Author Archives: Taras Berezowsky

After hitting an all-time low in December 2015 – dipping down into the 60s – the Global Precious Metals MMI rebounded a bit and is now hovering at 70 for the second consecutive month.

Free Sample Report: Our February Metal Buying Outlook

Of the three heaviest-weighted metal price points within this precious sub-index, gold bullion in both the U.S. in China, and silver ingot/bars in the U.S. all increased over the the last month, the primary drivers buoying the February MMI reading.

Global-Precious-Metals_Chart_February-2016_FNL

Gold Price Outlook

The longer-term outlook, though, may not be all that rosy for gold prices. “Despite talks of China and Russia buying gold, I still see main factors such as a strong [U.S.] dollar and a bear commodity market keeping a lid on gold prices,” Raul de Frutos, metals procurement specialist for MetalMiner, told me. “The price rally seen in January is way too small to consider that something is changing in the long-term picture.”

“I still have a neutral/bearish view on gold,” he concluded.

The Bigger Price Story: Palladium Downtrend

However, in a more interesting trend on the industrial metals side of the precious sector, two of the PGM price points we track on the MetalMiner IndX – for U.S. platinum and palladium bars – dropped 1.7% and 8.1% (!), respectively.

The U.S. palladium price has ticked up for a few days in a row since we took our MMI reading on Feb. 1, but it’s lost a whopping 26.3% in value since the beginning of November 2015.

So what’s going on in the palladium market?

The recent stock market selloff in China, which caused global tumult, is the real culprit hurting both palladium and platinum. A strong dollar is not helping matters, either.

Compare Prices With The January 2016 MMI Report

Strong car sales globally – in Europe, China and the U.S., with the latter two hitting all-time highs – did not correspond with stronger performances for platinum and palladium prices.

Despite analysts calling again for deficits in palladium and platinum markets this year, Raul has written that “it’s hard to imagine these two metals rising while China keeps driving everything down.”

Exact Precious Prices, Trends

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Gather round, folks, dead-cat bounces for all

Free Sample Report: Our January Metal Buying Outlook

And this month’s Global Precious Metals MMI was no exception – after hitting yet another all-time low of 68 last month, the sub-index bounced back up to 70 for our January reading.

Global-Precious-Metals_Chart_January-2016_FNL

As for the dead-cat bounce, the Aluminum MMI had what looked like one, my colleague Raul writes:

“Aluminum has declined more than 30% on the year-to-date. A 3% increase after such a price slump means nothing. Indeed, aluminum producers should be worried that prices are not able to make a decent rally from these low levels. That only means that investors are only interested in selling, not buying.”

The steel markets, too:

“Although steel prices took a break from their year-long fall in December, there are still many factors weighing down prices. It seems too early to bet on a recovery in prices. For corrosion-resistant steel buyers, the effects of the new import duties are certainly something to watch.”

And even the Copper MMI had a tiny one too, (stay tuned for that story, coming next week).

So, alongside the baby-sized Fed interest rate hike came a bit of a bounce for our precious metals price index. Welcome to the party.

The Platinum/Palladium Story

Putting aside gold and silver for now (global prices for which, on balance, fell for silver but rose for gold on the MetalMiner IndX), let’s focus again on the more industrial of the precious – the two PGMs we track.

As far as bigger end-use drivers go, the automotive markets have made most of the headlines lately. In China, car sales rose to the highest level ever, increasing in December by more than 23% from November 2014. That is the second consecutive month in which China’s passenger car sales grew by double digits. Here in the US, data from Ward’s Automotive Group shows 1.63 million vehicles were sold in December last year, making this the strongest month of 2015. In all of 2015, sales totaled 17.38 million, which exceeds the previous record high from 2000.

Producers like Johnson Matthey may have reason to look forward to 2016.

Compare Prices With The December MMI Report

Low gas prices, an improving labor market and low interest rates, “coupled with a solid U.S. economy, could also make 2016 a year of robust vehicle sales,” noted Commerzbank analysts recently. “This should boost platinum and palladium, which are used in auto catalysts; palladium in particular should profit because the U.S. market is gasoline-dominated.”

