Author Archives: Taras Berezowsky

Well, perhaps these rebounds are not quite worthy of The Worm — but our Global Precious Metals MMI has hit its highest level since October 2016, climbing 7.9% to 82 for the February reading.

PGMs Lead the Way

Two of the biggest movers on MetalMiner’s precious metal sub-index were U.S. prices of platinum and palladium, rising 10.2% and 10.9%, respectively.

That palladium increase nearly got the price to the 18-month December 2016 high.

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Here’s the deal with palladium in a nutshell, from MoneyWeek:

“Both U.S. and Chinese car sales have been solid of late, with the latter rising at their fastest pace in three years (in 2016) and the former potentially set for another boost thanks to President Trump’s fiscal stimulus. China’s pollution problem is forcing it to tighten car emission standards, adds Chen Lin on Equities.com, which implies a steady rise in demand for palladium over the next few years.

“On the supply side, South Africa, the world’s top supplier, is not expected to increase mined output much. Analysts reckon that dwindling sales from Russia’s stockpiles means they are probably nearly depleted. TD Securities thinks the market deficit could double this year.”

What a Gold Mine!

Our intrepid editor at large, Stuart Burns — you might remember him from world-class macroeconomic coverage as it pertains to industrial metals, or (our) voice of James Bond’s Q — recently explored the wilds of India, and with him, he brought back gold.

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Or, to be more accurate, some gold coverage.
Soon we’ll publish Stuart’s take on the gold import situation in India. Here’s a taste:

“Although India has mines that go back more than 120 years, its annual gold production is miniscule. According to an article in the Hindu Times, that could be about to change. The Kolar gold field was forced to close in 2001 due to mounting losses at operator Bharat Gold. The state-owned company had been mining the Kolar reserves since independence in 1947 but the mines are deep, down to 3 kilometers, and Bharat was operating with outmoded technology and a large unproductive legacy workforce. But Mineral Exploration Corp. estimates show reserves to be worth $1.17 billion in the mines, with another $880.28 million in gold-bearing deposits estimated to be left over in residual dumps from previous mining operations.

India is never likely to rival South Africa, Canada or Australia as a gold miner, but that’s not the point — any contribution will lessen the impact gold imports have on the country’s balance of payments. With domestic reserves estimated at over 100 metric tons, there appears to be scope — with the right state and government backing — for miners to reduce some of those imports and create domestic employment.”

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MetalMiner’s index of global precious metals prices dropped yet again this month, falling 3.8% for a January 2017 reading of 76, down from 79 in December.

Key Precious Metal Movers

The U.S. palladium price got a bit too frothy last month, resulting in a December MMI reading of $768 — which was good enough for an 18-month high.

However, for the January MMI reading, that price experienced a pullback, dipping back down under $700 per ounce (although not quite reaching November’s levels).

So a correction in that price point’s journey is evident. The U.S. platinum bar price also had a slight drop-off, as did silver and gold prices across global markets tracked by the MetalMiner IndX.

What’s Happened Since October?

Short answer: a ton.

Trump. Cubs. Brexit. Syria. Refugee crises. Panama Papers. Pokemon Go. (We could keep going…)

But a few of those had a lot to do with what’s happening across precious metals markets right now — especially gold.

Gold in Focus

What’s causing gold prices to fall dramatically? The U.S. dollar.

Gold (in dark) vs the dollar index (in green)

Gold (in dark) vs the dollar index (in green). Source: MetalMiner analysis of @stockcharts.com.

Since mid-August the dollar started a bull run that is still in play. Three main factors are propelling the dollar’s bull run, according to MetalMiner’s Raul de Frutos:

Markets expected the Federal Reserve to raise rates by the end of the year. In December the Fed raised interest rates by a quarter point, as expected, but policymakers signaled a likelihood of three increases in 2017, up from prior expectations for two moves. While interest rates outside the U.S. stay near zero or even in negative territory, it’s no wonder yield-seeking investors are going after the greenback.

The ongoing political tensions in Europe are causing the dollar to appreciate against the euro. The ongoing refugee crisis in Europe, Brexit, terrorist attacks and political instability are some of the events causing investors to lose their appetite for the European currency this year.

Finally, the victory of Donald Trump has added fuel to the dollar’s bull market. The new president-elect has proposed new tax policies that will potentially make multinational companies bring their foreign profits back to U.S., increasing the demand for dollars. In addition, the dollar is perceived as a stronger currency since investors expect growth in US to get a boost.

Essentially, what we wrote last month is still holding true, and it’s hard to see a reversal in the near term.

Exact Precious Metals Prices, Movements:

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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.

See the latest multimedia version of this story here.

