel,
aluminium, copper, and other metals.
Future mobility
“We’ve been talking a lot at conferences
about future mobility and what it means for
steel,” said Jody N. Hall, vice president,
automotive, at the American Iron and Steel
Institute. “Broadly speaking, we expect that
the role steel plays today in transportation
and infrastructure is likely to be similar to
the one it will play in future mobility.
Especially in strength and safety. No one
believes there will be a reduction in safety
54 | Metal Market Magazine | February 2020
KOMATSU
The use of autonomous dump trucks is
already a reality in the mining industry,
but driverless vehicles are steadily
finding use in many other applications
requirements. If anything there will be more
stringent rules because everyone in the
vehicle will be passengers, perhaps not
paying close attention to the road, perhaps
sitting in different configurations.”
Indeed the major questions, concerns and
complications around the development and
deployment of AVs involve technology,
operations and infrastructure, rather than
the design and construction of the vehicles
themselves. Like the dog that did not bark
during the night in the Sherlock Holmes
story “Silver Blaze,” the lack of alarm over
manufacture of AVs can be taken as a sign
that engineers expect the supply chain for
today’s vehicles will be sufficient for future
mobility as well.
“Steel, aluminium, and synthetic materials
will all continue to be used in AVs,” said Hall.
“For new shapes and designs we believe that
the most efficient material will still be steel
because of its high strength and formability,
especially in complex shapes. We expect it
will remain the dominant material” in AVs
as it is in driver-operated vehicles.
What is most likely to change, Hall
suggested, is the model of ownership and
use. “We expect to see more mobility
service providers. More than anything that
will change the ways vehicles are designed.”
Today’s passenger cars are designed for
private use with wide varieties of designs
and features. In fleet use there is likely to be
“a shift to ease of ingress and egress,” said
Hall. “There is likely to be a bigger side
opening without a center pillar. That will
certainly change the structure and design of
the vehicle.”
By all accounts AVs will be electric, either
wholly or hybrid. “The most efficient design
for that is a battery pack in the floor,” said
Hall, “so we are likely to see the front shorten.”
Form follows function
John K. Catterall, executive director of the
Auto/Steel Partnership added, “The design
of AVs will be a matter of form following
function, whether that is for cargo or
passengers, or both. We are hearing of a
need to be able to reconfigure vehicles
depending on the time of day. The whole
objective of AVs is to maximize operating
time, so the same vehicle may be configured
for passengers during morning and
afternoons, and reconfigured for cargo
in between.”
These future trends do not mean that
design has to be anodyne. “There are two
different schools of thought on design,” said
Hall. “Fleet owners and operators may opt
for a few simple and flexible designs. Others
may opt to differentiate themselves with
more elaborate and complex designs.”
At the level of metallurgy, Hall was
pleased to say that the collaborations
steelmakers and carmakers already have will
carry on. “We have been working together
for decades to develop first high-strength
steel in response to the first Corporate
Average Fuel Economy (Café) mandates,
then for advanced HSS to meet collision
standards. We are now working on third-
generation AHSS and are already
improving formability.”
For trucks cabs, Hall sees a move back to
steel. “There has been a lot of aluminium,
composite and polymer for trucks because
that business is all about payload.” The
lighter the cab, the more engine power can
go to freight. With autonomous trucks
operating at much higher utility rates, the
economics can support more robust, but
expensive materials.
For light vehicles such as shuttles and
haulers in confined areas, there is not the
same need for robust construction, and the
expectation is that those will be mostly
made of synthetic materials. That said, Hall
raises an important point about
environmental impact and sustainability. If
the goal is to reduce the carbon footprint,
“then you have to take into account the
recyclability for plastic cars. AVs will be in
service more, so perhaps the lifespan
will be four or five years, rather than the 12
we see today for the average family car.
Steel is the most recycled material today
worldwide.”
Sources of power
Electricity is poised to emerge as the
dominant fuel for automotive
transportation in the decades ahead, wrote
Anshuman Sahoo, project leader; Karan
Mistry, principal; and Thomas Baker,
managing director and partner of the
Boston Consulting Group (BCG) in a
December, 2019 report entitled The Costs of
Revving Up the Grid for Electric Vehicles. “To
meet the demand for power that
transportation electrification will create,
utilities must perform a tricky balancing act.
They need to invest in upgrading the
pipeline for that fuel, the transmission and
distribution system, without triggering
excessive upward pressure on consumer
electric rates.”