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If you need a last-minute gift idea, look no further than Julia Child and Barcelona’s La Sagrada Familia.

old julia child looking at stainless steel knives

Julia feels some steel. Sam G/Flickr

low angle sagrada familia bluesky clouds

When I visited the historic site in 2013, progress was still — shockingly — slow. Photo by Taras Berezowsky

You see, both icons have recently steered us toward the stainless steel world. Child, for her part, wrote “A Life in France,” which my colleague Katie Benchina Olsen has been reading lately, and in it, according to Katie, Child complains that stainless kitchen knives dull too easily. For its part, the procurement committee of the Basilica of La Sagrada Família, the historic Antoni Gaudí-designed church in Barcelona, Spain, has been sourcing its stainless steel material needs exclusively from Outokumpu since 2013 and recently put out a press release about its supplier relationship with the Finnish producer (although we can’t really decipher the reason for the release, as there’s nothing particularly newsworthy in the whole thing…perhaps a new PO for the next phase of construction, which has dragged on for more than a century?)

Free Sample Report: Our Annual Metal Buying Outlook

At any rate, we thought it funny to riff on an oft-used phrase around the office and in our metals outlook analysis in regards to buying metal forward when prices are falling, which is: “don’t try and catch a falling knife” – in other words, you’re sure to get hurt every time. Read more

Recently, we welcomed the voice of Heidi Brock, president and CEO of the Aluminum Association, to MetalMiner’s digital pages, in an op-ed titled, “The Challenges Are Real, But the US Aluminum Industry Can Still Thrive” — and naturally, our devil’s-advocate nature forces us to ask, can the entire US aluminum value chain still thrive?

Mainly because the US industry is doing its darndest to become more green, while those in other countries…not so much.

Free Sample Report: Our Annual Metal Buying Outlook

“North American aluminum’s carbon footprint has fallen by 37% since 1995 and achieved a 26% reduction in energy intensity over the same time period,” Brock wrote in a different op-ed. “We also know that aluminum can improve the environmental performance of other products through lightweighting and recyclability advantages.”

steel coil processing machine inside of steel plant

Can primary aluminum production survive this low-price environment? Source: Adobe Stock/icarmen.

However, she continues, “Aluminum production in China is the most carbon intensive in the world, with its coal-based smelters emitting significantly more greenhouse gases per ton of aluminum than its North American and European counterparts. In fact, a ton of aluminum produced in China is nearly twice as carbon-intensive as that same metal produced here in North America. Given the rapid expansion of high-carbon aluminum production in China, many of the efficiency and emissions reduction gains made by the global aluminum industry over the last several decades are being offset.”

Read more

On Dec. 8, the Institute for Supply Management (ISM) released its 2015 semi-annual forecast, surveying both the manufacturing and non-manufacturing sectors. The outlook for both sectors, it turns out, is positive.

Free Sample Report: Our Annual Metal Buying Outlook

I sat down with Lisa Reisman, executive editor of MetalMiner, who spoke with ISM’s Bradley Holcomb and Anthony Nieves, to find out how this data compares to what she is seeing within the organizations that make up MetalMiner’s audience — OEMs, tiered suppliers, service centers, metal producers and mining firms.

Taras Berezowsky: Lisa, the economic outlook for 2016 appears surprisingly bright — revenue growth of 4.1%, and a capex increase of 1.0% with current capacity utilization at 81.6% (up from 79.5% in April of this year); does that jive with what we are seeing?

Lisa Reisman: I think the anticipated revenue growth, capacity utilization rate and anticipated lift in capex expectations tells us that the health of the US manufacturing community is largely good.

Read more

The US gold bullion price as tracked by our MetalMiner IndX has fallen to a record low for this month’s MMI reading — $1,064.50 per ounce — the lowest we’ve seen since the Monthly MMI series began in January 2012.

Free Sample Report: Our Annual Metal Buying Outlook

Indeed, as we’ve reported on MetalMiner’s digital pages earlier this week, gold officially hit $1,054 per ounce – a five-year low. That price hasn’t been seen since February 2010.

Gold prices —which also fell in China, Japan and India as tracked by the MetalMiner IndX — are the obvious persona non-grata (as far as investors are concerned) in this month’s Global Precious MMI slip, itself a record low at a reading of 68, down 11.7% from 77 in November.

precious metals price index chart december

US Dollar to Blame

The No. 1 driver forcing gold into the Hadean depths of price charts everywhere is the strength of the greenback. As my colleague and metals procurement specialist Raul de Frutos commented earlier this week, “there’s no question” that the dollar is wreaking havoc on gold price — just check out this visual:

Gold sinks (yellow) as dollar surges (green) simultaneously. Source: MetalMiner analysis of @StockCharts.com data.

Gold sinks (yellow) as dollar surges (green) simultaneously. Source: MetalMiner analysis of @StockCharts.com data.

Yowza. So what’s next?

