Articles in Category: Macroeconomics

Just when it all seemed to be going so well in in Europe, another potential crisis looms.

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

Italy will hold a referendum on Sunday on whether or not to change the country’s constitution. The country’s center-left Prime Minister, Matteo Renzi, has promised to resign if the electorate rejects his proposals. At stake is political turmoil as Euroskeptic comedian Beppe Grillo’s Five Star Movement (M5S) is just a few percentage points behind the Democratic party in the polls.

Meanwhile, the global financial crisis saddled Italy’s banks with around $384.4 billion (€360 billion) of bad debt and there is no good solution to a growing bank crisis.

Source Independent Newspaper

Source: The Independent Newspaper

Unfortunately for Italy, new E.U. rules forbid governments from bailing out banks. Instead, they demand that shareholders and bondholders be what the Economist terms “bailed in,” forcing them to accept any losses that would otherwise be picked up by taxpayers.

Worse, in Italy bank debt worth around €170 billion is in private hands and it seems unlikely that in the current climate any Italian government, let alone M5S, would stand by while voters lost their savings. They may be tempted, therefore, to ignore the E.U.’s rules and rescue Italy’s banks, causing a split with Brussels.

Italy’s Plight

After Greece, Italy is earning the title of the sick man of Europe. Growth has not just stagnated but fallen and populist policies will not solve the economy’s long-term challenges.

Source Independent Newspaper

Source: The Independent Newspaper

Italy is far from alone in feeling the effects of the populist wave sweeping across western politics. In Italy, as in the U.S. and the U.K., the electorate is feeling empowered to vote against things they don’t like rather than necessarily voting for an uncomfortable reality.

Two-Month Trial: Metal Buying Outlook

The five-star movement has said it would hold a referendum to decide whether Italy should leave the Eurozone, looking at what the E.U. has done to Greece, who could blame them? After the U.K.’s decision to leave, should another large and economically important economy like Italy decide the same it could herald the breakup of the single currency. Read more

Liquid Molten Steel IndustryOne Australian miner is requesting Chinese steel mills pay a premium for its highest grade iron ore, a move that experts say will revive the once dormant pricing war.

According to a report from Reuters, Rio Tinto is the world’s No. 2 iron ore miner and demand from Chinese steel producers was at a six-year high when the annual pricing system collapsed. Iron ore supply issues are expected to reignite tensions between miners and mills over pricing.

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

“The steel market is so hot this year and they think it’s something that buyers can accept,” an anonymous source told Reuters. “If Rio gets it, other miners may follow.”

It is reported that Rio is looking for up to $1 per ton more than the index price for its Pilbara iron ore product on long-term contracts from Chinese mills for the year ahead. Rio was previously selling iron ore at a premium exclusively to traders.

Steel Prices on the Rise in Asia

Our own Stuart Burns recently wrote that the Asian market has seen steel prices rise due to much of the same dynamic that has pushed steel prices higher domestically. These movements suggest the trend will remain up for the remainder of the year.

How will steel and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

 

Once investors got over the shock of a Donald Trump victory, it didn’t take them long to realize promises and pledges made in the run-up to the presidential election, if implemented, would translate into a significant stimulus to the U.S. economy.

Such levels of investment in infrastructure, if supported with Buy America and some level of protectionist support for domestic producers, further coupled with significant reductions in corporate and personal taxation, would add up to a rather inflationary repackage. Not surprisingly, last week all four of the main U.S. equity indexes closed at new record highs on Monday.

According to the Financial Times, The S&P 500, the Dow Jones Industrial Average, the NASDAQ Composite and the Russell 2000 closed up 0.8%, 0.5%, 0.9% and 0.5% respectively, breaching their respective records as investors remain optimistic about a U.S. economic stimulus package next year. In their wake, European, Japanese and Chinese indexes all rose as well. Read more

This abridged, holiday week saw both the U.S. dollar, which recently hit a one-year high, and metals prices surge, abandoning their usual behavior, as investors grew excited about the prospects for both infrastructure spending and a stronger U.S. currency.

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

How strong is the dollar? The predictions of a December Federal Reserve interest rate increase are above 90% and the euro is headed in the opposite direction as the currencies are already nearing parity.

