metals market outlook - amm 2017 outlook/2017 outlook_amm... · 2017-02-17 · ‘trumpflation’...

As a gauge of where the industry stands and is heading, the annual AMM survey of metals

executives has been a remarkably accurate tool for assessing yearly business trends. The

changing nature of global issues is a key part of the outlook. Heading into 2016, 42 percent of

respondents named growth in foreign economies as the factor that would most likely affect the

price of metals products, well ahead of the domestic economy and raw materials costs, which

essentially tied for second place. But this year, only 13 percent see it that way; faith in the U.S.

economy grew considerably in the 2017 outlook survey.

METALS MARKET OUTLOOK20

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American Metal Market 3

AMM SURVEYTrump card

STEEL TUBE & PIPEFlat-rolled steel’s early 2017 bang could end in bust

STEEL TUBE & PIPEOrganic growth, Trump effect boost optimism at mills

IMPORTS / EXPORTSThe steel trade outlook is still murky and mixed for 2017

AEROSPACE METALSAdditive manufacturing set to move aerospace higher

STAINLESS STEELStainless mart expected to see ho-hum 2017 demand

FERROUS SCRAPClouds may be parting for market during coming year

RAW MATERIALS‘Trumpflation’ could spell trouble for scrap exports

ALUMINUMAluminum market is still cautiously optimistic for 2017

SECONDARY ALUMINUMAluminum scrap market keeps its eyes facing forward

COPPERLingering demand haze clouds copper market in 2017

NICKELUpward bounce may begin, and last through new year

SERVICE CENTERSMetals supply chain outlook could hinge on the GDP

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2017 Metals Market Outlook

T A B L E O F C O N T E N T S


For the first time in eight years a new president will be assum ing office, and as 2017 gets un derway, this fact alone seems to have put the wind in the sails of metals executives.

These views from leading metal players and AMM readers were expressed in the annual survey on what may lie ahead in the coming year. The results of the poll of er a glimpse into what people are thinking generally about issues that afect the metals industry. For instance, following a down 2016, about two-thirds of respondents still say that they are more optimistic about business heading into 2016.

A majority says the overall economy should turn around significantly by the end of 2017, with the construction, energy and auto sectors leading that charge. Exactly 50 percent say that the election results will make the year ahead more certain. Perhaps this is why only about 9 percent expect business to get worse during 2017.

The only real disagreement about the near-term future of the metals sector is that no clear consensus emerged in the survey over which domestic end markets are most likely to move things forward, at least if judging by the views put forward in AMM’s annual survey of executives.

Throughout 2016 at conferences and roundtables, at corporate meetings and in countless interviews, metals executives and analysts discussed all of these issues and more as they struggled to find ways to interpret signs and signals from the business world.

In addition to the results of our annual survey, on the following pages analysts and experts from a variety of metals businesses share their viewpoints on what fortunes or misfortunes the new year might bring to everything from flat-rolled steel to imports and exports.

And to get an even more in-depth look at the steel industry’s prospects, AMM is once again hosting two annual conferences in February and March.

AMM’s 22nd Annual Mexican Steel Fo rum is scheduled for Feb. 1-3 in Cancun. As the industry becomes more volatile in the face of the drastic changes to world steel dynamics over the last year it is more crucial than ever to keep up to date with the latest trends in Mexico, connect with clients, and make new contacts.

Topics to be discussed include how glob al steel dynamics are afecting the Mexican industry; the energy industry and analyzing oil price volatility

Trump cardA large number of respondents to AMM’s annual survey on the outlook for the metals sector say their business should be better in 2017 than last year, while a slightly smaller number say it will be sometime in 2017 when the U.S. economy recovers significantly from its rut.

Here is a sampling of comments from leading metals executives:

“I foresee domestic manufacturing ex ploding, as well as a rapid expansion and renewal of several different energy sectors do mestically. At the same time, when trade deals are levied on an above-the-table approach with U.S. interest alone negotiated we will see for the first time in 20 years our domestic scrap staying strong and priced right because foreign steel manufacturers will be prevented from dumping new steel into our U.S. market for below costs. This will result in our markets being strong and staying strong domestically.”

“Expectations are for a more robust U.S. economy with more spending on in frastructure leading growth.”

“I believe there is money that has been on the sidelines for some time now that will enter the construction market with the elec tion now behind us. While I would like to see President-Elect Trump get his way with a major infrastructure spending bill, the current debt, tax cuts and the Republican legislature may be barriers.”

“Trade barriers will play a significant role in the future of steel market behavior as China will try to accommodate their ex cess capacity of steel manufacture world wide. We depend on the WTO for them to make the right decisions.”

“In steel, the aggressive protection ist measures being taken by the domestic industry will help the domestic mills but damage the general manufacturing indus tries. Imports will be down and domestic production will be up albeit only near to mid-term.”

2017 Metals Market Outlook AMM SURVEY


and the implications for Mexican steel; panel discussions focused on steel service centers, scrap steel, and lo gistics; and how U.S.-based steel mills are interacting with the Mexican market.

Hundreds of senior decision makers will be attending the forum from across the entire supply chain – delegates attending last year represented commodity provid-ers, Mexican and foreign steel producers, service centers, distributors, processors,

OEMs and leading construction and auto-motive industry representatives.

Discussions are scheduled to include en ergy reform by the Mexican government and the opportunities this creates for the steel industry; the shift in global automo tive production from the US and Asia; new projects in oil, gas and infrastructure; and a focus on logistics, distribution and raw materials.

And AMM’s 10th Steel Tube and Pipe

Conference, March 8-9 in Houston, is the largest such gathering for the steel tube and pipe industry. The conference will be a particularly important one this year as trade cases and oil prices continue to re main in the fore. The conference will fea ture views from industry leaders on the OCTG markets moving forward into 2017 and how the sector may react to a changing environment. STAFF REPORT

2017 Metals Market Outlook AMM SURVEY

86.2% Steel

6.2% Copper

4.6% Stainless Steel 3.1% Aluminum

67.6% Better

23.9% Not sure

8.5% Worse 18.1% First half of 2017

38.9% Second half of 2017

33.3% 2018

8.3% 2019

8.3% 2020 and beyond

32.9% Nonresidentialconstruction

22.9% Energy15.7% Auto

11.4% Transportation

7.1% Retail goods

10% Residential construction 40.3% Growth in

the U.S. economy

12.5% Growth in foreign economics

27.8% Raw material costs

9.7% Energy costs

9.7% Other (please specify)

50% More certain

31.9% Less certain

5.6% No difference

12.5% Not sure

What is your primary metal of interest?

Which domestic end-markets do you expect

to be strongest in 2017?

Do you expect business to be better or worse for you

in 2017 than 2016?

What factor do you think will play the most significant role in

determining the price of your metal progucts in 2017?

How long before the overall U.S. economic situation turns

around significantly?

Have the outcomes of the national elections made the business

environment more or less certain heading into 2017


The flat-rolled steel market could come out the gates fast in 2017 following a flurry of price in creases and trade actions, indus try experts and market participants said.

And buyers might initially have little abil ity to push back against higher mill prices should service center inventories remain low and should ofshore options remain limited in the wake of three big flat-rolled steel trade cases and a circumvention petition against Vietnam.

That supply squeeze could collide with further trade actions under the adminis tration of President-elect Donald Trump, whose trade policy will be shaped by U.S. Commerce secretary nominee and steel dealmaker Wilbur Ross.

Ross lobbied former President George W. Bush for Section 201 import tarifs put in place in 2002. “It was the right decision to make,” he said in a 2007 interview with AMM. “There were probably 100,000 jobs saved by virtue of the changes the tarifs brought.”

Also suggesting a hawkish trade policy is Trump’s “landing team” for the U.S. Trade Representative (USTR): Dan DiMicco, for mer chief executive officer of Charlotte, N.C.-based Nucor Corp., and Robert Lighthizer, an attorney with long experience representing

Pittsburgh-based U.S. Steel Corp. in trade cases.

So don’t be surprised if steel forges Trump’s trade strategy. And if you’re not sure what that might look like, consider this quote from a 2013 letter-to-the editor penned by DiMicco and published in AMM:

“The reality is that we have been in a trade war with China and have never bothered to show up. . . . Until we choose to fight, we have little chance of achieving the kind of economic growth required to put more Americans back to work and sustain the middle class.”

An aggressive Trump trade posture would come on the heels of an “avalanche” of trade suits that have already changed the economics of the U.S. steel industry, accord ing to Peter Marcus, managing partner of Englewood Clifs, N.J.-based World Steel Dynamics Inc. The U.S. price for hot-rolled coil will as a result remain higher than hot band price elsewhere in the world, he said.

That’s good news for mini-mills and es pecially for integrated mills, Marcus sug gested. “You have a whole number of steel plants owned by integrated mills that, if they were to go bankrupt or start selling of assets, would not go away but come back in a lower-cost format,” he said.

One example: RG Steel LLC’s former plant in Sparrows Point, Md., may have been demolished but its Mingo Junction, Ohio, plant is being revived, Marcus said. Another example is Hamilton, Ontario-based Stelco Inc., the former U.S. Steel Canada Inc., which could emerge from bankruptcy protection leaner and meaner under the wing of Miami-based Bedrock Industries Group LLC, a private metals and mining firm.

“There is a vibrancy out there. The bank ruptcy process works. So the integrated mills are going to be there providing a com petitive product for quite a while into the future,” Marcus predicted.

But the steel industry also faces big challenges that even a decidedly pro-steel trade policy might not be able to overcome, he suggested.

“One of the very scary developments is we’re having almost a mysterious disap pearance of steel demand in the United States,” Marcus said. “Our steel intensity has plummeted.”

That’s in part because the United States has had a low gross-domestic-product (GDP) growth in recent year past and because much of that growth has been driven by the service sector, which has “almost zero steel intensity,” he said.