Watch the Fed

US dollar vs China yuan“Experts forecast a 78% likelihood the Fed would raise rates in December,” Raul writes. “An interest rate hike could (but not necessarily) boost the dollar even higher as it would add more market conviction that the domestic economy is doing well, or at least better than most major economies, which is good for the dollar.”

“Also, if the Fed raises rates, higher borrowing costs domestically would make the dollar more attractive to yield-seeking investors,” he continued.

Free Download: The November MMI Report

What does that mean for future gold prices? According to Raul, many signs point to a continued gold slump.

Dark Horse of this Month’s Index

Adobe Stock/ Björn Wylezich

Adobe Stock/ Björn Wylezich

Amidst all the gold hullabaloo, we’d be remiss not to mention palladium prices. The US bar price in particular fell nearly 20% since last month.

The PGM seems to be succumbing to pressure from lower Chinese demand, especially within the country’s auto market, the biggest in the world. Also, the knock-on effect of lower prices and lower demand is being felt by the likes of Johnson Matthey. As my colleague and MetalMiner Editor-at-Large Stuart Burns writes, the VW scandal has played a major role in JM’s woes. In the short term, the company’s stock has taken a beating, and in the longer term, look to production of different types of engines — gas, diesel, hybrid/electric — to drive the direction of palladium prices, and the future of companies such as JM.

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In light of more than 20 states finally being able to lodge formal lawsuits against the EPA’s Clean Power Plan a month ago, the National Mining Association has commissioned Energy Ventures Analysis (EVA) to drill down into the costs of complying with the rule — for industrial users, commercial user and consumers alike.

Free Sample Report: Our Annual Metal Buying Outlook

From a high level, EVA expects a “$214 billion increase in wholesale electricity prices, double-digit wholesale electricity price increases in 46 states, and $64 billion to replace lost power capacity serving 24 million homes.”

EPA Clean Power Plan Cost in Pictures

In a visual nutshell, here is what EVA projects the costs of the EPA Clean Power Plan to look like:

Source: Energy Ventures Analysis

Clearly, many of the hardest-to-be-hit states are also the most manufacturing-intensive. Source: Energy Ventures Analysis

US map of electricity prices under EPA CPP

Ouch for the Rust Belt. Source: Energy Ventures Analysis

US map compliance costs power capacity replacement

Source: Energy Ventures Analysis

What This Means for Industrial Manufacturers

According to EVA:

“The consequences for costs are evident in the looming price increases for electricity. EVA’s analysis projects that by 2030, when the CPP is fully implemented, the wholesale price for electricity will spike electricity prices nationwide by 21.2 percent above the non-CPP base case.

Commercial and industrial consumers of electricity will naturally experience the same price increases, which are likely to be passed on to consumers in increased prices for goods and services. Furthermore, the greater natural gas demand by the power sector will increase natural gas prices that will be felt beyond the power sector. Residential, commercial and industrial natural gas consumers’ bills would increase by $6-8 billion/year under the EPA Clean Power Plan to recover higher gas commodity purchase prices. In addition, if the industry requires additional investment in pipeline capacity to meet the power sector’s growing gas demand, these costs would also be passed onto consumers.”

Read the complete report for more context, analysis and, most importantly, EVA’s methodology.

Free Download: The November MMI Report

Before we get into Alcoa Inc., Micromill, their partnership with Ford Motor Co., or aluminum lightweighting, first up — Acronym Roll-Call:

CAE: here. FEA: here. FEM: here. FLC: here. FLS: present.

Free Sample Report: Our Annual Metal Buying Outlook

These niche acronyms, when they roll off the tongue of presenters and attendees, will contribute to the soothing sounds of an upcoming conference titled Modeling, Simulation and Crash Testing Of Automotive Lightweight Materials Congress, which bills itself as The Only OEM-Led Congress Encompassing Cost-Effective Modeling, Crash Simulation And Lifecycle Prediction For Lightweight Materials And Composites. (Whew.)

Computer-aided engineering (CAE), finite element analysis (FEA), finite element method (FEM) simulations, forming limit curves (FLCs), and forming limit surfaces (FLSs) are all elements of the stuff that lightweighting dreams are made of — and the first round of folks that the Dreamers-in-Chief begin with are (with all due respect) the R+D Nerds-in-Chief, several of whom will be attending and presenting at the January 2016 conference.