The recent rise in metals prices has had some strange market effects. The supposedly more reliable “upstream business,” that Alcoa, Inc. recently separated its aerospace and automotive products into, Arconic, was expected to have a higher stock price and better prospects than the commodity aluminum business that retained the Alcoa name. So much so that CEO Klaus Kleinfeld left with Arconic. Well, Alcoa’s stock has soared since the October split became official. Arconic’s hasn’t.

Now might be the time to buy aluminum forward. We’re not so sure about the long-term prospects for copper, but it’s rise in the last two weeks has been meteoric, nonetheless.

Here in the U.S., we celebrated the Thanksgiving holiday and the traditional beginning of the Christmas shopping season. Retailers are offering big discounts as they hope that consumers, weary of the election that finally came early this month, are ready to spend, particularly on rare-earth-using electronics.

Online shopping was on pace to reach $2 billion on Thanksgiving Day, up 16% from a year ago, according to Adobe Systems Inc., which tracked visits to e-commerce sites. Even our friends in the U.K. are chasing the online deals.

Two-Month Trial: Metal Buying Outlook

If consumer spending increases this season it will be another sign that the U.S. economy is ready to turn a page and maybe, just maybe, return to strong growth. We may have a lot to be thankful for this holiday season.

Carsten Reisinger/Adobe Stock

Carsten Reisinger/Adobe Stock.

This week, support from rising alloy-maker demand in domestic spot markets and a supporting trend overseas combined to move nickel prices up slightly.

Just another notch in the 2016 trend of industrial metal prices growing, nickel prices have climbed roughly 45% since the start of the year, according to a report earlier this month from The Wall Street Journal.

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

To begin November, three-month nickel prices on the London Metal Exchange were up 4.5% with copper futures climbing 1.5% at the same time.

Prior to the election earlier this month, rumors were swirling that the Federal Bureau of Investigation had new evidence that could warrant charges against U.S. presidential candidate Hillary Clinton. This development contributed to the risk appetite in nickel, copper and other base metals.

“Metals including copper and aluminum are likely to take their immediate price direction from the U.S. elections,” Helen Lau, analyst with Argonaut Research, told the WSJ. “The controversy over Clinton’s email use seems to have closed.”

Buying Nickel and Other Industrial Metals in a Bull Market

Now that the presidential election has been decided, we look ahead to 2017 and where this seemingly bull market will take us. Our own Raul de Frutos wrote recently that nickel saw two price consolidations in 2016 with both combining with the bullish sentiment across all industrial metals. In addition, a bullish narrative of supply shortfall in the nickel industry signaled an ideal time to purchase large quantities of the metal.

How will nickel and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

 

 

It’s not the first time, but the United States of America and Europe seem to be heading in opposite directions.

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

In this case, it’s their currencies that are going opposite directions. The U.S. dollar’s rise and the euro’s fall are being driven by policies and perceptions of what those policies mean for growth and prosperity next year. The big questions for firms with business interests in both camps is does this mean we could see parity between the dollar and euro next year?

Source Analysis UK Ltd

Source: Analysis UK Ltd.

The euro was last at parity with the dollar in late 2002, but the first half of the decade saw expectations for strong growth in Europe after the financial crisis followed by a flight to safety that maintained a relatively strong euro relative to other currencies.

How the US Dollar Got its Groove Back

While the recovery of the U.S. economy has been somewhat unspectacular, it has at least been steady and heading in the right direction for the last few years. Europe, on the other hand, has been plagued with banking fears, political unrest and slow if not stagnant growth. Read more

When the Organization of Petroleum Exporting Countries stated at their September meeting in Algiers that they would work on an agreement to cut production, many thought it was empty words intended to save face following yet another failed meeting.

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

The target to cut production to between 32.5 and 33 million barrels a day left out any detail as to how those cuts would be shared. But it would seem OPEC producers, along with some cooperating non-OPEC members such as Russia, have been continuing to work behind-the-scenes in preparation for the next planned meeting on November 30.