That clearly would create some new
demand for steel, aluminium, and copper
for towers, wires, and other utility-scale
equipment. Given the difficulties of
permitting greenfield power plants, any
significant growth in overall generating and
transmission capacity is likely also to foster
growth in grid storage. That will support
incremental increases in generating
capacity. Lithium and other important
“minor metals” stand to gain.
BCG developed a detailed model of
revenues, costs and retail-rate impacts for a
“representative” utility with 2 million to 3
million customers. “A representative utility,
depending on charging patterns, will need
to invest between $1,700 and $5,800 in grid
upgrades per electric vehicle (EV) through
2030,” the report stated.
BCG expects that, by 2030, EVs (mild
and full hybrids, plug-in hybrids and battery
EVs) will account for 50-60% of new-car
sales and 21-27% of all light-duty vehicles
(such as passenger cars and SUVs) on the
road. And the vehicles that will affect utility
operations the most – plug-in hybrids and
battery EVs – will account for 20-30% of
new sales and 7-12% of all cars and trucks
in use.
Patterns of use
“There is a strong correlation between AVs
and EVs,” said Mark Gottfredson, co-lead
for the automobile practice in the Americas
for consultancy Bain & Co. “Electricity as
fuel is what makes AVs attractive from an
economic standpoint.” That, and some form
of fleet or pool use. “Shared mobility is
increased mobility.”
Bain research has found that, all-in, a
driver costs about $1 per mile of operation,
while the vehicle itself costs between 40 and
60 cents per mile. “The driver is the greater
cost, and also the limit on utilization,” said
Gottfredson.
The other important statistic is that
private cars are in service a paltry 4% of the
time. “If an AV can be in service just 40% of
the time – not even half – that is a tenfold
increase in utilization. That makes the cost
per mile very attractive, even at today’s
premium for EVs.”
Given the “strong tendency to EVs
among AVs,” Gottfredson sees “an increase
in demand for copper windings for traction
motors. Overall the greater cost of
ownership of AVs [at least in the early years]
will tend toward a fleet focus.”
Fleet ownership and operation of AVs,
along with shared use and configurability
also address another statistic that
exacerbates the 4% usage figure, which is
that most private cars on most trips only
carry the driver. There are family trips and a
few carpools, of course, but Gottfredson
estimates that only 20-25% of a private
vehicle’s capacity is used on most trips.
Factoring in capacity and utilization,
available seat-mile usage plunges to a
shockingly low 1%.
Gottfredson offers one more set of
comparisons. When a person is driving
there is negligible productivity. The driver
can take a call but cannot do much more.
Passengers can be on a mobile device, but
again serious work is limited.
“If driving has zero productivity, then
flying is not much better, maybe 20%, given
time to get to the airport, through security,
and actual level flying time with WiFi,” said
Gottfredson. “I fly between Dallas and
Houston often. On a train that could rise to
60%, and there ought to be high-speed rail
from Dallas to Austin and Houston. But
trains infrastructure is expensive, and highly
effective public transport needs high density.”
He reckons that productivity could exceed
90% in purpose-built AVs configured for
work and able to travel first mile to last mile.
All that said, the mobility champions are
finding the devil is in the details. Two or
three years ago many top-down companies
thought they would have AVs on the road by
now, but completing the last 1% of the
technology and infrastructure is proving to
be tough.
One possible approach is one Gottfredson
noted being developed in trucking: on the
highway the vehicles are autonomous, but in
local traffic they are operated by remote
control. “That is an attractive model,” he
said. “It is a bottom-up approach that gains
optimum economics.”
The key drivers for automation are
productivity and lower operational costs,
said Gilbert Gagnaire, CEO of EasyMile, a
company based in Toulouse, France, which
develops software to automate mobility
platforms without the need for dedicated
infrastructure. “We worked hard on
responding to those drivers with the
TractEasy, our autonomous electric
tow-tractor.”
The TractEasy completed a pilot program
at Narita International Airport in Tokyo last
year and is in autonomous use at the
Peugeot PSA automobile factory in
Sochaux, France. The company says it is
“especially designed for complex industrial
use and is customizable to specific needs.”
EasyMile was selected from 300 start-ups
for the French Tech 120 program, which
was started in September to provide
support for the fastest growing companies
in France. The program provides access to
more than 50 government departments and
agencies, to aid in international
development, financing, market access and
administrative support.