Flat-rolled steel’s early 2017 bang could end in bust

Buyers might initially have little ability to push back against higher mill prices should service center inventories and offshore options remain low.

FLAT-ROLLED STEEL 2017 Metals Market Outlook


Trade policy also won’t fill the hole left by an oil country goods market decimated by 2014’s collapse in energy prices, Marcus suggested.

“The oil country market will come back at some point. But we have a kind of black cloud right now because demand is less than one might think—and it has lagged relative to the measures of production or activity in steel-consuming industries,” he said.

That’s a tough pill to swallow because energy had previously provided the fast-grow ing driver of steel demand, Nicole Leonard, an

analyst at Denver-based Bentek Energy LLC, said.

“The fact is, Trump is not going to change the fundamentals behind the energy market,” she said.“ I don’t think we will get anywhere near the demand we saw in 2014 for steel because we don’t anticipate a new shale revolution.”

Trump is pro-energy and will approve Calgary, Alberta-based TransCanada Corp.’s massive Keystone XL pipeline, Leonard said. But that doesn’t matter much for the steel industry because for the project has already been made and is sitting in storage waiting for the project to move for ward, she said.

Future steel demand—at least on the en ergy side—will be driven less by shale plays in the United States than by

less-developed nations in need of new wells and pipelines to tap their natural resources, Leonard predicted.

That’s a problem because other big steel-consuming industries don’t appear poised to pick up the steel slack left by energy sec tor, suggested Charles Bradford, president of New York-based Bradford Research Inc.

U.S. automobile sales, for example, are likely to remain flat in 2017 vs. 2016, and the heavy machinery is also unlikely to see growth, he noted.

“The big hope is nonresidential construction coming back,” Bradford said.

The Trump administration has pledged to spend as much as $1 trillion on infra structure projects. And infrastructure in vestment appears to be one of the few is sues that enjoys bipartisan support.

But the FAST Act—a $305-billion, five-year transportation funding bill—passed last year provides a cautionary tale, Brad ford said.“ It takes quite a while to engineer a large bridge project. . . . And it also takes time to put together bids,” he said.

Other clouds also loom over the nonresidential construction front: states don’t have requisite matching funds for federal projects, and there is a shortage of skilled non residential construction workers, Bradford said. Such problems explain in part why steel might not feel

the impact of Fast Act spending until this spring, he said.

Bradford is not alone in pointing out the long delay between announcements about infrastructure spending and the impact of that spending on the market. Peoria, Ill. based heavy equipment manufacturer Caterpillar Inc. has said Trump’s infrastructure plans, while positive in the long term, will have “little impact” on 2017.

And there’s another fly in the ointment for 2017: A steely trade policy toward China could have unintended consequences, Bradford said. China makes the bulk of lithium batteries used in the United States, and there is no high-quality, low-cost domestic source of lithium, he noted.

“What are we going to do if they don’t sell us those batteries?” Bradford asked. “And I would love to see Apple try to make iPhones in the U.S.”

The Cupertino, Calif.-based technology company makes its popular smartphones in China. MICHAEL COWDEN

‘U.S. automobile sales, for example, are likely to remain flat in 2017 vs. 2016, and the heavy machinery is also unlikely to see growth. The big hope is nonresidential construction coming back.’

— Charles Bradford, Bradford Research Inc.

2017 Metals Market Outlook FLAT-ROLLED STEEL


The Trump presidency is viewed positively by steel executives who expect new public infra structure investment,

A growing U.S. economy, expanding oil-drilling activity and the incoming Donald Trump presidency have steel pipe-and-tube providers feeling more confident that 2017 will be rosier than 2016.

With rig counts rising again, a recovery is at hand for the makers of oil country tubular goods (OCTG) and line pipe, market participants and analysts said. Acceleration in the domestic economy bodes well for sales of structural and mechanical tubing.

The Trump presidency is viewed positively by steel executives who expect new public infrastructure investment, a friendly attitude toward the energy industry and more barriers to imported goods. With gross domestic product (GDP) already accelerating in the third and fourth quarters of 2016, additional government stimulus would benefit product lines ranging from sprinkler pipe to water transmission pipe.

Trump has promised to reduce regulations on domestic energy production, in cluding an easier permitting process for drillers and accommodative siting of inter state oil

and gas pipelines. “He is certainly more favorable to

the industry than (President) Obama was,” Paul Vivian, principal at Preston Publishing Co., said. “It seems (Trump) would look at this as a way to create middle-class jobs.”

While anticipation of a Trump administration potentially improves the outlook, Vivian said supply-and-demand forces and commodity prices still will hold sway in convincing domestic drillers to make commitments in the new year. A key event was the November 2016 meeting of the Organization of the Petroleum Exporting Coun tries (OPEC), and all eyes will be on Saudi Arabia, Iran and other cartel members to see if they follow through on promises of crude-oil production cuts.

The number of active oil and gas rigs in the United States fell to an historic low of 404 in May 2016, according to Baker Hughes Inc. West Texas Intermediate Crude had traded below $30 per barrel earlier in the year. By the end of Novem ber the rig count had recovered to 593 and crude was consistently above $45. That points to better days ahead for OCTG consumption.

A growing U.S. economy, expanding oil-drilling activity and the election

have steel pipe-and-tube providers feeling more confident about 2017.

For TMK Ipsco, OCTG shipments were already accelerating as early as February 2016, according to Piotr Galitzine, the Houston-based company’s chairman and chief executive officer. While much of the domestic comeback has centered in the Permian Basin, Galitzine also saw encouraging signals in the Haynesville and Marcellus shale formations and elsewhere.

“We see there is momentum in the market, not only in tons and volume but also in pricing,” Galitzine said. “We think the Marcellus is going to come back strong in the next year because prices for gas are steadily improving and market participants are discovering that the Marcellus has been under-invested-in in recent years. We think that’s a sustainable rise.”

The president-elect generally favors more oil-and-gas infrastructure to make the domestic energy industry—and domestic energy-consuming industries—more competitive. At the same time, he wants to curtail the nation’s dependence on foreign suppliers.

“The U.S. had been trending toward reducing its imports of oil,” Kimberly Leppold, senior analyst at Metal

Organic growth, Trump effect boost optimism at mills

With rig counts rising again, a recovery is at hand for the makers of oil country tubular goods (OCTG) and line pipe, market players and analysts say.

STEEL TUBE & PIPE2017 Metals Market Outlook


Bulletin Re search, said. “One of Trump’s platforms was to cut back on or cut altogether the imports of oil from the OPEC countries.”

More drilling and expanding pipeline networks would mean greater demand for steel goods ranging from oil-country tubing and casing to line pipe to mechanical tubing components needed for the heavy equipment and refineries.

Trump proposes a $1-trillion investment in overall infrastructure over a 10-year period. While he has said he favors raising much of that money from private investors, and Congress may trim the total spending down to $500 billion or even $200 billion, steel industry participants still expect to benefit from whatever the ultimate commitment proves to be.

Tube mills, for example, would gain or ders for hollow structural sections needed for bridge construction, airport terminal expan sions and other civil engineering build-out.

“It’s huge,” according to Barry Zekelman, executive chairman and chief executive officer of Chicago-based Zekelman Industries Inc. “Infrastructure spending trickles down to all aspects of the economy.”

While the prospect of an outsized infrastructure fund potentially would improve steel industry sentiment in 2017, most of the tangible benefits to the industry would not arrive until later, according to Scott Morris, executive vice president of mar-keting and product development with Bull Moose Tube Co. Morris said the Chesterfield, Mo. based tube mill is not building any Trump-related bounce into its business plan for next year. Bull Moose also produc es sprinkler pipe and mechanical tubing.

“We are looking at 2017 with cautious optimism,” Morris said. “There could be an inverse impact if interest rates start to rise.”

Scott Montross, president and chief executive officer of Northwest Pipe Co., said the demand outlook for water transmission pipe was already getting rosier even before Trump was elected

with his $1-trillion infrastructure plan in tow. California’s multi-year drought and the Flint, Mich., lead crisis have prompted more states to reassess the integrity of their aging water systems.

Large-scale water transmission projects in Texas and Oklahoma alone are expected to order 228,500 tons of steel pipe in the next few years, Montross said.

“The spending on water transmission is improving. It was good in 2016 and a consensus view is it improves 5 to 10 percent in 2017,” Montross said. Regarding new infrastructure investment, “some of that is probably to show up in late 2017 and more is going to show up in 2018.”

Tempering the enthusiasm for Trump dur ing the transition are unknowns surrounding global diplomacy, security and spurned trading partners, in addition to the unintended consequences of a

stronger dollar, higher interest rates or the prospect of soaring federal budget deficits. Trump’s threat of an im migration crackdown arrives at a time when skilled labor is in demand and the steel industry faces an acute demographics crunch.

John Hritz, president and chief execu tive officer of JSW Steel (USA)

Inc., said another risk is how the Trump administration will handle the currency manipulation and intellectual property issues with China. Hritz’s Baytown, Texas, plate and pipe mill sells line pipe and storage-tank components to the oil and gas industry. It also supplies steel goods to the wind power industry, which has been a growth engine for domes tic steel producers in recent years.

He does not expect Trump’s promises to the coal industry to ofset demand for natural gas. Nor does he think Trump’s fossil-fuels push will harm alternative energy initiatives.

“It can all move forward together,” Hritz said. DOM YANCHUNAS

2017 Metals Market Outlook STEEL TUBE & PIPE

‘We see there is momentum in the

market, not only in tons and volume

but also in pricing. We think the

Marcellus is going to come back

strong in the next year.’

Piotr Galitzine, TMK Ipsco


The outlook for U.S. import and export of metals in 2017 is murky at best thanks to the presidential victory of Donald Trump, as the president-elect’s seemingly protectionist agenda could spark trade wars, industry sources said.