A CNBC article reports that significant progress has been made and at the very least a production freeze is achievable and possibly some cutbacks, probably led by Saudi Arabia. Ever since the last meeting both OPEC and non-OPEC producers have been ramping up production in anticipation of an agreement being reached on a freeze. Read more

President-elect Donald Trump’s recent announcement that he is “all for NATO” may have offered some comfort, but his repeated statements during the campaign regarding the North Atlantic Treaty Organization and Europe’s responsibility to look after its own defense have sent a shiver down the collective spines of E.U. countries, the likes of which they have not felt since the formation of NATO in 1949.

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

While very few in Europe would agree, it is possible that the President-to-be’s  position on NATO may ultimately be to Europe’s greater good. A recent article in Carnegie Europe entitled “America’s European Allies” highlights not just the issue of underfunding, but the appalling state of European defense structures and the inherent inefficiencies that result mean that of the $214 billion (€200 billion) that EU member states collectively spend each year on defense, much is wasted.

StuartsF35_500

Would you rather a standing personnel group? Or an F35?

More troubling even than that failure of accounting is that some states don’t even spend the agreed-upon 2% of gross domestic product on defense, an egregious violation of the compact of being an E.U. member-state. These structural issues undermine the region’s ability to effectively mount a unified defense.

People vs. Weapons

The first issue is high personnel costs. According to the article, cash-strapped Greece spends some 2.38% of the country’s GDP on defense, significantly in excess of the 2% minimum agreed by NATO members summit in Wales in 2014. Unfortunately, out of its total defense budget of $4.6 billion (€4.2 billion), Greece spends almost 70% on personnel alone. No weapons. Read more

Black lead zinc ore closeup rocky textureThe International Lead and Zinc Study Group‘s recent Portugal session revealed global demand for refined zinc metal will increase a little more than a half percent this year, to be followed by a larger increase of 2.1% in the coming year.

In the Far East, China’s renewed demand from the automotive sector will offset the decline in exports of galvanized sheet steel with demand expected to grow 1.8% this year with an additional 1.3% rise expected next year.

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

The ILZSG report stated: “Usage in Europe has been flat over the past four years and this trend is predicted to continue in 2016 and 2017 with limited growth of 0.7% and 0.5% respectively. In the United States, an anticipated fall in apparent consumption of 8.7% this year will be influenced by drawdowns in unreported inventories. However, in 2017 demand is forecast to rebound by 11.8%.”

A Closer Look at Zinc Supply

World zinc mine production is expected to fall 5.6% this year and then recover by 5.9% next year, the ILZSG report also stated. The most significant dropoff this year will come from India, Australia, Ireland and Peru.

Conversely, output is expected to increase in China, Mexico, Kazakhstan and the Russian Federation.

Lastly, global refined zinc metal output is forecast to drop 3.2% this year, but is expected to rise 2.9% next year due in part to recovery in India, Australia and Mexico.

How will zinc and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

Black lead zinc ore closeup rocky textureThe International Lead and Zinc Study Group recently convened in Portugal to deliver its forecast for the coming year, and revealed that global demand for refined lead metal is expected to rise 2.8% this year and 1.3% in 2017.

The report continues: “In China, strong growth in vehicle production and sales have helped to balance declining demand for lead-acid batteries in the e-bike sector where sales of lithium-ion batteries are reported to be rising. It is anticipated that Chinese lead usage will rise by 2.5% in 2016 and 1.1% in 2017.”

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

Furthermore, European usage of lead metal is expected to increase 5.3% this year after declining in 2015. This is due in part to positive performance from the automotive sector. It’s important to add that lead demand in Europe is expected to remain flat next year.

Pertaining to supply, global lead mine supply this year is forecast to be less than a half percent lower than in 2015 with a boost in China offset by other nations, including Australia, Mexico, India and the U.S. In the coming year, global lead output is expected to rise 3.3%.

Global Refined Lead Metal Balance

In closing, the ILZSG report states: “Having taken into account all of the information recently received from its Member Countries, the Group anticipates that in 2016, supply will exceed demand in the global refined lead metal market by 42,000 tonnes. In 2017, an even closer balance is predicted with current data indicating that the market will be in surplus by 23,000 tonnes.”

How will lead and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds: