Articles in Category: Macroeconomics

The Office of the U.S. Trade Representative recently sent to Congress a draft Statement of Administration Action for the Trans-Pacific Partnership, a procedural step necessary before a draft implementing bill is sent to Congress.

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According to the fast-track law, the trade rep must send a draft SAA to Congress at least 30 days before it submits a draft implementing bill, but that does not mean it will be submitted in that timeframe, that’s just merely the minimum before a bill can be sent. The trade rep sent notification August 12th. Read more

Construction has been one of the few pockets of strength in the U.S. economy – until recently. Construction payrolls have declined since March and spending in May rose less than 3% from a year earlier, the lowest rate since 2011.

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Coming after strong growth of 10% last year, the question now is whether the sputtering is just a blip or something more lasting that portends a significant drag on the economy.

The Associated Builders & Contractors, American Institute of Architects and National Association of Home Builders‘ chief economists recently gathered in Washington, D.C., for a mid-year market forecast, outlining stable to strong residential and commercial project activity through 2017.

Each economist discussed present and future indicators for sector performance, including ABC’s Construction Backlog Indicator (8.6, 1Q2016); AIA’s Architecture Billings Index (52.6 in June) and the Construction Consensus Forecast (5.6% growth in 2017); and, the NAHB/Wells Fargo Housing Market Index (60, August 2016).

While all of the economists predicted growth in 2017, they had varying degrees of optimism.

Anirban Basu, ABC Chief Economist: “Nonresidential construction spending growth will continue into the next year with an estimated increase in the range of 3 to 4%. Growth will continue to be led by privately financed projects, with commercial construction continuing to lead the way. Energy-related construction will become less of a drag in 2017, while public spending will continue to be lackluster.”

Robert Dietz, NAHB Chief Economist: “Our forecast shows single-family production expanding by more than 10% in 2016, and the robust multifamily sector leveling off. Historically low mortgage interest rates and favorable demographics should keep the housing market moving forward at a gradual pace, but residential construction growth will be constrained by shortages of labor and lots and rising regulatory costs.”

Free Download: The August 2016 MMI Report

Kermit Baker, AIA Chief Economist: “Revenue at architecture firms continues to grow, so prospects for the construction industry remain solid over the next 12 to 18 months. Given current demographic trends, the single-family residential and the institutional building sectors have the greatest potential for further expansion at present.”

a handful of granular zinc on a white backgroundPreliminary data from the International Lead and Zing Study Group reveals the global market for refined zinc metal was in deficit from January to May this year with reported total inventories also declining over that same time frame.

Decreases in output from India, Australia, Peru, Ireland and the U.S. led to the significant 7.7% reduction in global zinc mine production in the first half of 2016, compared to the same time period in 2015.

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“World output of refined zinc metal declined by 3.6% with reductions in India, Japan and the U.S. being partially balanced by increases in the Republic of Korea and Namibia,” the ILZSG report stated.

The report also stated that world demand for refined zinc metal grew 0.6% due to the rise in Chinese apparent usage, to the tune of 8.2%, that offset declines in Japan, Taiwan, the Republic of Korea and the U.S.

Lastly, Chinese imports of zinc contained in zinc concentrates fell substantially, by 26% with the country’s net imports of refined zinc metal growing by 112%.

Metal Prices Bullish on Global Stock Markets

Investors are becoming more positive on the health of the global economy, which could translate to industrial metals demand growth. The reason? Global stock markets continue to rise, and have already made up for their losses following Brexit.

You can find a more in-depth zinc 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.

Three-month Aluminum on the London Metal Exchange hit a new 13-month high this week, retaking the $1,700 level.

3M LME Aluminum hits 13-month high

Three-month LME Aluminum hits 13-month high. Source: MetalMiner analysis of Fastmarkets data.

Recently we talked about the decline in aluminum exports this year. China exported 390,000 metric tons of unwrought aluminum in July, down 9.3% from July of last year. Chinese aluminum exports have fallen around 7% for the first seven months of 2016. Lower aluminum exports are supporting aluminum prices this year.

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Despite the fall in exports, the U.S. is considering asking for a reclassification of aluminum products to stop a flood of “fake semi-finished” aluminum products entering the global market. The reason is that Chinese aluminum exporters seem to be avoiding export duties while simultaneously qualifying for Chinese export subsidies for semi-finished products, for products that are being shipped specifically for remelting as unwrought. Read more

Black lead zinc ore closeup rocky textureThe International Lead and Zing Study Group released new findings that reveal refined lead metal supply exceeded demand during the first five months of 2016.

Furthermore, over the same time frame, total reported stock levels grew, as well.

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“A decrease in global lead mine production of 5% compared to the same period in 2015 was mainly a consequence of reduced output in Australia and the United States,” the ILZSG report stated.

Refined lead metal production decreased by 1.9% despite increases in Kazakhstan and the Republic of Korea. The reason? Lower output from China, whose imports of lead contained in lead concentrates fell 19.9% compared to the same time frame in 2015.

Also in China, demand decreased by 12.4%, which contributed to the global usage decline of 3.3% overall. In Europe, usage climbed by 9.8% but in the U.S. and the Korea, usage fell by 1.2% and 7.5%, respectively.

Metal Prices Bullish?

Our own Raul de Frutos wrote this week that global stock markets continue to rise, indicating a positive outlook for the global economy and, in turn, industrial metals demand growth.

de Frutos wrote: “This is especially true when China’s stock markets rally. China’s stock market is possibly the best benchmark for China’s economy or at least investors’ sentiment about the Chinese economy. The slowdown in the Chinese economy (weak demand with too much capacity) explains why industrial metals peaked in 2011.”