Still, pundits initially predict that steel imports specifically could slow, given Trump’s campaign rhetoric targeting Chi nese steel dumping and his promises to back U.S. manufacturing.

Trump’s pick of former Nucor Corp. chief executive officer Daniel R. DiMicco to lead his trade transition team is tell ing, given DiMicco’s past criticisms of unfairly traded Chinese steel. A role for one-time steel investor Wilbur Ross in Trump’s administration also pushes ob servers to claim that steel interests will play a large role during the life of Trump’s term.

It all depends on what exactly, if anything, the incoming Trump administration will do to “block imports,” according to Kathryn Thompson, chief executive officer of construction research and advisory firm Thompson Research Group.

Still, there’s a bias towards blocking imports, especially given DiMicco’s potential role in Trump’s cabinet, she said.

“I think there’s going to be a bias

to restricting imports, which will have obviously a corresponding impact on pricing, on steel,” Thompson said during a Nov. 18 steel frames webinar, forecasting 2017 business conditions.

A forecast for lower U.S. steel import volumes received mixed reception among U.S. long product traders, however.

One U.S. wire rod trader agreed with Thompson, stating: “Import business will be difficult going forward.”

“There are so many trade cases going on and DiMicco will have Trump’s ear for sure,” the trader said, who works for a major U.S. steel trading house and importer.

Ongoing U.S. steel trade cases in 2017 include major cases on plate and rebar, an anti-circumvention case on Chinese steel, and a handful of others, including on Chinese stainless steel and carbon steel flanges from three countries, U.S. trade filings show. U.S. Steel Corp. continues to seek a blanket ban on many Chinese steel products, despite sufering a recent court setback.

In addition, industry sources have raised the possibility of filing a major Section 201 trade case, on steel or downstream steel products, an option made more feasible by

the new Trump administration. The United Steelworkers (USW) union filed such a case on aluminum imports in 2016, though the union dropped the petition in short order, citing industry opposition.

Nonetheless, a second U.S. rod trader said his trading company’s tentatively projects more steel imports in 2017.

“We’re slightly more bullish on 2017,” vs. 2016, the second rod trader said, who also works for a major U.S. steel trading house. “Our expectation is that our import business will be up into the U.S., some 10 to 15 percent.”

“It’s tough to predict, because of the political situation,” he added, noting that Trump could seek a tax of finished wire imports from the North American Free Trade Agreement (Nafta) region, specifically from Mexico.

That could shift demand for rod and wire in unpredictable ways, he said.

Trump has vowed to renegotiate or scrap the Nafta agreement, to best serve the American worker. It’s unclear if Trump could pull this of, as he may need backing from congressional lawmakers and some participation from Canadian and Mexican governments. It’s also unclear how exactly the end of Nafta or its overhaul

The steel trade outlook is still murky and mixed for 2017

Trump’s pick of former Nucor Corp. chief executive officer Daniel R. DiMicco to lead his trade transition team is telling as a glimpse of direction.

IMPORTS / EXPORTS2017 Metals Market Outlook


could im pact steel supply chains. Canada and Mexico are currently

by far the two biggest destinations for U.S. steel exports, with the European Union ranking a distant third. Canada is the top source of U.S. steel imports, a position it has held for more than a decade, while Mexico is a major source of steel imports, ranking fifth in 2015.

The three countries operate a North American Steel Trade Committee packed with gov ernment and industry representatives, which seeks to

cooperate on items of concern. Some North American producers

operate mills across at least two of the three countries, if not all three. The committee monitors Nafta steel trade flows, which averaged up to 1.417 million tonnes per month on average in 2016, according to the com mittee’s data.

Steel imports into the U.S. could moderate in 2017, due to decisions in key steel trade cases, according to Philip K. Bell, president of the Steel Manufacturers Asso ciation (SMA).

He hopes the Trump administration‘s review of Nafta, if any, will be “very careful and methodical,” noting positives from the long-established trade agreement for U.S. steelmakers from Nucor Corp. to Steel

Dy namics Inc. “Nafta has had pluses and minuses

over all. It’s probably been a net positive. There’s no doubt that all of our trade agreements can be improved and worked upon. But Mexico and Canada represent the largest export market for (U.S.) steel produc ers,” Bell said in a Nov. 28 interview with AMM.

“We need to look for ways for our relationship to continue to be a win-win, and to capitalize on the integrated supply chains that have

been created by the Nafta agreement,” he said.

Still, the Washington-based SMA and its members “welcome” any review of the agreement, to ensure it remains fair for all involved, Bell said.

One rebar trader will focus more attention on individual trade cases, because that will determine granular import flows. In particular, the trader is intent on a landmark case against Turkish rebar, the second case filed in three years, after U.S. producers lost a case filed in 2013.

The 2017 outlook for rebar imports, a major steel item, will “significantly depend” on what happens with Turkey in the ongoing trade case, where initial margins are expected Feb. 28,

the trader said. If Turkey is locked out of the market

due to high import duties, then the U.S. rebar market will flip overnight from oversupply to undersupply, the trader said. Other countries expected to step up shipments if Turkey is locked out cannot come close to Turkey’s typical monthly volumes of up to 200,000 tonnes, the trader said.

“Let’s take Portugal, Spain, Vietnam, Russia, others: all of these together, they’re not even 1 million tonnes (per year) combined,” whereas Turkey could easily ship 1.5 to 2 million tonnes to the U.S., the trader estimated.

But if U.S. mills do not score anti-dumping margins, then the U.S. rebar market will “continue to stay bearish” and prices will “continue to deteriorate,” the trader predicted.

Political pressure on U.S. trade cases, which are by law conducted via an independent, merit-based and quasi-legal process overseen by the U.S. Commerce Department and the U.S. International Trade Commission (ITC), will mount in a Trump administration, the person added.

“The pressure on Trump to show something in the first 100 days of his presidency: this rebar case is a perfect example for him to shine,” the trader said.

“To say: we got Turkey out, on the construction side—that’ll be a perfect news headline,” the rebar trader said. “Political pressure on these cases to go through successfully is now a lot higher than two years ago,” the trading source said. NAT RUDARAKANCHANA

‘Nafta has had pluses and minuses

overall. It’s probably been a net

positive. There’s no doubt that all

of our trade agreements can be

improved and worked upon.’

Philip K. Bell, SMA

2017 Metals Market Outlook IMPORTS / EXPORTS


“Metals have just started to take of in the last three years,” in aerospace AM, according to Terry Wohlers, president of Fort Collins, Colo. -based consultants Wohlers Associates Inc., which has been following the 3D printing market for 28 years and issues an annual “Wohlers Report” on the state of the industry.

Wohlers pointed out that while metals represent a relatively small part of the over all aerospace AM market today, its growth rate is climbing sharply. Wohlers Associates estimates the value of all raw materials for aerospace AM in 2015 at $769 million, most of this in polymers, with metal powder accounting for just $88 million. But this $88 million represented an 81-percent jump over 2014.

Meanwhile, machines that 3D print metal parts for aerospace, with 105 sold in 2010, have shown “hockey stick growth,” reaching a current total of over 808 machines, ac cording to Wohlers Associates.

Wohlers hasn’t yet issued a forecast for the coming years. But it would be hard to find anyone who doesn’t think this surge won’t continue. At General Electric Co. (GE) alone, a requirement is seen for 1,000 machines over the next decade, David Joyce, president and chief executive officer of the Cincinnati-based GE Aviation unit of General Electric, said

during an investor’s presentation in September.

Joyce also pointed out that, while metals’ share of the AM powder market in 2016 was just 12 percent, it’s growing at a compound annual growth rate of over 25 percent, and may account for as much as 25 percent of overall powder demand by 2020.

In 2015, when Alcoa Inc. announced its upcoming $1.5-billion acquisition of titanium producer RTI International Metals Inc., Alcoa’s then-chairman and chief ex ecutive officer Klaus Kleinfeld said one of the “very, very cool things” that attracted the aluminum producer to RTI was its capability in 3D manufacturing. That attraction evidently still holds.

Alcoa since then has spun of its value add assets into New York-based Arconic Inc., with Kleinfeld as its chairman and chief executive. Even before the spinof, the former parent had embarked on a $60-million expansion to develop 3D materials and process capabilities that are now part of Arconic. This included a new AM metal powder production facility outside Pittsburgh to produce proprietary titanium, nickel and aluminum powders optimized for aerospace parts.

Also before the spinof, Alcoa agreed to produce 3D printed titanium fuselage

and engine pylon parts for Toulouse, France-based aircraft manufacturer Airbus SAS. Three of Alcoa’s additive manufactur ing locations—now in the Arconic fold— were due to produce the parts: Whitehall, Mich.; Austin, Texas; and Pittsburgh.

Arconic told AMM in late 2016 that the first parts were delivered to Airbus in the third quarter and Arconic was working through final qualification, expecting to deliver the final, ready-to-install production parts in early 2017. Serial production was expected to begin later in 2017.

Rod Heiple, director of Arconic’s engineered products and solutions research and development, said the market is now seeing the successes of R&D investments made over the years by companies like Arconic, which are “coming to the forefront now because these investments are paying of.”

Heiple said the company’s recently opened powder facility is already responding to growing AM-related demand.

“Our customers are calling for Arconic to develop new material feedstock optimized for 3D printing,” Heiple said, noting these include, but aren’t exclusively, aluminum.

Still, it’s far from certain which aerospace AM tech nologies and processes

Additive manufacturing set to move aerospace higher

After years of playing second fiddle to plastics in aerospace production parts additive manufacturing (AM) is ready to make its move.

AEROSPACE METALS2017 Metals Market Outlook


will eventually come out on top. “Right now we’re in the Betamax vs.

