I am relatively new to the metals
industry. Now 10 years in an industry
might not seem “new”…until you factor some folks have been in the industry for
30+ years…I’m new! That being said, since
joining the metals industry, I have heard repeatedly – If you want to see where
copper prices are going, follow the oil prices.
Which I of course have been doing! But over the past few years, I have
found that following after global steel consumption and loss has been equally
valuable!
Steel is an alloy of iron and carbon
containing less than 2% carbon and 1% manganese and small amounts of silicon,
phosphorus, sulfur and oxygen. Steel is the world's most important
engineering and construction material, according to the World Steel
Association, a trade
group that includes steelmakers from 65 nations.
Steel has played a monumental role in the
daily function of society, contributing to the cars that we drive the houses in
which we live, the buildings that we work in and the infrastructure of the
cities and towns around us. Its ability to be easily welded, resistance to heat
and corrosion, and suitable machinability have made steel incredibly valuable –
until recently.
Although the nation’s economy is gradually
improving across many industries, the steel industry is still waiting to feel
any sort of economic lift as imports push steel prices down and the oil and gas
industry cut orders in response to low energy prices. For the first half of
2015 ending in June, steel production in the United States has declined 6.5%,
compared with the same period last year.
This decline is not specific to the United
States; rather, it is a global concern. According to a report by Industry
Week at the end of July 2015, China’s raw steel
production was 68.9 million metric tons, down 1.4% from the previous month and
down 0.8% compared to June 2014. Japan, the world’s second-largest steelmaking
nation, produced 8.6 million metric tons of raw steel during June 2015, 3.9%
less than during May and 6.2% less than during June 2014. Germany, the largest
steelmaker in the European Union, produced 3.8 million metric tons of raw steel
during June, increasing its output by 1.6% from May and 5.8% compared to June
2014. Despite the improvements, Germany’s year-to-date steel output is down
1.49% compared to the same period of last year.
The decline in bronze consumption
in the US, and possibly across the globe, is directly related to a decline in steel
consumption. Copper production fell more than 1% and, even worse, tin fell as
much as 4.9%. Bronze, an alloy that is most commonly made with these two
metals, has thus felt the impact in this slowed production.
In a Bloomberg article titled, “Gold Rout
Spreads to Copper, Tin and Zinc,” Daniel Brieseman, an analyst at a bank in
Germany, stated, “Commodities are not in vogue. The weakness of the precious
metals is spilling over to the base metals.” So as each of us watch oil &
gas prices to gauge future Bronze usage…truly we should be watching oil &
gas and steel.