China steel output slips from record as smog war bites; further drop seen

Date Oct 19 2017 17:10:26 Source:Reuters

SHANGHAI/MANILA, Oct 19 (Reuters) - China's steel output dropped in September from a record high the previous month as mills in the world's top producer cut production in line with Beijing's campaign for clearer skies, pointing to further drops as winter curbs set in.

    Crude steel output hit 71.83 million tonnes in September, the lowest since February and down from 74.59 million tonnes in August, National Bureau of Statistics data showed on Thursday. September's average daily output was 2.39 million tonnes, down 0.8 percent from August, according to Reuters' calculations. 

    Before slipping last month, Chinese mills had mostly been churning out steel at a record rate from March to August amid strong domestic demand, fatter profit margins and an environmental crackdown that shut out some other producers.   

    Mills in the northern part of China are expected to cut output during the winter season - four months from mid-November - on government orders to fight smog in part by cutting pollution from industrial plants.

    Some analysts have estimated at least 30 million tonnes of China's steel output may be lost during the four-month period, or nearly 4 percent of last year's production. 

    But that number could be bigger, with mills in several cities already slashing output as early as this month, including those in the top steelmaking city of Tangshan. 

    "Definitely we will see production decrease in coming months. Several mills have started to cut production already," said CRU consultant Richard Lu. "Small mills will be heavily impacted but larger mills, particularly the government-backed ones, can do better."

    Xia Junyan, investment manager at Hangzhou CIEC Trading Co in Shanghai, estimates crude steel output will drop as much as 40 million tonnes between November and March.

    Chinese mills ramped up output earlier this year as higher prices, boosted by the government's supply-side reforms and infrastructure push, boosted profit margins particularly for construction steel products like rebar. Rebar futures in China  SRBcv1  have risen 41 percent this year. 

    That meant output in September was still 5.3 percent higher than in the same month a year ago. Production for the first three quarters of the year came in at 638.73 million tonnes, up 6.3 percent.     

    Rebar prices sank nearly 4 percent on Thursday as worries over demand, which typically slows in winter, surfaced.

    "We think when supply-demand fundamentals take hold, margins will narrow and costs will go down and we forecast prices will follow," said CRU's Lu. 

Edited by SHMET

UPDATE 1-Brazil's Gerdau may sell U.S. facilities for $630 mln –report

Date Oct 18 2017 13:59:30 Source:Reuters

BRASILIA, Oct 17 (Reuters) - Brazilian steelmaker Gerdau SA  GGBR4.SA  could raise about 2 billion reais ($630.48 million) with the potential sale of its rebar-producing facilities in the United States this year, newspaper Valor Econômico reported on Tuesday.

    Gerdau expects to sell its Rancho Cucamonga, California, Sayreville, New Jersey, and Knoxville, Tennessee, units to U.S.-based Commercial Metals Co  CMC.N  by the end of the year, according to the report that citing two market sources. Gerdau's Jacksonville, Florida, and Beaumont, Texas facilities were also up for sale, the paper reported.

    Gerdau said while it does not comment on market rumors, it will maintain its strategy of focusing on more profitable assets.

    The potential deal would help the largest steelmaker in the Americas cut debt, according to the newspaper. 

    Gerdau earlier this month agreed to sell a Chilean long steel unit to local firms Matco SA and Ingeniería & Inversiones SA for about out $154 million.

    Preferred shares, the company's most widely traded class, were up about 6 percent year to date.

  ($1 = 3.1722 reais)

Edited by SHMET

India's MCX launches country's first gold options to mark festival

Date Oct 18 2017 13:58:45 Source:Reuters

Oct 17 (Reuters) - India's Multi Commodity Exchange (MCX)  MCEI.NS  on Tuesday launched the country's first gold options contract in New Delhi to coincide with the gold-buying festival of Dhanteras.

    "Gold Option contract, with Gold (1 Kg) futures as underlying, expiring on Nov. 28, 2017, and Jan. 29, 2018, are made available for trading from today," the exchange said in a statement. 

    India is the world's second-biggest buyer of gold, typically importing around 800 tonnes a year, with the metal being used in everything from investment to religious donations and wedding gifts.

    "The introduction of options gives a strong impetus towards systematic development and transformation of commodity derivatives market in India, ushering in a new era in price risk management in response to stakeholder expectations," MCX chairman Saurabh Chandra said in the statement.


Edited by SHMET

PRECIOUS-Gold falls on hawkish views about possible next Fed chair

Date Oct 18 2017 13:57:52 Source:Reuters

NEW YORK/LONDON, Oct 17 (Reuters) - Gold prices fell to a one-week low on Tuesday on speculation that the eventual successor to U.S. Federal Reserve Chair Janet Yellen will favor higher interest rates.