VHS stage, trying to establish which technology is best accepted,” Bill Bihlman said, president of South Bend, Ind.-based Aerolytics LLC, referring to the so-called vid eotape wars of the late 1970s and 1980s, when competing formats battled each other for dominance.

Bihlman said that, in broad terms, the three “fundamental modalities” competing in AM are powder bed (mostly titanium), blown powder and wire fed systems.

Todd Grimm, president of Edgewood, Ky.-based consultants T.A. Grimm & Associates Inc., thinks plenty of changes are yet to come.

“My prediction is that for the next five years you’re going to see a surge of innovations in technologies and also in materials,” he said. He agreed this can be a dilemma for firms who want participate in AM but are nonetheless wary of going out on a limb and picking a winner too soon.

“You don’t want to miss getting on the train, but we don’t know where that train is going to end up,” Grimm said.

Still, the introduction of new technologies is part of aerospace history, and most suppliers have learned to keep an eye on a shifting landscape at the same time they’re doing business.

“In the metals business, additive manufacturing is still in its infancy; there’s a lot of important developments going on,” according to Dan L. Greenfield, vice president of investor relations and corporate communications for Pittsburgh-based Allegheny Technologies Inc. (ATI).“You want to be working with both customers and universities to make sure you’re part of the development process” in metallics.

ATI makes titanium, nickel alloy

and cobalt-chromium powder metal in Oak-dale, Pa., produces titanium wire in Albany, Ore., and is expanding its nickel alloy powder capacity in Bakers, N.C. These opera tions are part of its High Performance Materials and Components Group.

“There’s a lot of guys out there trying to catch lightning in a bottle,” an executive of a major supply chain company said, referring to what he sees as a confusing scrum of competing players and technologies. “We’re waiting for it to shake out a little more, trying to see who the favorites are.”

But despite some lingering doubts about the pace of AM’s acceptance, there’s a strong argument that its progress won’t be nearly as fitful and prolonged as some other earlier-heralded technologies.

Stephen Peskosky, vice president of corporate development for Carpenter Technology Corp., recalled predictions 25 years ago that ceramics would soon be included in almost all areas of aircraft engine platforms. Instead, he observed, ceramics have only recently begun to take significant roles on some current and next generation engines.

In contrast, Peskosky said, additive manufacturing, not nearly as old as ceramics, is expected to show a compound annual growth rate in the “high teens” during the coming decade, with 15- to 20-percent increases, “year over year, every year.” Carpenter today is seeing “tangible” benefits from its AM eforts, he said, bringing in “viable business every month that is based on additive technology.”

Peskosky noted the Philadelphia-based company is “heavily involved for production jobs for several aerospace OEMs (orig inal equipment manufacturers),” which he wasn’t yet free

to disclose. Moreover, he also looks for medical AM demand to “ex plode” over the next two years.

Carpenter produces powders in four U.S. facilities and one Swedish operation, in cluding stainless, nickel-based and cobalt-based alloys, tool steels and other alloys. AM wire in nickel and cobalt alloys and stainless and tool steels is made in Reading, Pa., while titanium wire is produced at Dynamet in Washington, Pa. Carpenter also said it will add titanium AM powder in “the very near future.”

One obstacle that makes it difficult to determine how much traditional production work is shifting to AM is the reluctance of OEMs and large subcontractors to reveal their activity in this intensely competitive market—and their warnings to suppliers not to talk as well. For example, John O’Hara, global sales manager for Sciaky Inc., noted that the Chicago subsidiary of Phillips Service Industries Inc. was recently working on qualifying its electron beam additive manufacturing (EBAM) process on five separate programs he couldn’t disclose, three of them in aircraft or aerospace, in addition to a maritime application and another in energy.

One customer O’Hara can speak about, however, is Lockheed Martin Space Systems Co. Sciaky is supplying its electron beam additive manufacturing system (EBAM) to the Denver-based unit of Lockheed Martin Corp., which is building titanium 6Alumi num-4Vanadium propellant tanks for future satellites.

O’Hara said Lockheed Martin, by bring-ing tank fabrication in house with the EBAM system, was able to reduce its lead times—from release from engineering to a “fully inspected, ready to use product”— to six months from 18 months. FRANK HAFLICH

2017 Metals Market Outlook AEROSPACE METALS


The U.S. stainless steel market will see flat to minimal growth next year as inventory restock ing, lower import share and stabilizing raw material prices should ofset some end-market weakness, according to a metals analyst.

“We’re looking at a fairly flat stainless steel market going into 2017,” Christopher Plummer, managing director of West Chester, Pa.-based Metal Strategies Inc., told AMM. “The major diference is the market no longer has the excess inventory that it had for most of 2016.”

Analyst Markus A. Moll also believes the overall stainless steel market will be subdued in 2017. He recently predicted that demand for stainless steel long products will see a modest uptick next year, while that for flat and tubular products will be flat to negative.

“When we look at (demand) by country and region, I wouldn’t be surprised if we report a minus for the United States in 2017,” Moll, managing director and senior market research analyst at Austria’s Steel & Metals Market Research GmbH (SMR), told delegates Oct. 18 at AMM’s 30th Stainless and Its Alloys Conference in Philadelphia.

Still, stainless steel inventory levels could represent a bright spot for the

industry in 2017, according to Plummer. “We’ve had a long period of

inventory drawdown for stainless steel up until a couple of months ago,” Plummer said. “We’re clearly at the end of this much-needed inventory correction, and as a result, as long as demand holds up, we should start seeing a little more positive growth, at least in producer shipments.”

A significant drop in the share

of imports in the stainless steel market should provide further lift for the domestic stainless steel mills, Plummer continued.

“We had a strange and confounding situation over the last three years with the introduction of production out of Outokumpu Stainless USA LLC’s mill in Calvert, Ala., at the same time that import share was continuing to build,” he said. “Now imports’ share has started

to come down.” Stainless steel imports accounted

for 35 percent of apparent consumption in the U.S. in the first nine months of 2016, down from 40.7 percent in the same period in 2015, according to Plummer. “That’s a huge drop,” he said.

Indeed, some stainless steel buyers expect that any base price hikes by the four major

U.S. mills could be accepted by the market in 2017.

“We’re anticipating price hikes for 2017,” one Midwest flat products distributor said. “(The mills) will have a little bit of success in that, but at the end of the day, all the (mills) have to turn their inventory.”

With domestic lead times falling, demand for imported material has been weak, trad er sources said.

“Selling futures is not easy at

Stainless mart expected to see ho-hum 2017 demand

The overall stainless steel market could remain subdued in 2017, although stainless steel inventory levels could represent an industry bright spot.

STAINLESS STEEL

‘We’re clearly at the end of this much-needed inventory correction, and as a result, as long as demand holds up, we should start seeing a little more positive growth, at least in producer shipments.’ — Christopher Plummer, Metal Strategies Inc.



the moment,” one flat products and plate trader said. “It’s onesie-twosie business,” with only small-volume deals taking place.

“Imports don’t make sense now when you consider extended lead times. . . . (Imported material) still (has) a five-month lead time. (Also), the Pacific Rim countries don’t want to get thrown out (of the United States), and the surcharge isn’t moving a hell of a lot, so there’s not a lot of volatility,” a second Midwest flat products distributor said.

“We still get quite a few ofers, but import prices aren’t that good,” a West

Coast bar, flat products and plate distributor noted.

Another bright spot for the stainless steel industry next year will likely be the stabilization of stainless steel raw materials such as nickel and chrome, according to Plummer.

“We have finally seen nickel prices stabi lize at a very low level,” he said. “The key is that nickel prices have settled; no one needs wild swings.”

The stability will benefit both stainless sellers and buyers, and the relatively low prices will help keep the market competi tive with substitute metals, Plummer said.

On the downside, some vulnerabilities for the stainless steel

market will pop up and persist in 2017, mostly pertaining to three of its largest end markets: the auto motive, foodservice equipment and petro-chemicals industries, according to Plummer.

The U.S. automotive market is one of domestic stainless steel’s largest end markets, typically consuming about 350,000 to 500,000 tons per year, driven in par ticular by the automotive exhaust systems and decorative trim manufacturing subsec tors, Plummer said. This industry has likely reached its peak; last year it set a production record

within the North American Free Trade (Nafta) region, and it’s on track to set another production record this year.

“That can’t go on forever,” Plummer said. “The recovery began in mid-2009, so this has been a very strong recovery, but clearly it’s at the end of its cyclical upturn.”

A downturn in the automotive industry would likely hit AK Steel Corp. the hardest, as the West Chester, Ohio-based mill domi nates the market for 400-series grades of stainless steel, which are heavily used by the automotive industry, according to Plummer.

“AK Steel has created a solid, high-value niche with their aluminized

products that has moved them away from the fray of the more commodity, nickel-bearing 300-series grades,” he said. “Commodity stainless has turned into a real dogfight, and in 2017, it will be even more of a dogfight if mills like AK Steel have to revert back to that market.”

Challenges in the foodservice equipment market, mainly arising from the fast-food industry, also won’t help the stainless steel industry next year, according to Plummer.

“The fast-food market is struggling,” he said, pointing toward companies like McDonald’s Corp. that have fallen out of public favor in recent years. “A significant percentage of companies are cutting back and closing operations just because the market is oversaturated.”

In addition, the petrochemicals industry— including petroleum processing, but not to be confused with drilling or transmission pipe manufacturing—will likely continue to see stifled growth in 2017, further dampen ing stainless demand, Plummer said.

Overall, apparent consumption of U.S. stainless steel in the first nine months of 2016 was down 2.8 percent year on year, which “isn’t bad, but it’s not great either,” Plummer said.

“The underlying markets are mixed at best,” he concluded. “Even the end markets that are growing are just growing in the low single digits.” GRACE LAVIGNE

2017 Metals Market Outlook STAINLESS STEEL

‘We have finally seen nickel prices

stabilize at a very low level,” he said.

