Metals&Mining Alert:Daily prices and news,China pollution crackdown raises costs for steel mills

Industrials (/lb): aluminum $0.96(+1.7%), copper $2.97(+0.2%), lead $1.10(+1.3%), molybdenum $7.14(+0.0%); nickel $5.05(-0.8%); zinc $1.41(+0.3%);

    Precious (/oz): gold $1,311(+0.3%), silver $17.31(+0.6%); Steel (/mt): ChinaHRC $636(-0.1%), SHFE Rebar $576(-0.1%), MB Scrap Index $339(+0.0%);

    Bulks: iron ore (/dmt) $69(-4.1%), coking coal (/mt) $206(+0.0%), freight (BCI)2,723(+1.6%); Energy: Brent (/bbl) $55.14(-0.6%), WTI (/bbl) $49.48(-0.9%),natural gas (/mmBtu) $3.12(-0.8%), thermal coal (/t) $98(-0.1%).。

    China’s environmental crackdown is leading to inflated raw material costs forsteelmakers globally. Electrode prices have surged, adding $30-36/t toEuropean steelmakers’ costs as Chinese exports are expected to halve in 2017to 100kt, driven by enforcement of production stoppages to meetenvironmental standards. European steel mills consume 226kt of electrodesannually, with ~60% imported from China. Refractory prices have surged175%, as China has stopped issuing mining permits of magnesite, which is theprimary feedstock for steel furnace refractories. Additionally, electrodeshortage in China has indirectly impacted US mills who procure refractories, aselectrodes are also used in fused magnesia. (SBB)。

    US housing permits rose in August to SAAR of 1.3m units (+5.7% MoM,+8.3% YoY). However, housing starts declined to 1.2m (-0.8% MoM, +1.4%YoY) and housing completions fell to 1.1m (-10.2%, +3.4%). (SBB)。

    US steel import permits for September through 9/19total 2.0m st. If adjustedto a full month, permits would be 3.1m st (+11% YoY) vs. Aug. permits of 3.6mst and July imports of 3.5m st. Semis (-184kt, -20%) appear to decrease themost MoM, followed by coated sheets (-73kt, -16%), whereas, tin plate (+25kt,+29%) and rail (+20kt, +185%) permits are rising. (US Import Administration)。

    Installation of first 3D printed titanium bracket by Arconic completed onAirbus’ A350XWB aircraft. The next-generation widebody aircraft productionrates are anticipated to increase from 6per month in 2017to 8per month in2018should increase revenue and margins for Arconic. (Company, DB)。

    Steel Dynamics (STLD) provides 3Q17adj. EPS guide of $0.63-0.67, below DBeof $0.75and consensus $0.71. Miss mainly at Steel Operations, with segmentEBIT guided to be flat QoQ (DBe $328m, +20% QoQ) on flat pricing ($791/st,+2%) and higher scrap costs ($299/st, -1%). Flat-rolled profitability to declineQoQ, offset by improved long product ops. Fabrication and Metals Recyclingsegments to be steady QoQ. STLD adj. 3Q17EPS exclude $8m (2c/sh) of debtre-fi expenses. (Company, DB, FactSet)。

    Constellium signs multi-year contract with Pilatus to supply aerospace plate formore than 80of the company’s PC-24executive jets. First PC-24delivery isanticipated in 4Q17. While not a large volume client such as Boeing or Airbus,we view the increased aluminum plate volumes as a positive due to dilution offixed costs at company’s Issoire plant. (Company, DB)。