Author Archives: Taras Berezowsky
Source: Adobe Stock/ epitavi

Source: Adobe Stock/ epitavi

Copper metal is continuing to pile up in warehouses and Chinese overstock may be making its way into London Metal Exchange warehouses all over Asia as the price has dipped to historic lows.

According to the Financial Times, “LME copper stocks have surged by almost 40% this month – or 50,000 metric tons – spooking investors already concerned about flagging demand for the metal and plentiful supplies.”

“One theory doing the rounds,” according to the paper, “is that a major metals trader is moving copper that had been sitting in China – the world’s largest consumer of copper – to LME warehouses in Singapore, Malaysia, Taiwan and South Korea where financial incentives are being offered to store metal.”

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Sign up for your free trial to our monthly buying outlook reports!

According to this month’s Copper MMI analysis, Raul de Frutos and Jeff Yoders agree that supply-side issues, such as overproduction, are seminal.

“Investors are simply not excited enough to trigger a bull run in copper prices,” they write. “The Copper MMI fell 5% last month as overcapacity still plagued the red metal. Rather than cut capacity, Rio Tinto Group approved a $5.3 billion expansion to more than double output at the Oyu Tolgoi copper mine in Mongolia, making it one of the world’s largest copper mines.

“Rio is also expanding its iron ore efforts. Even though almost everyone seems to agree that the market is oversupplied, copper producers are still quite optimistic on the long-term picture and are expanding rather than curtailing production,” according to their analysis.

You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.

Shiny aluminum ingots with a crane in the background while a plane is flying overAs aluminum prices have whittled away their May gains by the beginning of June, news from a Goldman Sachs report indicates Chinese aluminum output is about to get ramped up again.

Bloomberg recently reported that “with most producers in the world’s largest supplier [China] posting solid margins, output growth will accelerate to 4% year-on-year in the second half after contracting 1.7% in the first four months,” according to a Goldman report released Monday.

As capacity fires back up, “the bank sees prices dropping to $1,450 a metric ton in three months, $1,400 in six months and to $1,350 in a year, reiterating previous forecasts.”

However, we take some other factors into consideration.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Sign up for your free trial to our monthly buying outlook reports!

As my colleagues Raul de Frutos and Jeff Yoders have noted earlier this month, China exported 400,000 mt of unwrought aluminum back in April. This represents a year-over-year decline of 7.8%, supporting the argument that domestic demand has picked up there thanks to the stimulus effect. However, how robust and for how long that uptick is likely to last is extremely difficult to tell.

The sustainability of aluminum prices will still depend on this fluctuation in Chinese aluminum production and on how much China can inflate aluminum demand through further stimulus measures. Both factors remain quite uncertain at the moment.

You can find a more in-depth aluminum price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.

The world may have never encountered a more crucial Year of the Monkey than 2016.

That is, at least as far as global trade between China and the Western world is concerned. At the end of this year, China believes it ought to receive Market Economy Status (MES). This would allow China to enjoy the same market status as the U.S. and European Union when it comes to anti-dumping investigations before the World Trade Organization.

Recently, China’s Ministry of Commerce responded to questions from the Financial Times with this: “China is firmly against any misinterpretation or delay in performance of the [WTO] clause [that “automatically” grants China MES on December 11, 2016]. We call on members, such as the U.S. and E.U., to take necessary measures as soon as possible in order to ensure ending the [current methodology used in anti-dumping cases] before the due time.”

However, since China’s economy — and the role of its government within it — operates differently than much of the rest of the world, that country is effectively able to export and offer its products much more cheaply to many of its trading partners. Depending on the circumstances, this has spurred allegations of “dumping” over the past several decades, and has now come to a head.

Currently, China is considered a ‘non-market economy’ under WTO rules. Achieving market economy status would ultimately put China on the same level as the U.S. and E.U. in the eyes of the WTO, taking what some already consider a global trade war to new heights.

For a more in-depth investigation of the criteria China must fulfill to achieve MES, and what it could mean for its Western trading partners, start here.

Two-Month Trial: Metal Buying Outlook

US Steel plant in Granite City wide

The U.S. Steel Granite City Works captured by Google Street View in September, 2014 — a year and two months before the latest idling of the mill.

Dan Simmons has seen a lot during the 38 years he’s worked at U.S. Steel’s Granite City Works in Illinois, just outside St. Louis.

From starting out as a general laborer, to swinging hammers on the track gang, to “feeling like Mr. Haney from Green Acres” while trucking around the mill, Simmons took it all in. There were days “you were whistling when you came in, and whistling when you left,” he said.

But nothing compares to what he’s seeing now.