Gagnaire suggested that his firm’s
inclusion in French Tech 120 was
recognition that “our technology has
reached maturity and our expertise is
trusted worldwide. With 90% of our
business already outside France, we have an
aggressive global expansion plan in place
that will be boosted even further by this.”
February 2020 | Metal Market Magazine | 55
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2020
Innovations
Canadian researchers collaborate
to bring LIBS know-how to mines
Canadian research companies are
joining forces on a project to bring
laser-induced breakdown
spectroscopy technology (LIBS)
benefits to mine sites. They will
explore real-time onsite mineral
analysis for applications such as
conveyor belts and scanning coarse
rock streams.
The Cooperative Research
Centre for Optimising Resource
Extraction (CRC ORE) and National
Research Council of Canada (NRC
Canada) will apply the chemical
analysis know-how, more commonly
used in soil and metal analysis and a
variety of other applications, to the
mining production cycle.
They report that LIBS, which
features a laser pulse striking a
sample surface and removing material
to produce a high-temperature
plasma plume, is well-suited for
real-time mineralogy analysis.
Norican teams with DataProphet
for AI foundry intelligence
Norican Group, a metallic parts
enhancement company, has
entered into an exclusive agreement
with artificial intelligence (AI)
company DataProphet to bring AI
applications into foundries. The
first AI application will shortly go
live in a customer manufacturing
production process.
The collaboration comes after 12
months of joint innovation projects
carried out with Norican brand
DISA, a provider of green sand
foundry technology.
“The team at DISA understand
where foundries are on their data
journey – where to look for the
largest gains, which data to collect
and use, which problems to tackle
first. Too often AI is a solution
without a problem; together, we
can make it a powerful tool that
solves real operational issues,” said
Frans Cronje, chief executive and
co-founder of DataProphet.
DataProphet has expertise to
enable the factory floor to move
The LIBS research project,
which is reaching the end of its
two-year tenure, is now being
taken to the next level at operating
mine sites.
“By applying LIBS in a real-time
application such as across an
operating conveyor belt, operators
are empowered with high volumes
of rapid analysis provided in
real-time,” Greg Wilkie, CRC ORE
programme coordinator, said.
“Analysis in real-time speeds up
the mineralogy process, providing
operators with details they may
have previously had to wait days or
weeks to obtain,” Wilkie added.
It is anticipated that the solution
will be used in conjunction with
CRC ORE’s Grade Engineering®,
which is focused on extracting
metal more efficiently by
separating ore from waste before it
enters comminution.
towards autonomous
manufacturing to optimize
production without human
analysis.
DataProphet is a partner which
shares Norican’s “pragmatic
attitude and our passion for
helping foundries work ever more
productively and resource-
efficiently,” Anders Wilhjelm,
chief executive of Norican
Group, said.
“We have started with DISA
applications, but we will fast
forward to the full brand portfolio
and beyond soon,” Wilhjelm added.
The new AI applications
developed are equipment-agnostic,
meaning they will also work
with non-Norican equipment as
well as on solutions from the other
Norican brands, i.e. Italpresse
Gauss for die casting,
StrikoWestofen for high-end
furnace technology, and
Wheelabrator for surface
preparation.
NRC
LIBS chemical
element analysis
is already used in
applications for soil,
effluents, and alloy,
scrap and molten
metals
DISA
Norican partners
with DataProphet
to accelerate AI in
foundries
Sandvik buys US
manufacturer
Thermaltek
Sandvik has bought North
Carolina, US-headquartered
Thermaltek, a privately owned
manufacturer of
high-temperature furnace
systems and metallic heating
elements. The purchase price
was undisclosed.
Thermaltek has 30 employees
and generated revenue of $13
million in the year ending
September 2019.
Thermaltek will be accounted
for as part of Kanthal, supplying
sustainable heating technology
and resistance material within
Sandvik Materials Technology.
“Through this acquisition
we add further strength to
our leading position in
industrial heating, a strategically
important growth area for our
Kanthal division within Sandvik
Materials Technology,” Göran
Björkman, president, Sandvik
Materials Technology, said.
Voestalpine Austria
commences ‘green’
hydrogen pilot plant
Voestalpine has successfully
moved forward with a pilot plant
for the carbon dioxide-neutral
production of hydrogen at its
Linz, Austria, facility.
The company is researching
the long-term potential of
‘green’ hydrogen as a
replacement for fossil fuels in
steel production.