Spot gold  XAU=  was down 0.6 percent at $1,286.74 an ounce by 2:16 p.m. EDT (1816 GMT), after dipping to $1,281.31, while U.S. gold futures  GCcv1  for December delivery settled down $16.80, or 1.3 percent at $1,286.20 per ounce, hitting a one-week low of $1,283.20.

"Uncertainty about the next Fed chair being interpreted as being more hawkish encouraged more selling," said Ryan McKay, commodity strategist at TD Securities in Toronto.

U.S. President Donald Trump was favoring policy hawk John Taylor as the next head of the Fed, Bloomberg reported , pushing the dollar higher and lifting U.S. Treasury yields.  USD/ 

Taylor, a Stanford economist, is seen as more likely to raise rates than Yellen, which would boost the dollar and dent gold and U.S. Treasuries

Meanwhile, the U.S. Labor Department said on Tuesday import prices jumped 0.7 percent last month, the biggest gain since June 2016, pushing inflation expectations higher and increasing the likelihood of monetary policy tightening.

    The Fed will probably need to raise rates in December and then three or four times "over the course of next year", assuming U.S. unemployment continues to fall and inflation rises, Boston Fed President Eric Rosengren said on Monday.

Gold generally loses some of its in appeal when interest rates are higher as it yields no interest.

Palladium  XPD= , used mainly in auto catalytic converters, rose 0.9 percent at $981.25 per ounce, after hitting its highest since February 2001 in the previous session.

Analysts are wary about the price of palladium overheating in response to higher demand in the world's biggest auto market, China, and an expected supply deficit this year.

"While fundamentals in palladium are good, they are not supportive of the kind of gains we have seen this year," Arnold said.

Raising political tensions, Iraqi government forces captured the Kurdish-held oil city of Kirkuk on Monday, responding to a Kurdish referendum on independence with force and transforming the balance of power in the oil-producing country. 

    Meanwhile, the United States is not ruling out the eventual possibility of direct talks with North Korea, Deputy Secretary of State John J. Sullivan said on Tuesday, hours after Pyongyang warned nuclear war might break out at any moment.    

     Silver  XAG=  fell 0.8 percent to $17.04 an ounce, having touched a one-week low of $16.92, while platinum  XPT=  was up 0.3 percent at $931.24 an ounce.


Palladium rallies as U.S. consumers replace autos lost in hurricanes

Date Oct 18 2017 13:55:21 Source:Reuters

 NEW YORK, Oct 17 (Reuters) - Palladium  XPD=  rallied to a 16-year high this week and may rise even further, industry participants said, as consumers replaced vehicles damaged by hurricanes in the United States and on rising auto sales in China.

Hurricane Harvey destroyed up to half a million cars when it deluged the U.S. state of Texas in August. Two weeks later, Hurricane Irma slammed into Florida, adding another 200,000 vehicles to the year's storm toll, according to auto industry estimates. 

Demand for cars drives demand for palladium, because the principal use for the metal is in catalytic converters that reduce pollution from gasoline-fueled engines.

Strong demand is likely to continue for months as consumers replace vehicles lost to the storm, so palladium may rally further, said Dan Pavilonis, senior market strategist at RJO Futures in Chicago.

Palladium touched a high of $1,010.50 per ounce on Monday, the highest level since 2001. The metal gave up some ground on Tuesday to trade at $971.15 an ounce. Last month, palladium prices rose above platinum  XPT=  for the first time since 2001.

"Palladium is technically a strong market and experiencing demand,but not just from autos," Pavilonis said. Funds were among those buying the metal, he added.

 U.S. new vehicle sales rose in September, the first monthly gains in 2017. The value of receipts at auto dealerships rose by the highest level in 2.5 years, contributing to a surge in overall U.S. retail sales. 

 Last month's auto sales in the Houston area, which suffered extensive flooding, rose 109 percent in September over August 2017, and lead Texas to a 34 percent jump for the same time period, according to automobile sales website 

Strong sales are expected to continue for several months as consumers receive insurance payouts and replace vehicles damaged in the storms, said Jessica Caldwell, senior analyst at Edmunds.

In China, the world's largest vehicle market, sales in September rose 5.7 percent on the year and were up 4.5 percent in the first nine months of 2017.

In Europe, gasoline-fueled cars are also getting a boost from a shift away from diesel-fueled vehicles after the scandal involving Volkswagen. The manufacturer underestimated emissions from its diesel vehicles.

 A stronger global economy and overall positive consumer sentiment are driving the automotive industry worldwide, said Charlie Chesbrough, senior economist at Cox Automotive.

"For the first time in five years, we have all five major economies going in a positive direction," which boosted interest in vehicles, Chesbrough said.