This is our final top-rated post of 2016. Chinese market economy status was a huge issue for the entire year and this interactive package, originally published in May, put all facets of the problem into one package. How China will change its economy to compete with the rest of the world without overproduction for export is still an open question and a major threat to market stability. — Jeff Yoders, editor

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

Put the dragon fruit back on the shelf, guys; it’s still a bit too green — er, red.

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That’s the metaphor that U.S. Commerce Secretary Penny Pritzker forced us to take a step further, when she went on record stating that “at this moment, [the time is] not ripe for us to change our protocol,” regarding a decision on whether China has taken necessary steps to achieve market economy status (MES).

If China had its way, that time for the U.S. — and the whole gamut of WTO-member nations — came precisely yesterday, December 11, 2016. That’s the date that China claims it should be given MES automatically, according to a line item in the country’s WTO Accession Protocol made official exactly 15 years ago.

So what has happened? Do we all of a sudden live in a world where China is given free reign in trade, on equal footing with the U.S. and E.U.? Not so fast. Read more

MetalMiner’s Global Precious Metals MMI dropped two points this month to 79, from 81 in November; a 2.5% decrease. But that’s less the story than what happened within this precious metals sub-index.

The PGM Story

As we said last month, longer-term structural concerns remain for the platinum-group metals (PGMs), especially platinum and palladium. However, in the short term, one of those two precious metals that are instrumental in automotive catalytic converters kept the Global Precious MMI from falling even further for December.

Global-Precious-Metals_Chart_December-2016_FNL

Indeed, with gold and silver falling across all four geographic markets (see below), our U.S palladium bar price jumped to an 18-month high, rising a whopping 24% month-over-month. Japanese palladium also rose appreciably.

The platinum bar price, however, did the reverse. Our U.S. platinum bar price hit a 10-month low, dropping 7% since Nov. 1.

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Crossing like ships in the night, one heading north, one heading south, what should buyers make of the platinum/palladium divergence?

According to HSBC senior analyst James Steel, talking to Platts, “the platinum-palladium spread has narrowed substantially, from $375/ounce before the U.S. election. This reflects clearly tighter underlying fundamentals for palladium.”

With car sales in the U.S. and China continuing to be robust, and with Johnson Matthey predicting another supply deficit in 2017, palladium could continue its buoyancy for the near future.

The Dollar –> Infrastructure –> Gold

Raul de Frutos gave MetalMiner readers this helpful rundown in late November:

A rising dollar depresses commodity prices, especially precious metals. It does have less of an effect on more economically-sensitive groups like energy and industrial metals. Indeed, industrial metals are on the rise despite a strong dollar. This is because the dollar is rising on expectations of higher rates down the road but, at the same time, metal prices are getting an additional boost because of Trump’s plans to spend big on the nation’s infrastructure. However, gold’s demand won’t be affected by infrastructure spending. As a result, investors are left without reasons to buy gold at this moment.

That still appears to be the case here in early December, as the US gold price on our MetalMiner IndX hit its lowest point in 10 months, falling to $1,173/oz on Dec. 1 — just over an 8% drop from Nov. 1.

(Silver prices followed suit across 4 markets globally, all dropping from November to December.)

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Don’t we all wish we could predict where the scrap markets are going?

Tracy Porter is no exception.

Porter, the executive vice president of operations for Commercial Metals Company (CMC) and board chairman for the Steel Manufacturers’ Association, sat down with us not too long ago to chat about a number of issues crucial to the steel industry, one of which is the volatility of scrap markets.

While certain short-to-medium outlooks, such as Platts’ recent view, may appear to be bullish for prices, the wild card is still China, as Porter mentions in the video interview above.

“There are a lot of unanswered questions with the new [US presidential] administration and China’s intervention in the coal futures,” a U.S. exporter told Platts. “At the end of the day, there is not enough scrap in the pipeline, here or abroad. It’s a good position to be in if you’re a scrap dealer.”

 

Tracy Porter, Executive Vice President of Operations for Commercial Metals Company (CMC) gives MetalMiner his thoughts on today’s United States presidential election between Hillary Clinton and Donald Trump – and what it would mean to the U.S. steel industry.

We recently sat down with Mr. Porter following the fall board of directors meeting of the Steel Manufacturers Association, of which he is the chairman, to discuss his take on a range of issues that the industry faces during the next President’s first 100 days and beyond, which we will cover in a follow-up.

But since the election is taking place now, let’s buckle up – the next 12 hours will surely be interesting.

MetalMiner’s Global Precious MMI dropped 5.8% to a value of 81 for November, the sub-index’s lowest level since June.

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In the midst of worries over the U.S. presidential election and the Federal Reserve‘s interest rate moves, precious metal prices have been on the rise over the past week.