“The key is that nickel prices have

settled; no one needs wild swings.’

Christopher Plummer


2016 ended on a bright note, with scrap prices and finished steel prices moving upward and creating optimism for the start of the new year.

The upward momentum is partially due to metals and stock markets responding well to Donald J. Trump being named as president-elect, but his campaign promises to protect manufacturing and invest in infrastructure will not pan out overnight af ter the Jan. 20 inauguration date.

“We have a tendency to overestimate the short term and underestimate the long term. When you have an economy that has been this dead for so long, it will take time. Moving the whole economy is liking taking an 18-wheeler around a corner. You can shift the direction but you have to turn the corner slowly before you can resume the speed limit,” a chief executive officer in the metals industry said.

The U.S. economy is forecast to show strong growth after a 1.5-percent gross do mestic product (GDP) increase in 2016, according to the Organization for Economic Cooperation and Development (OECD). OECD projects that “activity is expected to accelerate in the United States, due to an assumed easing

of fiscal policy, with the economy projected to grow by 2.3 percent in 2017 and 3 percent in 2018.”

Steel-intensive industries like infrastruc ture, construction and heavy machinery are expected to improve in the next two years but the uptick will be a gradual movement for most of 2017.

There is hope that infrastructure investments in Trump’s $550-billion

stimulus plan could increase steel demand by 22 million tons a year for five years, according to Morgan Stanley research released after the general election, but these eforts will take at least a few quarters to get started.

A 22-million-ton increase in finished steel demand would be a boon for scrap metal recyclers who would enjoy being immune to an oversupply and mediocre demand for a change.

In the short term, global factors—including some of the usual characters—will continue to dominate the local ferrous scene.

2016 was plagued by a strong U.S. dollar, weak gas and oil prices, historically low iron ore prices and China’s massive exports of steel all over the globe. The end result was taxing to suppliers of ferrous scrap as domestic demand was mediocre and

export demand was erratic. Even with the U.S. placing trade

sanctions on China in 2016, the country’s global dominance on the steel stage continues to impact the domestic industry. China sells competitively priced billets to Turkey, which negatively impacts opportunities for U.S. scrap exporters.

The absence of export opportunities im pacts domestic mills, which leads to over supply of scrap

Clouds may be parting for market during coming year

The worst of the storm in the U.S. ferrous scrap market has passed, with brighter days ahead, but there are still clouds in the fore cast through at least the third quarter.

FERROUS SCRAP

The absence of export opportunities impacts domestic mills, which leads to oversupply of scrap and there is nothing to suggest that the United States will be insulated from the phenomenon during 2017.



and there is nothing to sug gest that the United States will be insulated from this phenomenon during 2017.

Scrap exporters will face another challenging year as the strong U.S. dollar makes its scrap more expensive to exporters, with weaker currencies and Chinese billets to Turkey show no sign of easing up.

Trump’s vow to place more pressure on China will take time to work its way into legislation or trade decisions.

“(President Ronald) Reagan was hard on Japan and Trump is going to be hard on China, and said he will label them currency manipulators as well as target them for dumping products here. How efective Trump will be in the first year is hard to tell. A one-year time frame is pretty hard to adhere to, but in years two and three of the administration. I absolutely see it taking impact,” the chief executive added.

Iron ore prices, used in the production of Chinese billet, has risen sharply which raises costs for Chinese billet makers.

After hitting $38.30 a tonne in Dec. 11, 2015, according to Metal Bulletin,

iron ore is now showing signs that is has been re suscitated, hitting a $79.81-tonne high on Nov. 11 and trading in the mid-$70 range by November’s end.

On the domestic front, demand is ex pected to be better. Mills serving the oil and gas industries are expected to remain running at low operating rates but have been steadily showing improvement. After hitting a historic low of 404 in May 2016,

U.S. rig counts have been in recovery and were 568 as of the week ended Nov. 11.

Even a slight demand increase from oil and gas mills producing pipe and tube should help to nudge up U.S. utilization rates during the year, and utilization rates could accelerate in the latter part of the year when new infrastructure spending is expected to occur. Infrastructure spending will take time to develop as funding has to be released and then project planning needs to be initiated before new building is shovel ready.

The commissioning of Big River Steel LLC in Osceola, Ark., is also expected to benefit scrap prices with the new indepen dent mill creating competition for tons throughout the southern and Mississippi River regions. The mill purchased a modest 20,000 tons during November’s buy but is expected to increase to as much as 100,000 tons a month once it is ramped up.

The worse is clearly behind the industry in terms of metal recyclers going belly up or quietly closing their doors. 2016 was a year plagued with countless recyclers folding, and those who navigated throughout the downturn have less competition from feeder yards. One southeast shredder

oper ator said he suspects that the better activity at his scales is due to the ‘mom and pop’ yards exiting his region.

Rising iron ore prices and rig counts, new capacity coming online and the potential for strong infrastructure investment will all work to allow 2017 to be stronger than the prior two years but still shy of the potential that awaits 2018. LISA GORDON

2017 Metals Market Outlook FERROUS SCRAP

Trump’s vow to place more pressure on China will take time to work its way into legislation or trade decisions.


The fate of U.S. ferrous scrap ex ports remain uncertain as currency valuation tops the list of factors that could potentially suppress the hunger of customers in the up coming year.

The U.S. dollar has been under a “Trump flation” spell since the presidential election and its value is expected to appreciate further on renewed investor confidence and likely in terest rate hikes by the Federal Reserve.

“The Feds will have no choice but to raise interest rates and throw the country into a big boom,” a top executive of a major scrap company noted. “We are going to see a good uptick in America. . . . In this area, it is going to be easy to achieve.”

A strong dollar bodes well for the U.S. economy but as the world’s largest ferrous scrap exporter, this could materially impact demand from key export destinations. U.S. ferrous scrap exporters are no stranger to the effects of currency fluctuations having experienced it when the dollar spiked sig nificantly relative to other currencies in the second half of 2014.

“U.S. scrap will become more expensive for our customers, which could reduce demand and negatively impact export sales,” an exporter

source said. “Also, the value of the Japanese yen is dropping, which would make Japanese H2 more attractive to buyers, especially in Asia.”

Unlike U.S. ferrous scrap exports, which declined 15.3 percent year on year to 13 million tonnes in 2015, World Steel As sociation (WSA) data show a 5.4-percent increase in Japanese exports to 7.8 million tonnes during the same period. Japan is the second-largest ferrous scrap exporter worldwide. A top executive

at a Japanese exporter attributed the uptick to increased scrap appetite from emerging markets like Vietnam.

However, the near-term outlook is not all doom and gloom for U.S. scrap exporters. International scrap trading prices are closing out the year on a more positive note compared to 2015, propped up by runaway coking coal prices. Several analysts are ex-pecting coking coal prices to remain

high through the first quarter of next year.

“If I had said three months ago that coking coal prices would hit $300 (a tonne), you would’ve said I was crazy,” a scrap company executive said. A second scrap executive echoed this view: “I’ve been in this business a long time and I don’t re member coking coal ever going beyond $100.”

The coking coal price rally was an unintended efect stemming from the Chinese government’s supply-side reform eforts aimed at stabilizing

global steel prices. Targets have been set to reduce production capacity in various steelmaking provinces, which happened in tandem with coking coal capacity cutbacks.

These unprecedented price levels have prompted integrated mills worldwide to shift their raw material consumption pat terns and increase their usage of higher grade iron ore and ferrous scrap.

‘Trumpflation’ could spell trouble for scrap exports

But the near-term outlook is not all doom and gloom for US scrap exporters as scrap trading tags closed out 2016 on a much more positive note.

RAW MATERIALS

‘U.S. scrap will become more expensive for our customers, which could reduce demand and negatively impact export sales.’ — An exporter source



MARKET ‘Reality is that demand is still lackluster, but with the election over it makes sense that there would be buyers. It is not short term—I think it will last for a while.’

— A scrap exporter participants believe this will contribute to increased export scrap demand, which ap peared to be on point with China’s come back to the U.S. bulk ferrous scrap market in November.

“What it comes down to is that China is a serious contender in the scrap market. The appetite that they have for ferrous scrap and nonferrous scrap is just unbelievable. It is astounding how much they want and how much they need,” a trader source said.

Chinese semi-finished billets was a sore spot for U.S. export market participants since 2014 but this is no longer the case since the Chinese authorities initiated a tax probe on billet exporters in June. The in vestigation, coupled with periodic produc tion restrictions in Tangshan lifted the floor on the billet export price.

Turkish steelmakers then shifted their focus to billets originating from Common wealth of Independent States (CIS). While the competitive dynamics between billets and scrap remains the same, the rival has changed.

It is unclear how long Chinese finished steel prices will continue to hold at higher levels but eforts to curtail steelmaking capacity in China have yet to yield any in tended efects. The capacity cutbacks did not result in any meaningful drop in production levels. Instead, restrictions on actu al production boosted market sentiments, drove Chinese finished steel prices upwards and raised

overall steel output. “At some point, they were just

cutting idled or inactive capacity, which has no impact on the market whatsoever, but right now because the target is so high they have to cut active (capacity),” an analyst said. “It is a combined efect—when prices are higher and you cut active capacity, existing mills will have to raise utilization rates to meet (finished steel) demand, if it is there.”

There is a general consensus that the worst times are now behind us and export market participants are mixed on their sentiments regarding 2017 but many agree that it has become progressively harder to accurately read the market in recent years.

“Diferent markets are showing diferent signals. . . . There have been more mixed signals than 15 years ago when the Chinese were not paying in the market,” a scrap trader source noted. While some traders and exporters maintain a bullish outlook for the coming year, others are more skeptical questioning global real steel demand.

