Much to do about nothing in Chinese EMM

In the latest Kerfuffle, manganese metal prices shot up in China after word that TMI was closing one of its lines. However, the company took one of its new lines off for maintenance. The net result, no change.

Record highs for SDI’s 3Q income and EBITDA

Steel Dynamics reported third quarter 2018 net sales of $3.2-billion and net income of $398-million, which includes charges of approximately $13-million related to fair value purchase accounting adjustments associated with the Heartland acquisition, and a tax benefit of $10-million associated with a change in tax accounting methodology.  Excluding these items, the company’s third quarter 2018 adjusted net income was $397-million.

In the the third quarter of 2017, SDI reported net sales were $2.4-billion, with net income of $153-million which included debt refinancing and repayment charges and sequential second quarter 2018 net sales were $3.1-billion, with net income of $362 million.

The company’s third quarter 2018 income from operations of $532 million and adjusted EBITDA of $626 million were both record highs for the company, according to Mark D. Millett, President and Chief Executive Office.  “Our strong financial performance was the result of record steel shipments, average steel selling price improvement, and resulting metal spread expansion across our steel operations.  Underlying domestic steel demand remained strong.  There was some temporary hesitancy in flat roll order activity based on customer sentiment and increased hot roll coil import levels. However, demand from major steel consuming sectors was steady, including construction, automotive, and energy.”

Earnings from its metals recycling platform declined in the quarter primarily as a result of nonferrous operations, as shipments and commodity prices declined.  In addition, China’s decision to ban certain grades of recycled material has had a negative impact on nonferrous sales volume.  

“Our steel fabrication platform achieved record shipments in the quarter, as nonresidential construction demand remained strong and customer sentiment positive.  The order backlog remained at near record highs entering October. Despite the positive demand environment, earnings from our steel fabrication operations slightly decreased by the continued rise in average steel input costs,” said Millett.

Third quarter 2018 operating income for the company’s steel operations increased 7% sequentially to a record $577-million, based on metal spread expansion across the platform, as average steel product pricing increased more than consumed raw material scrap costs.  The third quarter 2018 average product selling price for the company’s steel operations increased $56 to $988 per ton.  The average ferrous scrap cost per ton melted increased $4 to $352 per ton.  

Third quarter 2018 operating income attributable to the company’s flat roll steel operations increased 5% sequentially, driven by metal spread expansion related to continued strong underlying demand and higher average selling values.  Operating income from the company’s long product steel operations increased 17%, as a result of higher average selling values and metal spread expansion.

Third quarter 2018 operating income from the company’s metals recycling operations was $18-million, compared to $26-million in the sequential second quarter.  Ferrous shipments decreased slightly and metal spread remained steady.  The primary driver for lower earnings was a nine percent decline in nonferrous shipments and a 5% decrease in associated metal spread, as commodity pricing fell in the quarter.

The company’s fabrication operations recorded third-quarter 2018 operating income of $13-million, compared to sequential second quarter results of $14-million, as record high shipments and improved average selling values were offset by continued higher average steel input costs.

Mn now attracting the cats and dogs

You could have bet this would have happened, e.g. high prices always bring about new projects which may or may not see the light of day. Euro Manganese (EMN), a Canadian company, plans to buy EP Chvaletice s.r.o. (EPCS), a Czech operating company whose principal asset is a large parcel of industrial zoned land adjacent to the Chvaletice Manganese Project, where EMN proposes to develop its high-purity manganese processing facility.

The products include ultra-high-purity electrolytic manganese metal (UHPEMM) and/or ultra-high-purity manganese sulphate monohydrate (UHPMSM). The company is targeting the electric vehicle industry and manganese metal consumers.

According to EMN, Chvaletice is one of Europe’s largest manganese resource, hosted in tailings from 1951-1975 historical mining and milling operations. No hard mining, crushing or milling are expected to be required for its extraction. Manganese occurs at Chvaletice predominantly as highly soluble minerals, amenable to conventional hydrometallurgical processes. Indicated resource estimates are 23.37-million mt grading 7.4% Mn.

FeV prices cause jitters, but still firming

Pointing to the high cost of a truckload of FeV, sellers admit to being nervous, but few see the price rally ending in the near-term. “I have no doubt that prices are going to fall in 2019,” said a trader “but right now no one is holding a lot of material—not producers, not consumers and not traders—and there is buying to be done.”

Consumer sales were reported in the US at $52.50 per lb and in Europe at $114 per kg.  One European mill, however, is believed to have paid $120 per kg because his normal supplier was unable to deliver a contracted amount.

Crazy stories are coming out of China, including reports that buyers are driving trucks to FeV plants and offering to pay cash to haul the FeV from the plants. A trader said domestic prices in China rose $10 per kg in a week and were headed towards $140 (including the VAT).

Many endusers are just starting negotiations for 2019 contracts, and one supplier predicted that last year’s discounts of 3.5% off a published price will transform into discounts of cents in 2019.

