This is the first full year for the new LBMA gold and silver prices. More open and transparent processes for precious metal prices can only help purchasers in the long run by giving them more information about what goes into the prices they are quoted. We are thankful for market transparency in all its forms.
Happy Thanksgiving from everyone here at MetalMiner!
That’s why our own MetalMiner IndX is updated daily with over 600 price points from domestic and multiple international markets. We’re always happy to add more open and transparent price points. Read more
Typically steel buyers look at short-term steel cycles — inventory cycles. These are what drive short-term pricing trends. Let’s face it. Most buyers think in terms of what their next purchase will be or, maybe at this time of year, the next year’s requirements.
However, from time-to-time, it’s worth sitting back and looking at the big picture; the long-term; over-the-horizon. It’s a useful thing to do. It provides some perspective.
The chart highlights global steel output since 1950. Very simply, we can look at 3 cycles.
1950-73 – steady growth. Post-war investment in North American infrastructure; the development of the automobile; reconstruction in Europe and the emergence of Japan. All drove steel production and consumption higher.
1973-98 – stagnation. The oil shock; light-weighting in cars, packaging, construction and increased efficiency. The end of investment in Europe and North America led to demand falling and only partially offset by the growth in emerging Asia.
1998-2014 – the emergence of China. A country of 1.4bn people industrialised and moved from the country to the city; a development model specifically based on steel-intensive capital investment.
Global Crude Steel Production ( 000 metric tons)
Steel prices since 1950. Source: Steel-Insight.
The first two cycles lasted 25 years; the last one has been 15 years.
Europe, North America and Japan (25% of global steel consumption) are mature consumers where steel consumption will perhaps grow 1% over the longer-term, and even that is under threat from aluminum in the automotive industry and lightweighting and efficiency elsewhere.
China (50%) has peaked. Construction is 70-80% of demand and that is a one-off use of steel. Once cities and roads are built, they don’t need to be renewed for a while. Steel consumption has peaked and could fall by 20% from here over the next decade.
Emerging economies (25%) were expanding, but in many cases, they were investing the super-profits of commodity gains from oil, metals and agriculture — from China. Without that bulwark, capital expenditure may plummet.
That means we could be in for a long period of stagnation and decline — 15-20 years based on previous cycles. It will be marked by mill closures, job losses and low prices. Yet the last period of stagnation gave birth to the minimills and a whole new dynamic group of steelmakers. It is not all doom and gloom.
Steel-Insight is a steel industry price-forecasting publishing company, based in Toronto. James May, the firm’s managing director, has been a steel industry analyst for 15 years and advises some of the major global steel trading companies, steel producers and steel consumers on the outlook for steel pricing and industry trends. For more information, visit www.steel-insight.com.
In early October I received a phone call from a well-known consultant/advisor within the domestic steel industry. He wanted to know if we were urging our readers to begin to hedge steel (meaning immediately hedge, as opposed to creating a hedging program).
My gut reaction to the question was to dodge it because I wanted to understand why he asked it. Our conversation went along the lines of this:
Him: Hi, Lisa. I heard you speak at the recent Steel Market Update event. I was just wondering if you were urging your readers to hedge steel.
MetalMiner Executive Editor Lisa Reisman
Me: Why do you ask?
Him: I think there is a lot more steel price upside risk than downside risk.
Me: I don’t disagree with you, in that prices are on the low end of the range relatively speaking, but in answer to your question, no, we are not telling our readers to hedge right now.
Him: Why not?
Me: Because we don’t see signs of a market bottom. Prices would have to stop falling and begin rising, crossing certain levels before we’d suggest companies hedge.
Him: So you don’t see upside risk?
Me: We don’t try and time the absolute lowest point of the market and then lock-in. We try to identify when the trend has shifted (from bear to bull) and take cover, then buy forward or hedge. Until we see evidence of a trend shift — and the market still looks negative to us —we don’t pay much attention to upside/downside risk, per se. It’s not relative in driving industrial buying behavior.
Source: Adobe Stock/Yury Zap
Is This Analyst Wrong?
That’s probably somewhat of an irrelevant question. He can be both right and wrong. Right in that, yes, there is likely more upside risk (e.g. steel can likely go a lot higher vs. a lot lower) but from an industrial metal buying perspective — I give it the big SO WHAT? Read more
Three-month Nickel on the London Metal Exchange fell on Monday to a new 12-year low, falling as low as $8,175 per metric ton. The metal is the biggest loser on the LME this year, losing around 45% of its value on the year-to-date.
Three-month London Metal Exchange nickel has now hit a 12-year low. Source: FastMarkets.com.
Nickel is the first metal falling below its 2009 low. With this, we believe the chances of other metals suffering the same fate have increased. Some base metals like copper are still trading well above their recession’s lows. Aluminum however, could be next.
In part one of this series, we analyzed how metal prices have fallen in three selling waves. In this section, we will analyze the current sell-off (third wave) in metal prices that a rising dollar is producing.
Investors expect that the Federal Reserve will rise interest rates in December for the first time since 2006 while the European Central Bank plans to continue with more easing monetary policy. This, and the fact that growth prospects look brighter in US than they do overseas both add to the dollar’s attractiveness. Indeed, we suspect that the bullish move in the dollar over the past few weeks could be the beginning of a bigger move which could depress metal prices even more down the road.
Let’s take a snapshot of industrial metals to see the individual impact of a rising dollar since mid-October.
Three-month London Metal Exchange aluminum. Source: MetalMiner analysis of FastMarkets.com data.