A market analyst who took a more conservative view for the upcoming year said: “We believe the market will continue to have a price spike in December and Janu ary and we see a great deal of price volatil ity but no change in apparent demand. . . . I don’t see how we have the expectation of a sizeable rise in U.S. (scrap) exports in the years ahead.”

“There is real legs in the export market. . . . I don’t think prices are going to come down significantly anytime soon,” according to an exporter who took a posi tive stance. “Reality is that demand is still lackluster, but with the election over

and people coming of the sidelines, it makes sense that there would be buyers. It is not short term—I think it will last for a while.” MEI LING TOH

2017 Metals Market Outlook RAW MATERIALS


Where 2016 was expected to be a year where companies would turn more towards value-add products in an efort to divorce themselves from the difficulties of a flagging upstream industry, 2017 may prove to be the year where sup ply tightness returned to the conversation.

While the biggest weight on aluminum’s profitability—smelter overcapacity in China—has yet to be neutralized, signs exist that the Chinese suppliers may be starting to curb its overcapacity for its own reasons. According to a report by AMM sister publication Metal Bulletin, the Chinese government is looking to enact tougher environ mental restrictions—which may prove to lead to more capacity cuts, with 2.3 million tonnes of aluminum smelting capacity hav ing been taken offline since 2010.

Additionally, the cost of thermal coal in China has risen 65 percent since the beginning of 2016, with alumina jumping 50 percent in that same time frame. Such price increases have raised the cost of Chinese aluminum production by approximately $350 per tonne, making $1,600 per tonne the average cost of production for suppliers with captive energy sources—of which 75 to 80 percent of Chinese producers qualify.

With these indicators, it’s perhaps no surprise that the aluminum market began to show signs of tightness in fall 2016. AMM’s assessment of the Midwest aluminum premium began its rise in mid-September, rising

32.6 percent from a low of 5.5 to 6 cents per pound to 7.5 to 7.75 cents per pound as of Nov. 17. Coinciding with this increase were reports of a tighter

P1020 market, with market participants anticipating that the spot market will be making a transition into being a seller’s market in 2017, as opposed to a buyer’s market in 2014-15.

However, while these conditions seem to suggest that the overall aluminum market may see a continued tightening in 2017, a lot of it is dependent on how China chooses to handle its excess aluminum capacity.

“I’m going to be reserved with Chinese capacity,” John Mothersole said, director of research, pricing and purchasing service at London-based IHS Markit Ltd. “You’ve got to show me before I believe it.”

IHS Markit is currently projecting a global deficit of 500,000 to 800,000 tonnes in 2017—which would support average London Metal Exchange prices around $1,800 per tonne by the end of the year. However, this kind of outlook could easily be derailed by China, Mothersole said.

“When it comes to inflicting pain, the authorities in China consistently back away,” Mothersole said of China following through with its plans to limit capacity. “I would not anticipate that changing.”

However, if Chinese capacity were to become limited in 2017, it would open up many doors for the North American

Aluminum market is still cautiously optimistic for 2017

The aluminum market began to show signs of tightness this past fall, due in part to signs that China may be starting to curb its overcapacity.

ALUMINUM

‘When it comes to inflicting pain,

the authorities in China consistently

back away. I would not anticipate

that changing.”

John Mothersole, IHS Markit Ltd.



industry. Should LME prices continue their “upward drift”, as Mothersole calls it, then prices levels could get high enough that U.S. smelters could even consider turning back on previously shuttered aluminum smelt ing capacity. The biggest example of this would be Arg International AG’s purchase of Noranda Aluminum Holding Corp.’s smelter in New Madrid, Mo., in October. Should LME prices surge, then Arg could be in a position to reap in profits of of re starting the otherwise unprofitable smelter.

Regardless of what China does, alumi num supply is expected to be tight, due to the amount of primary capacity taken offline in the past couple years finally being felt on the market. With this new found tightness, Canadian smelters are in a position to sell into the U.S. market, although the passing of the European Union (E.U.)-Canada Comprehensive Economic and Trade Agreement (CETA) may cause more Canadian aluminum to find its way to Europe. Regardless, the U.S.’s proximity makes it a better target for Canadian metal.

“I think the natural place for Quebec production is the United States,” Mother-sole said. “Putting it on a boat is cheap, but putting it on a train is cheaper.”

Rio Tinto Plc confirmed in October that aluminum produced at its smelter in Kitimat, British Columbia, was being sold into the U.S. Midwest, a departure from its recent target of the Asian Pacific market. Spot premiums for Japanese P1020 were soft near the end of the year, as opposed to their strengthening U.S. counterparts.

As of late November, market participants told AMM that the P1020 market would only continue to tighten,

as major suppliers appear to be sold out or unable to handle new spot orders of material.

“The discounts are gone—and rightly so,” one supplier told AMM in late November. “There’s no units coming in. . . (traders and buyers) are running around like crazy looking for units.”

“I think people oversold,” concurred a second supplier.

Rumors also floated around the market near the end of 2016, suggesting that the excess aluminum supply previously on the American market had been bought up by large trading firms.

In the short term, market participants believe that the U.S. market will continue to exhibit tightness going into 2017. What may help fuel this is the actions of President-elect Donald Trump, who campaigned in 2015 and 2016 on the promise of protectionist trade policy. Plans to institute an infrastructure rejuvenation plan may prove to be an engine to spur aluminum demand in the building and construction sector.

As we expect Trump’s infrastructure investment plan to target extractive industries, highway spending and border security, despite the lack of details, will result in slightly higher than-expected U.S. steel, copper and aluminum consumption over a multi-year horizon,” BMI Research, a di vision of Business Monitor International Ltd., said in a research note Nov. 9. “In terms of metal production, Trump’s strong stance against dumping and general protectionist attitude will provide a slight upside potential to our U.S. steel and aluminum production forecasts, through further raising tarifs on metal imports and providing demand with

the infrastructure plan.” However, BMI Research

acknowledges a “lack of details” in Trump’s policies, which have market participants unsure of how a Trump administration will proceed, or carry out its promises. For the aluminum industry—as well as the metals industry at large—the involvement of Daniel DiMicco, the former chief executive officer of Charlotte, N.C.-based Nucor Corp., with the office of the U.S. Trade Representative (USTR) seems to suggest that the administration is interested in embracing a metals-friendly economic policy. KIRK MALTAIS

2017 Metals Market Outlook ALUMINUM

‘I think the natural place for Quebec production is the United States. Putting it on a boat is cheap but putting it on a train is cheaper.’

— John Mothersole


Amid the macroeconomic haziness, aluminum scrap processors and collectors are questioning what it will take to transition to a higher-volume market, as many grapple with lower margins, while mixed scrap con tract negotiations for 2017 further cloud the picture.

Inbound volumes of scrap to processors and collectors remain a key concern. Increasing capacity rates will help processors and collectors relieve some of the pressure on margins, according to participants.

“2017 may actually be somewhat worse for scrap processors and collectors due to higher working capital requirements with stronger LME prices. The challenging environment won’t change until processors get more volume because they’re not going to be able to take on the risk of passing on wider margins until their utilization rates pickup,” a supplier said, adding that price discipline will be a crucial step in

alleviating margin strain. “The pounds will always migrate to a higher price point.”

However, some market participants remain cautiously optimistic extrapolating on the re cent rallies in terminal markets and signals that steel prices will improve next year.

“It’s setting up to be a much better year for aluminum scrap than 2016 and 2016 wasn’t so bad on the aluminum scrap side. 2016 seems like it was a slow year on the supply side with starts and stops, but boy it feels like it has ramped up over the last three months. Barring the LME pricing falling through the floor, I think 2017 is going to be a very good year,” a second supplier said.

A recovery in steel markets could bode well for the nonferrous scrap market, helping to improve higher collection rates and allowing processors to increase capacity and ease some pressure on margins.

“I’m a cockeyed optimist. I think the

steel market is going up and if that continues into the first quarter that will be good for scrap. The U.S. dollar won’t get any stronger. Aluminum is going to be strong. I’m pretty confident that prices are going to stay in the range they are. Supply is tight but not horrible across the board and automotive will continue to drive the aluminum market around the world,” a third supplier said.

Floating in the backdrop is a larger unknown, President–elect Donald J.Trump who could usher a revival in U.S. manufacturing and reinvigorate business. Just three weeks after the election, and before being sworn in as president, Trump managed to persuade Carrier Corp. to keep 1,000 jobs slated for Mexico, in Indiana.

Trump is expected to level the playing field in terms of international trade, to increase infrastructure spending, dampen regulations and cut taxes, all moves they claim will encourage manufacturing and boost the health of both the steel and scrap industries.

Scrap consumers, suppliers, traders and brokers overwhelmingly are hopeful that his campaign promises will translate into economic growth.

Automotive, on the other hand, has been the bright spot in recent

Aluminum scrap market keeps its eyes facing forward

Aluminum scrap market participants welcome the

notion of tossing the challenges of 2016 behind them

for the prospect of better days ahead, but uncertainty

driven by a possible peak in automotive, the impact of

a new administration in Washington, flows, margins

and the London Metal Exchange has stirred a range

of emotions from uncertainty to cautious optimism.

SECONDARY ALUMINUM



years, but may have peaked. Bullish participants are unfazed pointing out that more aluminum is being used by automakers and the trend is expected to continue.

Automotive is transitioning into a plateau stage with sales reining in at the mid-17 million units, with some sensing softness from automakers in the second half of 2016, as well as inconsistencies in contract negotiations which are currently underway, may be clear signals that the automotive boom has hit its ceiling.

“Auto sales are down but the overall feeling is business is going to be the same as 2016, definitely not better. It will be more of the same for spreads and relatively tight flow of scrap going forward,” another supplier said.

