Author Archives: Stuart Burns

Copper has been on a bit of a roll this month. After a quiet summer, investors have been looking at growing concentrate imports in China and increased refining to pure copper as signs that Chinese demand is picking up.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

A recent article by Reuters throws some light on what is going on behind the scenes that suggests while demand from refiners is robust, it does not mean demand from China’s consumers is equally as strong and rising imports should not necessarily be seen as a bullish sign for copper.

Copper Price

Source: Kitco.com

The metal had hit a four-week high last week, approaching $4,800 per metric ton after better-than-expected Chinese data lifted sentiment. Read more

Traders love volatility.

They say that today’s electronic trading platforms play to that desire of investors to make a buck, regardless of the fundamentals, allowing investors to play each twitch up and each slip down at the touch of a button.

Oil Prices: Perception vs. Reality

Indeed, if you can shape the perception of those fundamentals so much the better, and that seems to be what has been happening in the oil market this year. In reality, the world is as awash with oil today just as it was six months ago. As it dawns on the market that nothing much has changed, prices fall and producers make statements like a cutback deal is near, or an output freeze is being discussed — bingo! up goes the market by several dollars a barrel and you can bet producers and investors alike are rubbing their hands in glee.

Then, news comes out reminding us of the reality of the situation: the Environmental Protection Agency reports that gasoline stocks are up 600,000 barrels and distillates like diesel up 4.6 million barrels. The news that refiners are drawing on crude reserves only to process it into unwanted downstream products depresses the markets and prices fall again. Read more

Sometimes firms take solid commercial decisions that have laudable environmental side effects, and sometimes firms take environmental decisions that they seek to justify as being cost neutral or occasionally even saving them a little money.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

But the miner, Anglo American Platinum, has an investment division that makes hard-nosed commercial investments that hold out not the dim and distant prospect of eventual impact but the imminent probability of strongly positive environmental benefits. The firm is helped by its positioning as a major miner of platinum group metals (PGMs) and the pivotal role those metals play in catalyst technologies.

Catalyst Demand

Catalysts, like modern day alchemists, turn waste into something of value, a pollutant into an environmentally beneficial product. In this case, environmentally damaging flare gas, produced in the processing of crude oil and from drill rigs, which is often flared or burned as a waste product can be turned, with the help of catalysts, into something of value.

Burning flare gas produces carbon dioxide (CO2), nitrogen oxides (NOx), carbon black, and other pollutants such as methane, which, according the Environmental Protection Agency, as a greenhouse gas is 25 times more potent than CO2. The World Bank estimates that, globally, approximately 140 billion cubic meters (5 trillion cubic feet) of natural gas is flared annually, resulting in the emission of more than 300 million tons of CO2. Eliminating these emissions would be the equivalent to removing more than 77 million cars from the road or the combined total car fleets of Germany and the U.K., according to the firm’s statement.

Anglo American’s Future

Anglo American has been actively investing growth capital in companies that can demonstrate the commercial viability of their products or technologies since 2013. Anglo American Platinum’s Platinum Group Metals Investment Program holds investments in Hydrogenious Technologies and United Hydrogen Group, and has just added another, Greyrock Energy — whose catalyst-based system converts liquids and gasses such as flare gas, natural gas, bio-gas and similar feedstocks into clean liquid transportation fuels with hydrogen as a by-product.

The hydrogen production is seen as supporting Anglo’s efforts to help develop fuel cell technologies and fuel cell feedstock supply. For Anglo, this is seen as a solid investment in a growing technology but environmentalists extol the fuel cells’ ability to produce electrical power and produce nothing worse than clean water.

In a recent press release Anglo announced its investment in Greyrock while strongly promoting the potential environmental benefits of both the process itself and the growth of technologies that lower costs would support but, make no mistake, Anglo is making these PGM technology investments with the intention of buying into a rapidly expanding industry from which it will augment its mining revenues in the future.