“I have grown men coming into my office, crying,” said Simmons. “You see the pain, the ‘what ifs,’ the blank stares…”

Simmons, who just turned 56, is now the president of the United Steelworkers Local 1899, and some of the grown men coming to him are pipefitters just like he had become during his long tenure, which began in 1978.

However, those men and women aren’t coming to him because they’ve been hurt on the job. They are coming to plead for help, because they have lost their jobs, and in many cases still don’t know when they’ll land their next one.

Cyclicality in steel production is nothing new, but it wasn’t until 2008 — when the global markets began crashing — that USS Granite City Works endured its first indefinite idling in its history.

“We had the unemployment office cycling 400 people through at a time,” Simmons told MetalMiner. “The biggest fear is not knowing. If I could have given them a definitive timeframe, they would’ve said, ‘OK, I can handle that.’ But after two to three months, people come to me and don’t know what to do with themselves.”

And now, after the mill went idle a second time in December 2015, some of those workers have been without a job for nearly half a year. Last December, 1,500 people were laid off — 75% of the mill’s total workforce. Across the country, a total of 13,500 steel workers have been laid off over the past year.

Simmons knows what it’s like to feel that fear firsthand. “I got a brother that works here, a brother-in-law that works here, so it’s personal. You worry about where your whole family will be.”

So what’s different today, compared to 2008?

For Simmons and scores of others in the country’s steel sector and other manufacturing industries, much of the pain can be traced back to one main source: China.

A History of Unfair Trade?

The world may have never encountered a more crucial Year of the Monkey than 2016.

That is, at least as far as global trade between China and the Western world is concerned. At the end of this year, China believes it ought to receive Market Economy Status (MES). This would allow China to enjoy the same market status as the U.S. and European Union when it comes to anti-dumping investigations before the World Trade Organization.

In its quest to grow its economy over the past two decades, China has become the leading producer — by far — of steel, aluminum, cement and other industrial materials. Read more

Simply looking down the list of prices contained within our Global Precious Metals MMI, the biggest story may appear to be gold’s significant increase over the past month. (Overall, the MMI reading for March reached a high we haven’t seen since last November: 77.) However, the focus should – and will – be on another precious category with greater industrial implications.

First, on the gold front…

US Gold Price Shoots Up – Why?

With China’s stock market turmoil of late, many investors turned to gold as the classic safe-haven commodity. Of course, now that the stock market in China has stabilized, the “damage” has been done, with the US gold bullion price on the MetalMiner IndX having increased nearly 15% since the beginning of February.

Global-Precious-Metals_Chart_March-2016_FNL

The US dollar has also taken a break from the tear it’s been on lately and weakened in January, which allowed gold — and other commodity metal — prices to rise.

The Main Story: Platinum

Speaking of investors and gold, back to the main event: platinum.

Editor at large Stuart Burns recently spoke with Trevor Raymond, the director of research at the World Platinum Investment Council in London about the firm’s sixth quarterly report on the platinum market, and subsequently analyzing the metal’s outlook based on the report’s contents.

But there are two interesting takeaways in particular from Stuart’s analysis, both relating to investment and gold.

#1 Investment-Grade Bars and Coins

While total global demand increased to 8,205,000 ounces as stronger automotive, industrial and investment demand more than offset a dip in jewelry demand from China (and demand again exceeded global supply in 2015 by some 380,000 ounces), bars and coins represented the most significant single uptick.

Free Sample Report: Our March Metal Buying Outlook

“Demand for physical coins and bars rose from 50,000 ounces in 2014 to 480,000 ounces in 2015, contributing to a net gain for investment of 73% from one year to the next,” Stuart writes. Wow. While WPIC doesn’t expect this gangbusters rate to continue in 2016, retail investment will still figure prominently in how the metal behaves.

#2 Relationship Between Platinum and Gold Price

And we finally circle back to gold…here’s quite a nugget:

“The platinum price has only four times previously — over the last forty years — been at a discount to gold for a sustained period. In all previous cases, the price has recovered strongly in the subsequent year. We have no axe to grind one way or another, but we do wonder — with supply constrained and the market in widely acknowledged and persistent deficit and demand from a number of sectors remaining robust — is this discount likely to prevail?”

Read Stuart’s full analysis of the WPIC report.

This Month’s Key Precious Metal Prices

US platinum bar prices bumped up 8.4% – but this was the 14th straight month of that metal being at a discount to gold.
For exact pricing, log in or sign up to become a MetalMiner member!

For full access to this MetalMiner membership content:
Log In |

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

For exact prices, log in or sign up below!

For full access to this MetalMiner membership content:
Log In |

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.”

Get the exact prices by logging in or signing up for MetalMiner membership below!

For full access to this MetalMiner membership content:
Log In |

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