FeV prices today are $51-52.50 per lb in the US and $113-116 per kg in Europe.

Standoff between the US and Mexico and Canada on steel

Even though Mexico and Canada have tentatively agreed to a new free trade agreement, the penalty duties on steel imports from the two countries remain in effect. The US government said it wants an agreement similar to the one it negotiated with Korea which set a quota on steel imports at less than historical levels. However, both the Canadian and Mexican government are saying no to quotas. And, if there was a quota, it would be set at HIGHER than historical norms to allow for growth.

 

MPM increases its silicones footprint in China

A lot seems to be going on with Momentive Performance Materials (MPM). In addition to its merger with SJL Partners LLC, KCC Corp. and Wonik QnC Corp., MPM plans to increase its share of its Chinese joint-venture silicones project.

MPM’s Singapore unit will buy an additional 24% of Zhejiang Xinan Momentive Performance Materials from its Chinese partner, Zhejiant Xinan Chemical Industrial Group, for $30-million. With the deal MPM will increase its stake in the silicones manufacturer to 49%.

The parties also agreed to add 32,000 mtpy of silicone monomer products to the joint venture’s output by 2020. The project’s total investment will not exceed $10-million. The joint venture currently has an output of 200,000 mtpy of organic silicon monomer, according to Yicai Global.

The cooperation will help the company seize and consolidate the downstream silicone monomer market and increase its core competitiveness in the entire industrial chain of the organic silicon materials industry, the Chinese firm said.

Xinan Momentive will sell 49% of its total output to the US partner and its affiliates. The rest is reserved for its Chinese partner. Xinan Chemical Industrial Group will pay Momentive Performance’s Singaporean unit no more than $5-million for the new project’s licensing fee.

European FeSi sale

A small quantity (around 150 mt) of ferrosilicon was sold to Italy at E1,275 per mt, ddp, 90 days credit. The price, according to others sellers was high especially if quantities were higher, but the deal was small. One seller predicted that prices would drop below E1,200 before the end of the year.

Tshipi’s net profit more than triples in the first half of fiscal 2019

Tshipi e Ntle Manganese Mining reported revenue of ZAR5,323-million in the first half of fiscal 2019 (ended Aug. 31, 2018) vs. ZAR2,899-million in the same year-ago period while the manganese mine’s net profit after tax was ZAR2,087-million vs. ZAR680-million. The cost of sales in fiscal 2019 was ZAR2,429-million vs. ZAR1,788-million while its EBITDA was ZAR3,202-million vs. ZAR1,115-million.

AMG Vanadium to more than double capacity for recycling spent catalysts

AMG Vanadium is not wasting any time in taking advantage of the tight supply situation for vanadium. It has replaced plans to increase recovery of vanadium from spent catalysts by 30% for a new project to boost capacity more than 100%.

The company announced yesterday that it will more than double its current recovery capacity of 6-million ppy of V by early 2021. AMG received board approval to proceed with engineering work for replicating its existing Cambridge, OH, facility for producing vanadium from spent catalysts at a site within the operational vicinity of the existing plant.

The construction of a second recycling facility replaces AMG’s previously announced $35-million, 30% expansion of the existing catalyst recovery plant by yearend 2019. The company will apply for completely new permits for the new plant, an AMG spokesman said.

Following permitting, construction of the new facility is expected to start in mid-2019. When completed in early 2021, AMG will have increased its spent catalyst processing capacity by 35,000 tpy and have added over 6-million ppy of incremental vanadium production capacity.

“This expansion has been in the making for over a year,” said Hoy Frakes, President of AMG Vanadium LLC.

Will the Chinese export VAT be used as a counter to the new US duties?

The plot thickens. With the US planning to bump the penalty duty on most Chinese ferroalloys to 25% at the start of 2019 from the current 10%, the Chinese government may counter by eliminating its export VAT. The VAT is now 20% on exports of manganese alloys and ferrosilicon and 15% on ferrochrome. A side benefit would be that illegal smuggling would dry up. Also, with environmental cutbacks and more capex on pollution control equipment, the Chinese government might want to give some love to domestic ferroalloy producers.

Still, the Chinese government always maintained the export VAT, which the US long criticized, was put into place as a energy saving devise, i.e., no exporting power in the form of ferroalloys. Before the VAT and the growth of the Chinese steel industry, China was THE major exporter of silicomanganese and ferrosilicon to the Western markets.

Also working against the Chinese is the continued weakness of the yuan. While the Chinese government says it won’t use the devaluation of the yuan as a weapon, the currency is hovering near the important rmb7:$1 level which hasn’t been broken since 2007.

Higher US interest rates will raise the value of the dollar unless the Chinese government actively intervenes to prop up the yuan. Also, the Chinese government fears flight risk as the Chinese sell yuan to buy dollars. Not good news.

China is battling with higher inflation, a drop in home sales and falling car sales. The car sales is especially important since it puts China on the path of its first annual drop in car sales in almost three decades.