There has been considerable concern in the U.S. and elsewhere that China’s exports of primary aluminum are damaging global prices. China would maintain that it imposes an export duty on primary aluminum explicitly to prevent the export of primary metal, largely seen as exporting energy due to the high power cost associated with producing each metric ton of the metal.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Many outside China believe a considerable amount of metal leaks out of the country in the nominal form of semi-finished products which avoid the export duty, and, indeed, attract a value-added tax refund, only to be subsequently remelted. Large volumes of exports from China make their way to Vietnam, and it is believed much of this material is remelted in the country before being sold.

The Impact of Chinese Aluminum

However, our concern in this article is not so much the impact of primary metal leakage, considerable as it may be, but rather the growing threat of Chinese value-add product manufacturers and the impact they are having on western firms that had previously had the field cornered for automotive and aerospace — to name but two high-tech applications for aluminum — applications.

Chinese material at the end of the last century was considered a joke in terms of quality, but over the first 10 years of this century the country has invested heavily in European and Japanese extrusion, rolling and heat treatment plants and equipment. By the beginning of this decade, Chinese extrusions and commercial sheet/plate were being given equivalence to material from many other sources such as Russia, Turkey, South Korea, Taiwan and other locales.

Are aluminum slabs welded together really "deep-processed extrusions?"

Are aluminum slabs welded together really “deep-processed extrusions?”

Such material is still sold at a discount to European or North American semi-finished products, but its growing penetration and the willingness of major distributors to hold a proportion of their inventory as Chinese material, speaks volumes for its growing acceptance, particularly in terms of quality.

The Lucrative Automotive Market

Still, while China — and to a lesser extent mills in places like Malaysia, Turkey and other locales — gradually ate into western mills’ commodity products, those same western mills moved upstream, investing heavily to meet growing demand for automotive sheet and castings, aerospace sheet, plate and extrusions. Read more

There have been many among the advocates of Brexit and even more than a few among those opposed to it who have pointed out the relative stability in both U.K. GDP growth and the reaction of the stock markets to say that it wasn’t such a disaster after all, was it? Where is the economic collapse so many forecast?

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Of course, we all like reassurance that all in the world is well but the reality is we are living in a phony war. The armies are massing but little engagement has taken place yet. The initial shots have been fired. The British pound dropped 10-20% against most currencies, notably the U.S. dollar and the euro. Japan sent an uncharacteristically strongly worded 15-page memo to the British government warning them of the consequences should negotiations lead to Britain leaving the single market. Jean-Claude Juncker, president of the European Commission with a long history of bitter antagonism towards the U.K., has uttered countless dire warnings as to life for the U.K. post-Brexit. But so far, in spite of these initial salvos, little has changed. Read more

There appears to be an almost universal expectation that iron ore prices will start to retreat soon, after surging some 62% through April. They have since eased back but are still up 28% on the year.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Without doubt, much of iron ore’s gains in 2016 have been driven by strong demand from China, with imports up 9.3% to 669.65 million metric tons in the first eight months of the year from a year ago. But prices in Qingdao lost 5.8% in the seven sessions through Wednesday. That was the longest run of daily declines since March and while steel output remains robust, questions are again being asked how much longer prices can remain north of $55 per mt as yet more supply comes on stream. According to the MetalMiner index, finished steel prices have eased this month.

Iron Ore Output

You would expect the miners to refute this and, sure enough, in a Bloomberg report, Vale SA and Cliffs Natural Resources Inc. said that the impact of the new output won’t be as severe as expected and will see the $50 per mt level holding, but banking analysts are not so sure with Westpac saying last month rising supply will drive prices below last year’s lowest point of $38.30, while Citigroup expects an average of $45/mt next year. Read more

The tin market, along with nickel and zinc, has been a standout performer this year.

Two-Month Trial: Metal Buying Outlook

Whereas copper, aluminum and other ferrous metals have languished due to oversupply, the tin price has risen steadily and robust demand has met a constrained supply market. According to the World Metal Statistics August report, the tin market recorded a deficit of 7,200 metric tons during January to June 2016. That’s less of a deficit than in the equivalent period in 2015, true, but still a deficit and with no DLA deliveries during the period total reported stocks fell by 2,600 mt during June. In spite of rising production of refined metal in Asia, a 12.6% increase in demand from top consumer China kept the market under pressure.