Global-Precious-Metals_Chart_November-2016_FNL

Many investors are girding for a Brexit-like jump if Republican contender Donald Trump wins; the U.S. palladium price, for example, coming off $700/ounce-level highs from early October to just around $600/oz at the start of November, jumped back up to $630 mid-last week.

Focus on Palladium Prices

While some more short-term spikes are undoubtedly coming, longer-term structural concerns continue to swirl around the PGM markets in particular.

In just last month’s analysis of another MetalMiner monthly sub-index (the Automotive MMI), my colleague Jeff Yoders brought up excellent points about the state of the platinum group metals:

“The increasing cost of PGMs was keeping the Automotive MMI in positive territory for most of the first three quarters of 2015. The pullback in precious metals prices could pull the rug out from under automotive, too. The catalyst metals never took off for investors the way that gold did and that’s bad news for their prices as supply was never really in much doubt without more investor interest.”

Now, it looks as though that’s coming true.

Bloomberg reports that palladium futures “tumbled to the lowest in more than three months amid signs of weakening investment and physical demand for the metal used in auto pollution control devices.”

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Phil Streible, a senior market strategist at RJO Futures in Chicago, told Bloomberg that “demand is really starting to fall.”

“You’re going to see that as interest rates go up in the U.S., auto loan rates will rise and you’re probably going to see automobile sales decline,” according to Streible.

The Rest of the Precious Metals

Platinum, silver and gold prices fell across the board from October to November, across geographies including the U.S., China and India.

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cubs win chicago tribune home page

I had to go through the contemporary equivalent of ritually collecting newspapers’ front pages, and here’s the local’s effort (all the more fitting due to their parent company’s past ownership of the Cubs). Note the time – 1:28 a.m. ET. A long, yet exhilarating, night. Go Cubs Go!

The entire city of Chicago, our company headquarters included, is still in shock.

The lovable, perennially losing NorthSiders overcame the Curse of the Goat and so many other obstacles to take it all: The Chicago Cubs are, at last, World Series champions after 108 years.

Jayson Stark of ESPN put it best when he quipped, “It was suddenly possible to type a sentence that no living human has ever typed: The Chicago Cubs are the champions of baseball.”

I’m still coming out of a wonderful coma-like aftermath of emotions, having watched every pitch and vacillating between several elements of superstition (standing near the TV for top halves of innings, sitting in armchair for bottom halves since Game 5, among several others…don’t ask) as the Cubs and Indians’ seesaw battle jacked my heart rate up and knotted my neck-and-shoulder muscles in the early morning hours.

The fearless leader of our sister site Spend Matters, Jason Busch, wrote this excellent post-mortem earlier today, so head over there to read a great personal story of the Cubs’ triumph.

But first, share in this #TBT to when my colleague, MetalMiner Editor Jeff Yoders, and I did our parts last season in helping lay the literal groundwork for this 2016 victory:

Music: “All Those Devils…” by Holy Pain (http://www.myspace.com/holypain)

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Kevin Dempsey, AISI.

MetalMiner Managing Editor Taras Berezowsky recently sat down with Kevin Dempsey, Senior VP for public policy at the American Iron & Steel Institute. Dempsey leads the AISI public policy team representing the interests of North American steel producers and also serves as General Counsel to the Institute. Before that he was a practicing attorney who specialized in trade matters.

During his years on Capitol Hill and in the private sector, Dempsey has worked extensively on international trade negotiations, including the Doha Development Agenda and the original negotiations on the accession of China to the World Trade Organization. He also has considerable experience with U.S. and international law related to subsidies, trade remedies, market access, intellectual property rights, and product standards, as well as U.S. legislative procedures for authorizing and implementing trade agreements.

This is part three of their discussion. Read part one  and pick up where we left off in part two for more on the U.S., China, steel and trade matters.

Kevin Dempsey: I’m not a believer that there’s a WTO case that’s going to solve all of this problem, either, but there may be aspects of the Chinese system that can be addressed. We have successfully brought several WTO cases against China for restrictions they’ve placed on the export of raw materials.

It’s another way in which they subsidize their domestic steel producers. They restricted the export, for instance, of coking coal, which had the effect of lowering the price for their domestic producers and raising the price on the world markets for everybody else. That was a violation of their WTO commitment, so we took them into WTO and we succeeded in that the WTO changed that policy. It’s going to require firing on all cylinders and pressing on all these fronts because it’s not just one single thing in China, it’s this whole range of government policies that are at play.

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So, we have to press on enforcing our trade laws, getting our allies to enforce their trade laws. Enforce, really,  at every chance we get. If there’s a WTO violation to push China to address that. But then keep pressing through international forums to get China to make the necessary economic reforms domestically and get out of the steel business. Read more