Consumers are reportedly a little bit more tentative and not as interested in tying up contacts, according to sources, who say that consumers are showing an interest in buying on the spot market.

Aluminum melting facilities are still em bracing contracts. “We’ve done some of our negotiations for 2017 and still have more to do, I think 2018 and 2019 should be a lot stronger,” one consumer said.

A fifth supplier said, “My sense is that things will be similar to last year. Spreads seem to have widened out and no consumers seem to be consistently in the market.

Regardless of the uneasiness, the auto industry is expected to continue to drive alu minum scrap demand in the U.S. and abroad.

“Auto sales have been astronomically high for a number of years, but markets regress to a norm or average. So we could see where those sales taper of but I don’t think there’s a fundamental shift away from aluminum,” a sixth supplier said.

Another supplier shared a similar view, quick to note that even if auto sales drop, more aluminum is being used in each new vehicle, signaling that increased proliferation of aluminum parts will match the decrease in auto sales.

“Negotiations for 2017 have been kind of inconsistent. Extruders and billet mak ers are hungry for 6000 type series material, forecasting strong automotive demand,” the supplier said. “Even if automakers cut back production, they’re increasing the amount of aluminum in each car. . . some consumers want to increase scrap volumes for next year and at

the minimum some have held pricing from 2016 to 2017 steady in terms of its relationship to the Midwest transaction price or tightened spreads.”

End-user demand has varied, according to some suppliers who cited that construction related interest has been soft so far in 2017 contract negotiations.

“The consumers who are not as hungry this year compared to last year seem to be the people buying products going into construction products. As a result, prices for 2017 are pretty much flat. There wasn’t a clamor for us to increase these type of commodities and some consumers had us cut back on volumes,” the supplier said. BRAD MACAULAY

2017 Metals Market Outlook SECONDARY ALUMINUM


The annual copper mating season is wrapping up and market participants are eager to finalize holiday plans with the end of year approaching, but despite a major price rally and indications of improved demand in 2017, investors still acknowledge a host of pitfalls for the red metal.

Ever since the industry convened in Lon don for the ostentatious LME Week, base metal prices have been on a euphoric roller coaster with copper eventually hitting the highest mark since June 2015—prices at last glance were up nearly 25 percent year to date.

It’s a staggering recovery after the same period one year earlier was filled with doom and gloom, and speculation was rampant that the Chinese economy could buckle under a ballooning debt burden.

The optimism has bled into the U.S. market, with American Copper Council attendees in Florida recently expecting 2017 to see a further recovery, especially for the trading community.

“Things are more positive next year, a bit more realistic,” a physical trader said, while noting that fewer contractual deals will al low more spot activity.

While U.S. and Chinese demand is ex pected to grow, mining companies haven’t restarted shuttered mines,

producing a material shortfall so far. According to the International

Copper Study Group (ICSG), for the first eight months of 2016, there was a production deficit of about 91,000 tonnes, or a sea sonally adjusted deficit of 93,000 tonnes. This compares with a production surplus of around 10,000 tonnes, or about 19,000 tonnes on a seasonally adjusted basis, in the same year-ago period, ICSG said.

“World apparent refined copper usage rose 3.8 percent, or about 570,000 tonnes, from January through August. This was mainly due to increases in China, where de mand increased 7.5 percent largely due to an

8-percent increase in net imports,” the Lisbon, Portugal-based group said.

Producers like Glencore Plc, Freeport-McMoran Inc., Asarco LLC, Corporacion Nacional del Cobre de Chile (Codelco) and Rinto Tinto Plc’s Kennecott Utah Copper Corp. are aggressively seeking ex panded market

share instead of increasing production. So where are prices going? That’s

a difficult question, even for the forecasters, because of ongoing uncertainty circling the industry.

The enigmatic nature of the Chinese government is the million-dollar question, because the country has injected an historic level of stimulus in the economy to stabilize growth between 6.5 and 7 percent. This has resulted in a scorching property market that has outsiders beginning to wonder if it is sustainable for an extended period.

If China injects another round of stimulus, then construction spending

could resume its go-go days. And what about the United States? Well, President-elect Donald Trump is inheriting an economy with record-high stock and home prices, along with rising wages and unemployment below 5 percent.

The Chinese government has

Lingering demand haze clouds copper market in 2017

2017 marks a change from last year, which was filled with speculation that the Chinese economy could buckle under a ballooning debt burden.

COPPER

‘Things are more positive next year, a bit more realistic,’ a physical trader said, while noting that fewer contractual deals will allow more spot activity.



injected an historic level of stimulus in the economy to stabilize growth between 6.5 and 7 percent.

But he ran on a campaign of strength ening beleaguered working class families primarily residing in the Rust Belt. So one of his first proposed domestic policies is a massive increase in infrastructure spending, with preliminary figures as high as $1 tril lion in private-public partnerships.

If Trump unleashes a wave of Keynesian spending to repair the dismal state of U.S. infrastructure, copper prices are going to push higher. However, that’s a lot of ‘ifs’ and if history is an indication, Trump could change his mind—several times—by the time he is inaugurated in January.

This has produced a broad range for experts, including London-based CRU Group, which is expecting prices to average between $2.05 to $2.25 per pound in 2017. But managing consultant Robert Edwards said the price could reach $2.75 per pound if the aforementioned policies in China and the United States are enacted.

Edwards is downbeat because the group is expecting mine growth to produce a 400,000-tonne global surplus in 2017 as worldwide demand only increases by 2 percent, while Chinese construction is expected to decline into negative territory unless the People’s Bank of China (PBoC) once again intervenes.

Finally, there is the U.S. central bank and the question of when Federal Reserve chair woman Janet Yellen and company will lift rates once again. Last December, the Fed lifted rates for the first time since 2006 and initially targeted four hikes in 2016.

But ongoing fears of a Chinese collapse, the United Kingdom

referendum vote to leave the European Union and inconsistent domestic growth has forced the policy board members to sit on their respective hands.

That is likely to change in a few weeks when the organization convenes in Wash ington, D.C., because in recent weeks Yellen has signaled that the case for a rate hike has improved since the last meeting and an in terest change could come “relatively soon.”

Prediction markets reacted by essentially guaranteeing the Fed does indeed lift rates shortly, according to the CME Group Fed-Watch, a tool that tracks the market’s views on the likelihood of changes in U.S. mon etary policy.

So what’s the future for an industry that is only expected to see demand grow by 2 percent in 2017? Producer battles for market share are sure to continue and the resulting outcome should see traders once again facing a murky outlook.

Still, with the U.S. economy heading for its eighth year of expansion and the Chinese government keeping growth constant, there is cause for optimism.

Fear still remains after the industry cut thousands of workers, shuttered mines and saw stock prices tumble to multiyear lows due to the same issues still plaguing the copper sector. But why play the Grinch with prices at 18-month highs and Christ mas right around the corner.

“Nobody is jumping for joy but peo-ple are expecting 2017 to be better,” another trader summarized the mood in the industry. DALTON BARKER

2017 Metals Market Outlook COPPER


Following a bleak 2016, many market participants believe that strong fundamentals are propelling the refined nickel market in North America into the initial stages of an upcycle that will last through 2017.

Leading the upcycle are the oil and gas, aerospace and stainless steel industries, while the automobile industry is expected to put downward pressure on the market in 2017. The oil and gas sector is a particularly influential market for nickel because of its role in pipes, according to one nickel trader. “If anything moves demand, it’ll be oil and gas.”

The U.S. Energy Information Administration is projecting that oil prices will average $49.9 per barrel in 2017, up from $42.94 the previous year.

Although not a huge increase in price, a second trader said that it should be enough for companies to begin to start to put in new parts in pipes, rather than solely maintaining and repairing pipes. “New parts will be put in place rather than just pure replacement.”

Dan Maudlin, vice president of finance and chief financial officer of Haynes International Inc., said while the oil and gas sector has been a very weak market for the company for quite a while, he anticipated strong

long-term demand growth. “With higher oil prices, that should activate a lot more capital expenditure spending than what we’re seeing now.”

However, one factor that could impact the oil and gas industry is President-elect Donald Trump’s promise to revive the U.S.’s coal industry, according to Central Wire Industries Ltd.’s president and chief executive officer Paul From.

Converting coal to natural gas plants has grown demand for nickel in the U.S., but “if there’s a decreasing number of coal plants switching to natural gas, I don’t see that as a good thing for nickel,” From said.

Market participants agreed for the most part that the aerospace sector is looking strong for next year, though there are some possible demand hiccups.

Demand from the aerospace industry remains “quite good,” though there have been some delays and disruptions within the supply chain related to new engine plat forms, Maudlin said. While these issues are impacting Haynes’ going into aerospace, “that’s our solid market right now.”

David Pathe, president and chief executive officer of Sherritt International Corp., said that airplane

manufacturers are “doing quite well. There’s definitely been a decent amount of airplane production.”

Meanwhile, From cautioned that if oil and gas prices continue to remain flat, airlines could possibly backtrack on the number of airplanes that they’ve ordered. With the price of jet fuel at a very low price relative to the price of a new airplane, “there may be some decisions to continue to oper ate older, less-efficient planes.”

The automotive industry is expected to be detrimental to nickel demand, as market participants agreed that the industry is likely headed for a downturn next year.

The first trader cited oversaturation as the driving force behind the downturn. “Automotive has been up the past three or four years and there comes a point when people aren’t going to buy.”

Indeed, Dearborn, Mich.-based Ford Mo tor Co. said in October that it planned additional production cuts in North America through the fourth quarter due to a slow down in vehicle retail sales and an overall maturity in the current market cycle.

However, From said that he doesn’t anticipate a dramatic fall of in nickel volume going toward the automotive market. “It might start to trail down,

Upward bounce may begin, and last through new year

Leading the upcycle are the oil and gas, aerospace and stainless steel industries, while automotive is expected to see downward pressure.

NICKEL2017 Metals Market Outlook


but that’s just speculation.” While the stainless steel market

isn’t a huge driver of nickel consumption in North America, most market participants said that it’s still relevant and indicative of the overall health of the economy.

According to Markus A. Moll, managing director and senior market research analyst at Austria’s Steel & Metals Market Re search GmbH (SMR), demand for stainless steel in North America will be subdued in 2017, due to various impediments such as potential interest rate hikes, a delayed oil and gas recovery, weak growth for trucking equipment, among others.

From agreed with Moll that the market will remain flat in 2017 relative to where it is now, though he said that the promised infrastructure investment by Trump could shake things up if it goes through. “The first half will be a wait and see for what voices in Washington are saying. And then it’s going to get interesting.”

Thanks to stronger overall demand, the second trader said that he had been negotiating higher U.S. spot premiums for 2017 of around 17 cents. “It’s a vast improvement” over last year when contracts were between 9 and 12 cents.

The first trader agreed that premiums would steadily improve and

anticipated average spot premiums to be between 15 cents and 20 cents. One of the main reasons he gave for the higher premiums was the fact that premiums generally lag behind the

London Metal Exchange price. “The market is going up now, and I think premiums will follow.”

Over the past year, the LME’s three-month nickel contract has climbed approx imately 25 percent and is projected to rise even higher next year by various banks and analysts. Analysts at Bank of America Merrrill Lynch (BofA) wrote in a Nov. 9 research note that they expected prices to average $10,019 per tonne ($4.54 per pound) in 2016, and then rise to $12,250 per tonne ($5.56 per pound) in 2017.

Edward Meir, an analyst at New York-based INTL FCStone Inc., projected in October a 2017 price high for nickel of $13,500 per tonne ($6.12 per pound), a low of $9,000 ($4.08 per

pound) and an average of $11,200 ($5.08 per pound).

The expectation that the global market will enter a deficit in 2017 is helping boost the price, with the

extent of the deficit depending on the number of nickel mines that the Filipino government shuts and the length of those closures, according to BofA.

Driving the possibility of a deficit is a fall in production, evidenced by an estimated 5.6-percent year-on-year decline in global output in 2016. The decrease in output is primarily attributed to reduced Chinese nickel pig iron production.

The International Nickel Study Group (INSG) is also projecting a deficit of ap proximately 66,000 tonnes of nickel in 2017 following a deficit of about 67,000 tonnes this year, primarily due to increased demand in China for stainless steel. MILLICENT DENT

2017 Metals Market Outlook NICKEL

‘The first half will be a wait and see for what voices in Washington are saying. And then it’s going to get interesting.’ — Paul From, Central Wire Industries Ltd.


“It’s hard to make a case how tomorrow or next year is going to look a whole lot diferent with a continuation of 2-percent GDP growth,” M. Robert Weidner III said, president and chief executive officer of the Metals Service Center Institute (MSCI). Based in Rolling Meadows, Ill., MSCI serves more than 300 members in 1,200 locations across North America. Its members provide approximately 2.4 million jobs that pay about $55 billion each year in wages and benefits.

Weidner explained that the na tion’s GDP has been stuck at an annual growth rate in the neigh-borhood of 2 percent since the end of the Great Recession some six years ago. “I’m not an economist,” he said. “But if we look at our data—and we have 40 years of data on steel—our service center shipments peaked in 2006 at 54

million tons. Last year, it was 38 million tons, and this year it should be flat.”

Looked at in perspective, Weidner said, steel shipments by his members are down 30 percent from 2006. Aluminum shipments are down 20 percent, and stainless shipments are of 14 percent from 2006.

“You look at manufacturing over the last eight to 10 years, and with few exceptions, manufacturing is not booming,” he said, noting that the automotive and aerospace sectors

have done pretty well while the construction and energy

sectors have not. “We had an economic summit in September.

Some of our end-use markets expressed optimism

about 2017; some not so

much.” Weidner

noted that with 2-percent GDP growth, “what you see is what you get. Nearly a decade of sub-par economic growth is

unacceptable. When the economy isn’t growing, it’s American workers who sufer the most.”

Weidner is hopeful that the new administration of President-elect Donald Trump will result in positive changes for manufacturing and the industrial metals supply chain, but he is enough of a realist to know that hope and change don’t always imme diately occur. “We’ve got a new president, and a new Congress,” he said, “but at this point, it’s just a lot of talk. It’s too early to tell. To me, it’s all about show me the money.”

Showing Weidner the money involves a host of issues. “It’s time to come together to streamline our tax code, stop currency manipulation and spur private investment in American infrastructure, including investing in America’s energy future,” he said.

R. Holman Head, president and chief operating officer of O’Neal Industries and vice chair of the MSCI board of directors, told the U.S. International Trade Commission (ITC) in testimony this fall that perhaps the top priority for the new adminis tration should be halting unfair and illegal trade practices.

“Global demand for aluminum

Metals supply chain outlook could hinge on the GDP

The industrial metals supply chain, the network of service centers that provide steel, aluminum, stainless, copper and brass to manufacturing customers, hinges on gross domestic product (GDP) growth.

SERVICE CENTERS2017 Metals Market Outlook


has stagnated and declined,” Head told ITC commissioners. “Meanwhile, according to U.S. government and International Aluminum Association data, the Chinese share of the global aluminum market has ex ploded from approximately 10 percent in 2000 to nearly 55 percent last year. China’s government-subsidized aluminum production glut, currency manipulation and other unfair trade practices have weakened the aluminum industry.” Head pointed out that service centers represent an important outlet for domestic aluminum mills, purchasing more than an estimated 2.1 billion pounds of aluminum mill products in 2014 according to the Aluminum Association.

Head recommended that federal policymakers vigorously monitor compliance with free trade agreements and promptly take action against violators, while negotiating

with trading partners directly to reduce global excess capacity. He said Congress should make it a stated principal objective of U.S. trade policy to target excess capacity in countries, such as China, that increase production through market distorting policies and should expand ef orts to enforce antidumping and counter vailing duties, which currently cover only aluminum extrusions. He suggested the

U.S. declare that the Chinese government is a currency manipulator and immediately initiate negotiations to address the causes of the under-valuation. Finally, the U.S. should resist eforts by China to be de clared a “market economy” in the World Trade Organization, which would help insulate it from inves tigations and enforcement actions aimed at its market distorting, unfair trade practices.

MSCI’s Weidner said the Institute

supports free trade, “but it has to be fair.” And if it is free and fair, it should encourage both a healthy domestic source of supply of industrial metals, and an equally healthy source of domestic demand. That’s what makes a healthy manufacturing industry and a healthy industrial metals supply chain.”

MSCI also supports corporate tax cuts and a review of regulatory reform. “One of the drags on GDP growth has been business investment,” he said. “Frankly, we have not seen as much business investment as we would have liked to have seen in recent years.”

Free and fair trade. Regulatory reform. Increased business investment. Put all of those together in 2017, and the industry could be on its way to recovery. “If we go to 3 or 4 percent on GDP growth,” Weidner said, “the industrial metals supply chain is going to be very healthy—and a good place to be.” BILL BECK

2017 Metals Market Outlook SERVICE CENTERS


register with the U.S. Mint and supply basic company information, as well as agree to random inspections by Mint officials.

Recyclers would also be required to obtain a surety bond to participant in the program.

Implementation of surety bonds-a three-party agreement between the recycler, Mint and bond provider-would protect the Mint from fraud or malpractice, with the amount of the bond not exceeding the value of the redemption.

“This program of safeguards would provide effective incentives while continuing to provide adequate enforcement,” Wiener said.

By imposing a temporary surety bond as part of the registered supplier program, the Mint would only need to inspect facilities when they suspect a problem or possibly on a routine basis.

Once the safeguards are properly established for domestic recyclers, they can then can be rolled out for foreign recyclers. “Following a successful evaluation of new domestic safeguards, the safeguards can be extended to foreign producers as quickly as

possible,” Wiener said.Meanwhile, ISRI was critical of some

of the safeguards the Mint is considering, including requiring recyclers to demonstrate where the coins were obtained and setting an annual limit on coins recycled by each supplier.

“There should not be any annual limitations,” Wiener said, citing economic, regional and weather-related events as a few of the variables affecting the volume of coins recovered. “It is not possible to accurately predict the amount of coinage that will be recovered and thus redeemed in any given year, making an annual limitation impracti-cable, arbitrary and unnecessary.”

Requiring recyclers to provide a full chain of custody when redeeming the coins is “simply impossible,” she said, noting that the pool of scrap metal from which the coins are recovered is constantly changing.

In both these instances Wiener cited the registered supplier program as the most effective approach to restarting redemptions as soon as possible.

ISRI has tried to work with the Mint to resolve the buyback program’s current

suspension, but its attempts have been met with limited success (amm.com, Sept. 13). This is the Washington-based trade group’s second attempt to have the moratorium lifted (amm.com, July 15).

“The scrap recycling industry has been significantly and adversely impacted by the suspension of the U.S. Mint’s mutilated coin redemption program, particularly in light of the depressed global commodity markets. The suspension of the program has imposed an additional hardship on the scrap recycling industry that is made up of many small and medium-sized family owned and operated businesses who depend on the mutilated coin redemption program,” Wiener said, noting that ISRI welcomes the opportunity to provide suggestions on the program and work with the Mint to develop practicable solutions to ensure the integrity of the program.

The U.S. government has agreed to return $2.65 million to coin recycler America Naha Inc. for damaged coins seized in 2014 amid claims that the money was counterfeit (amm.com, Nov. 1).

For information on licensing our pricing data contact us: [email protected] 877-638-2856For information on licensing our pricing data contact us: [email protected] 877-638-2856 amm.com


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