Strongbow!

Against such a backdrop, the reopening of previously abandoned mines is not unexpected. What does raise an eyebrow is the tactics of one junior miner in employing the image of the hit UK BBC period drama “Poldark” in trying to entice investors onto its $150 million fund.

Strongbow Exploration is invoking the romance of the series set in the 18th century mining industry of northern Cornwall to buy-a-bit-of-history, according to the Telegraph. The TV series featuring the dashing Aiden Turner and delectable Eleanor Tomlinson has been a massive hit here in the U.K. — and may prove equally popular to the “Downton Abbey” series once it’s rolled out around the world. It’s just starting its second series (or “season” to you Americans) with even higher viewing numbers.

Poldark: Courtesy of PBS/Masterpiece.

“One Day, this will all be yours.” “What, the curtains?” “No, all that you bloody see!” Poldark is taking audiences by storm and igniting memories of romantic tin mining. Image courtesy of PBS/Masterpiece.

Strongbow may well raise its capital on the romantic idea of buying into a 400-year-old mining tradition, but hard-nosed investors may like to know that with modern recovery technologies, Strongbow’s South Crofty mine has at least a 10-year lifespan.

Read more

Copper prices have been on the decline this summer, depressed by reports of oversupply and, worse, an exodus of inventory from top consumer China.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Indeed, we recently wrote about the rise of metal coming out of Shanghai bonded warehouses ending up in London Metal Exchange stocks around Southeast Asia, leading to a 60% increase in LME stocks last month.

Why Are Exports Slowing?

We speculated this was probably a result of slowing domestic demand and unwinding of financing deals. But a recent Reuters article reports that exports have slowed and imports of refined copper have picked up in China after the price plunged to 12-month lows last month.

Reuters suggests this is due to price declines taking copper into territory where investors once again feel it is oversold and, on the back of a pick-up in demand after the summer, ripe for restocking.

Source Reuters

Source: Reuters

The article states a flood of new supply will still prove too much for the copper price and 2017 will see prices remain under pressure. Read more

You get the sense speaking with Trevor Raymond, Director of Research at the World Platinum Investment Council that the Platinum market is like a ticking time bomb – they are my words not his but during an interview prior to the release of the WPIC’s Platinum Quarterly Report for Q2, Trevor disclosed details about the supply side to the platinum market that bear further scrutiny.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

The platinum market has been in deficit for five years now, a series of strikes and outages have consistently led to poor supply side numbers and 2015 was no different running a 520,000 ounce deficit. Investors looking for price increases have been thwarted by large, above-ground stocks that, while difficult to accurately quantify, are estimated by the WPIC as dwindling from some 4 million ounces to a current level of 2 million ounces over the period. Read more

There are conflicting messages out there.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Last month, Business Insider ran a piece saying “Recent movements in copper inventories highlight the lack of significant demand for the metal, particularly in the ever-important Chinese market.”

Shanghai Futures Exchange inventories are falling while, London Metal Exchange inventories are rising, suggesting metal is flowing out of Shanghai bonded warehouses into local Asian LME sheds. The contango has grown, allowing traders to store and hedge metal on the LME supporting the move but the fact that refined metal is flowing out China suggests industrial demand is weak. BMI calls the move a red flag and says it expects imports of refined metal to fall in the coming months.

Copper_Chart_September-2016_FNL

Copper supply in LME sheds might be up, but our copper MMI is down.

Yet, just last week, better-than-expected official industrial PMI numbers unexpectedly rose to the highest level since 2014, according to Bloomberg, resulting in a bounce in copper prices, share prices in Hong Kong  and London and a fall in bond prices.

What’s Up With Copper?

So, what does this mean for copper? Was the export surge a temporary phenomenon prompted by the market moving into contango? Or is this truly a sign of an underlying weakness in demand?

China imported a record amount of refined copper in the second half of 2015, partly fueled by a relaxation of credit controls and encouraged by Beijing’s stimulus plans. Domestic refined production also increased significantly, but refiners are now cutting back and appear well supplied with concentrate in what remains an oversupplied market. Read more