Two such engineering experts, Steven Sheng, formability engineer for General Motors, and Xinran Xiao, professor of Mechanical Engineering at Michigan State University, recently gave interviews on what they expect to see on the lightweighting horizon.

hroephoto/Adobe Stock

Newer, stronger forms of aluminum should help vehicles perform better in crashes. hroephoto/Adobe Stock

While I don’t recommend reading both interviews in their entirety unless you’re deeply embedded in the R+D sector, the essential takeaways are that material fracture prediction and modeling and simulation will become more important than ever, which means CAE analysis will continue playing ever-larger roles in lightweighting. “To increase the use of composites in crash critical structures, we have to be able to predict the crashworthiness of the structure as we do for metal parts. Good material models, robust and accurate safety simulations are critical to vehicle lightweighting,” Xiao is quoted as saying. This, ultimately, will increase understanding of, say, aluminum’s performance under stress way before the first crash test.

Speaking of Aluminum…

Read more

This is a Throwback Tuesday post from MetalMiner’s Top 50, updated with new information since it initially ran January 15, 2014. Hope you enjoy the first of many #tbt posts! This was the first of several posts about the new aluminum Ford F-150 that have since graced our pages.

Free Download: Historical Metal Price Reports, Where Prices Have Been (And Where They’re Going)

 

ford-motor-aluminum-F150

Source: thetruthaboutcars.com

If there’s any reason at all to be anywhere near Detroit during Winter (believe me, I’m from the Metro D and can say such things with more than passing conviction), it’s to attend or be involved in the North American International Auto Show.

If it’s not sports, it’s cars, and at least the city keeps the lights on at the Cobo Center, where the latest designs are unveiled, human models awkwardly complement the exhibitions, and concept cars are the main attraction.

(It’s where I’ve spent many hours of my youth, to be followed by a Ride to Nowhere on the Detroit People Mover and coney dogs at Lafayette).

However, arguably, the biggest story from the Auto Show this year, although quite a concept, was not exactly a concept car – it was Ford’s all-aluminum F-150 truck.

How’d That Happen?

Apparently, after designing and building the new F-150, Ford “secretly” distributed the vehicles to a number of test subjects to see if their lightweighting efforts would hold up.

“The automaker was looking to test how lightweight aluminum alloys would hold up on the job, at a gold mine, an energy utility and a construction firm…What Ford learned from 300,000 total miles convinced the world’s biggest seller of full-size pickups to make wholesale changes to the F-Series,” writes Jerry Hirsch for the LA Times.

The new F-150 weighs 700 pounds less than the previous model, featuring an engine compartment, doors, hood, side panels, truck bed and tailgate all made of aluminum alloys. The way they’re marketing the featured material is by calling it “military-grade aluminum.”

Back to Car Wars: Aluminum vs. Steel 

So how do advanced high-strength steel (AHSS) producers – and the steel industry in general – respond to Ford’s move?

Read more

PGM prices rebounded this month from being hit by the Volkswagen scandal last month, buoying the entire Global Precious Metals MMI for November. Our precious metal index hit 77 this month, a 4.1% increase from last month.

Global-Precious-Metals_Chart_November-2015_FNL

It helps that the rest of the complex did well across the board, with every single price point for platinum, palladium, and also gold and silver, appreciating across US, EU and Asian markets.

PGM Time

The US platinum price on the MetalMiner IndX ticked up considerably more than the US palladium price, almost-but-not quite proving our point from last month that “ultimately, in MetalMiner’s view, based on how investors reacted to the [VW] news, we’ll likely see both platinum and palladium trending in opposite directions in the short-to-medium term.”

Speaking of those investors, some big news in the ETF world: apparently platinum and palladium ETF outflows have approached some record lows. According to Reuters, platinum ETF holdings tracked by that news giant dropped 160,000 ounces near the end of October. Reserves of palladium ETFs were down 207,000 ounces over that same month, resulting in ETF holdings of both metals hitting their lowest since early 2014.

EconoTimes reported that just a few days ago, platinum and palladium ETF holdings were reduced by a further 31,600 ounces.

Interestingly, net-long positions, as the source reports, had risen to 13,500 contracts in that last week of October, which is itself the highest level since the beginning of July – so are we seeing investors taking a longer-term, slightly more bullish outlook? Remains to be seen.

In Economic Driver News: Fed Interest Rate Rise

The Federal Reserve recently announced that they would not raise interest rates, but it’s not ruling out a rate hike before the end of the year. Fed honchos see current economic indicators as generally favorable, which is the main reason the short-term rates have remained at near zero for the 7th year in a row.

However, as my colleague and MetalMiner’s lead forecasting analyst Raul de Frutos has pointed out, this waiting game is “generally bad news for metal prices and all commodity prices and the longer the Fed delays the more likely it is that when a rate increase does finally happen it will only make the US dollar more attractive to investors seeking yields.”

Which, of course, should bolster the dollar and, in turn, could ding at least gold prices…

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