This research is part of an €18
million ($20 million) EU-funded
H2FUTURE project, also in
conjunction with Verbund,
Siemens, Austrian Power Grid,
K1-MET and TNO.
In the face of global climate
goals to cut CO2 emissions by
2050, the new plant, with a
capacity of 6 megawatts, is
promising for using the technology
on an industrial scale.
February 2020 | Metal Market Magazine | 57
End-user
Tata Steel ComFlor® helps to transform
London’s Battersea Power Station
Tata Steel has so far supplied
135,000 square meters of internal
steel flooring to transform the UK’s
landmark Battersea Power Station
in London.
The company’s plant in Shotton,
North Wales, supplied its trademark
ComFlor® lightweight composite
flooring system for the complicated
design brief to transform the art
deco grade II-listed building in a
seven-stage development plan,
according to Tata.
The multi-billion pound
development of the historic power
station will feature mixed-use
homes and business to also include
Apple’s new London headquarters
when completed in 2025. It will also
provide a community hub.
“Our ability to offer support and
thorough advice for such a complex
package helped us win the contract
– our customers know they can
count on us for quality at every stage
of a project,” Jo Evans, managing
director, Building Systems UK at
Tata Steel, said.
The team at Shotton developed
the steel in collaboration with
Apple buys first batch of ELYSIS sustainable aluminium
Apple has purchased an initial
“commercial batch” of sustainable
aluminium from Alcoa-Rio Tinto’s
joint venture ELYSIS, which was
made by using a carbon-free
aluminium smelting process.
The sale to Apple represents a
significant milestone for the
ELYSIS™ technology and is a sign
of the progress it has made. It also
confirms the market interest in
aluminium as a sustainable metal
produced using carbon-free
smelting know-how.
The Rio Tinto and Alcoa joint
venture announced in May 2018
the breakthrough process to make
aluminium that emits oxygen as a
by-product, rather than
greenhouse gas emissions (GHG)
that are part of the traditional
smelting process.
58 | Metal Market Magazine | February 2020
steelworks contractor William
Hare, which provided guidance on
the type of flooring needed, detailed
technical information, and ultimately
the ComFlor product, according to
Jo Evans, managing director,
Building Systems UK at Tata Steel.
Renovation on the building began
in 2013. The riverside adjacent to
the River Thames will be open to the
public for the first time and also
feature a new tube station, library,
retail space, food units, medical
center and concert venue for
2,000 people.
At that time, the aluminium
companies, in partnership with
Apple and the governments of
Canada and Quebec, together
invested 144 million Canadian
dollars for future research and
development of the patented
technology.
“We are continuing to progress
further development of our
technology, with our focus on
bringing it to market to
revolutionize the industry,”
Vincent Christ, chief executive
officer of ELYSIS, said.
Apple’s 2019 Environmental
Responsibility Report noted that
the carbon footprint of aluminium
enclosures of MacBook computers
has been steadily decreasing since
2015—for some products, it is
over six times less.
A new ISSF
guide to
duplex
stainless steels
The International Stainless Steel
Forum (ISSF) has published
a reference document
highlighting duplex stainless
steel applications, aimed at
producers, material specifiers,
architects, OEMs and stockists
alike.
TATA STEEL
The document outlines the
benefits of the product in areas
including: chemical
Battersea Power composition; corrosion
Station, known resistance; physical properties;
for its iconic four mechanical properties;
chimneys and art applications; and fabrication.
deco design, has For certain applications,
utilized 135,000 duplex is highlighted as a good
square meters alternative to austentic or ferritic
of Tata’s flooring grades of stainless steel.
system For further details see: www.
worldstainless.org
India’s Hindalco
launches all-
aluminium
freight trailer
Hindalco Industries has launched
an all-aluminium freight trailer in
Jaipur, Rajasthan, which was
handed over to Kamal Exim Pvt., a
leading transporter for UltraTech
Cement Limited.
Hindalco said the trailer is 50%
lighter than an equivalent-sized
steel trailer, thus reducing logistics
costs through better efficiencies.
Made from high-strength
aluminium alloy, the 34-foot
trailer weighs 2.5 tonnes less than
an equivalent steel trailer,
according to Hindalco. It also has a
70% higher scrap value.
The trailer, engineered with
inputs from the Automotive
ELYSIS
Research Association of India, can
ELYSIS continues to transport cement, alumina, fly
develop its carbon- ash, grains, flour, steel coils and
free aluminium cylinders.
smelting process
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