Aluminum prices are trading below $1,500 per metric ton, the lowest level since 2009. Notice how prices fell sharply as the dollar surged in mid-October (red arrow). Read more
As the US Green Building Council finished its annual Greenbuild Conference in Washington, DC, last week, one somewhat unlikely organization came away touting better opportunities for its green and sustainable products: The Steel Market Development Institute.
Steel, you say? Doesn’t it burn a lot of fossil fuels just to get the iron ore out of the ground? Isn’t the process to turn it into structural beams and bars energy-intensive and dirty, as well? Perhaps, if you’re looking at mined and milled steel only, but if you look at less-obvious concepts like reusability, material reduction through smart design, recyclability, decreased maintenance cost and empowerment of adaptive reuse, steel and, even some other metals, are ahead of the game when it comes to construction specification.
All of these green and sustainable steel-framed buildings might get a boost from new LEED standards. Source: Dmitry Ersler/Adobe Stock
The USGBC introduced will put its latest sustainable building certification, Leadership in Energy and Environmental Design version 4 (LEEDv4), into effect early next year. It approaches building materials content credits in a completely different way than previous editions of LEED.
“The new version of LEED, the primary changes are in the materials section and those changes are mostly around things like lifecycle assessment, environmental product declarations, transparency really,” said Mark Thimons, vice president sustainability at the SMDI. “What’s it take to make this product? What’s in it?” Read more
“Today’s announcement highlights the LME’s new approach to market engagement,” said Garry Jones, CEO of the LME. “This has been an extremely customer-focused product launch, and we have collaborated with participants throughout the metals value chain to ensure we have created contracts that people want to trade.”
The new scrap and rebar contracts will be traded on LMEselect, allowing industry participants to reduce their risk exposure by hedging more steps in the steel production process. The contracts are cash-settled against physical Turkish scrap and rebar price indexes.
The new ferrous contracts will be supported by market-making programs to optimize market depth and tightness of spreads.
With the physically settled aluminum premiums contract, participants can now hedge the regional all-in price to ensure the metal they receive is readily available in a non-queued LME warehouse at a convenient location
The Department of Commerce yesterday announced the initiation of anti-dumping and countervailing duty investigations of imports of circular welded, carbon-quality, steel pipe from Pakistan and anti-dumping investigations of imports of the same merchandise from Oman, the Philippines, the United Arab Emirates, and Vietnam.
The investigations cover welded, carbon-quality steel pipe and tube, of circular cross-section, with an outside diameter not more than 16 inches, regardless of wall thickness, surface finish, end finish, or industry specification.
Welded carbon steel pipe from five nations could face US import duties. Source: Adobe Stock/Sasint.
The products are generally known as standard pipe, fence pipe and tube, sprinkler pipe, and structural pipe and are intended for the low-pressure conveyance of water, steam, natural gas, air and other liquids and gases in plumbing and heating systems, air conditioning units, and automatic sprinkler systems. The products may also be used for light load-bearing and mechanical applications, such as for fence tubing.
Anti-Dumping vs. Countervailing Duties
For the purpose of anti-dumping investigations, dumping occurs when a foreign company sells a product in the US at less than its fair value. For the purpose of countervailing duty investigations, countervailable subsidies are financial assistance from foreign governments that benefit the production of goods from foreign companies and are limited to specific enterprises or industries, or are contingent either upon export performance or upon the use of domestic goods over imported goods.
The petitioners for these investigations are Bull Moose Tube Company of Chesterfield, Mo.; EXLTUBE of N. Kansas City, Mo.; Wheatland Tube of Chicago; and Western Tube & Conduit of Long Beach, Calif. Many of the countries being investigated have also been accused of shipping Chinese goods from their ports to the US so as to conceal the origin of the shipments.
The US International Trade Commission (ITC) is scheduled to make its preliminary injury determinations on or before December 14, 2015. If the ITC determines that there is a reasonable indication that imports of the pipe from Oman, Pakistan, the Philippines, the United Arab Emirates, and/or Vietnam materially injure — or threaten material injury to, the domestic industry — the investigations will continue and Commerce will be scheduled to make its preliminary countervailing duty determinations in January 2016 and its preliminary anti-dumping determinations in April 2016, unless the statutory deadlines are extended.
Chinese steel prices hit record lows and caused at least one major closure Tuesday and aluminum delivery premiums leveled off in Europe.
Closures in the Chinese Steel Sector
Chinese steel prices hit record lows on Tuesday amid prolonged worries over shrinking demand in the world’s top consumer that market sources say has forced one of the country’s largest private producers to cease output.
The shutdown by Tangshan Songting Iron & Steel, with an annual capacity of 5 million metric tons, would be one of the biggest in the sector’s years-long downturn as the world’s No.2 economy slows, traders and analysts said.
Aluminum Surcharges Fall in Europe
Surcharges for physical delivery of aluminum in Europe leveled off after recent gains and may come under pressure from additional supply if Chinese exports rebound and some inventories are liquidated.
The surcharges, or premiums, which consumers pay on top of the London Metal Exchange (LME) cash price for immediate delivery of metal, have gradually climbed over the past couple of months amid tighter availability.
This week started with the horrible Samarco mine disaster in Brazil. Two mine dams burst and waste from tailings ponds created to service the iron ore mine flooded local villages and affected water supply within a 60-plus-mile area. The death toll has now reached eight people.
BHP CEO Andrew Mackenzie hopped the first flight to Brazil to put as best a face as he can on the response. Yet the Brazilian government has already set its sights on Vale and BHP as the responsible parties and literal owners of the disaster.