You can find a more in-depth lead 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.

 

Global stock markets continue to rise as we noticed last month. Stock markets have already made up for their losses following the U.K.’s decision to leave the European Union.

Two-Month Trial: Metal Buying Outlook

This recovery suggests that investors are turning more positive on the health of the global economy, which bodes well for industrial metals demand growth.

The Chinese stock market ETF hits a nine-month high. Source: MetalMiner analysis of @Stockcharts.com data.

The Chinese stock market ETF hits a nine-month high. Source: MetalMiner analysis of @Stockcharts.com data.

This is especially true when China’s stock markets rally. China’s stock market is possibly the best benchmark for China’s economy or at least investors’ sentiment about the Chinese economy. The slowdown in the Chinese economy (weak demand with too much capacity) explains why industrial metals peaked in 2011.

China’s stock market bottomed out earlier this year (coinciding with a bottom in metal markets) thanks to China’s stimulus measures that fueled demand growth. Chinese shares have risen rapidly this month to the highest levels in nine months as investors expect its central bank to ease monetary policy again.

Caixin’s PMI measure of manufacturing in China moved above the boom-bust line of 50 last month, for the first time since early 2015 while China’s Q2 GDP growth came at 6.7%, beating the market’s expectations.

Industrial Metals Continue to Climb

Industrial Metals ETF rises to a 13-month high. Source: MetalMiner analysis of @Stockcharts.com data.

Industrial Metals ETF rises to a 13-month high. Source: MetalMiner analysis of @Stockcharts.com data.

Not surprisingly, the trend in industrial metal prices looks pretty similar to China’s stock market. The recent rally in global stock markets, particularly in China, favors a continuation of this year metals’ bull market.

Free Download: The August 2016 MMI Report

Some industrial metals have benefited from a bull narrative of supply shortfall this year but, on top of that, they have also benefited from higher demand coming from China which is being reflected in the surge in Chinese imports this year.

Mergers and acquisitions in the metals sector were down in Q2 2016, according to PricewaterhouseCoopers‘ Q2 2016 Global Metals M&A Deals Insights report. Total deal value was down a whopping 69% to $2.8 billion from Q2 2015.

PwC’s U.S.Metals Leader, Mike Tomaro said the global economy and unpredictable commodity markets have led to caution from metals firms contemplating major deals.

“It really does seem to exist outside of anything like normalcy,” Tomera said. “We are seeing a pickup in prices. A lot of that is, we think, driven by trade enforcement actions that have come out. The question is, will these prices stick or even maintain the upward trend? There’s speculation that they may not. There’s also speculation that this will drive change.”

Two-Month Trial: Metal Buying Outlook

17 Deals were announced during Q2 2016, down 45% from the same quarter. Of the 17 deals, 12 deals were pending (forming 71% share) valued at around $2 billion during the quarter.

Completed deals were valued only at $0.7 billion in Q2 2016, the lowest observed of all quarters in the last two years. The largest deal was JiaoZuo WanFang Aluminum Manufacturing’s acquisition by
Hangzhou Jintou Jinzhong Investment Enterprise LP for $347 million.

Free Download: The August 2016 MMI Report

All premium metals categories (steel, aluminum and iron ore) saw weaker deal activity in the second quarter while the “other metals” category surged its share to 38% in total deal value (recording the highest share). Aluminum and steel together constituted more than half of total deal value.

“If you look at the volume of deals that happened this quarter – and the volume of deals in the first quarter – it really can’t get any slower than where we’re at right now from a deal perspective,” Tomera said.”It has got to start to pick up, especially on the steel side. The price pickup should translate into a better market, but whether that translates into more deal volume remains to be seen.”

South Crofty tin mine

South Crofty tin mine, located in the U.K.

The South Crofty tin mine story has a new chapter as Canadian mining company Strongbow Exploration, Inc. announced plans for the historic site in Cornwall, U.K.

It’s been a long and winding road, but just last month the West Briton reported that Strongbow finally completed the acquisition of the mine, which has seen its fair share of potential suitors dating back to 2001.

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 the West Briton, several companies attempted to acquire the mine from 2001 to 2013 but poor market conditions led to the mine going into administration in 2013. Enter Strongbow, which completed its acquisition with 100% interest in the South Crofty Tin Project and associated mineral rights just last month.

The mine has an active permit valid through 2071.

The reason for optimism in August 2016? Rising tin prices and a weakened pound could supplement each other to grow the mine’s value, which at one point employed thousands of locals before closing, according to the West Briton.

China to Increase Tin Imports?

A recent report from Reuters stated that China could increase imports of refined tin in the near future. The reason? Upcoming environmental inspections at smelters, which could derail local output.

“It should have a huge impact on the whole (tin) industry,” a trader at one Chinese tin smelter told the news source. “It’s … part of long-term supply side reform not just for the private sector or special smelters.”

You can find a more in-depth tin 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.

Source: Ronnie Chua/Adobe Stock

Source: Ronnie Chua/Adobe Stock

Copper continues to struggle as demand for the metal wanes, most notably in its top consumer market, China.

BMI Research analysts noted that copper inventories indicate a significant lack of demand in general, but a lack of demand coming from China makes it especially troubling considering the Far East Nation is the world’s largest importer of the 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!

“While the corresponding decline in Shanghai inventories largely offset the jump in (London Metal Exchange prices), the shift suggests that China’s strong H1 2016 economic data does not in fact reflect improving demand growth,” BMI Research stated, according to a report from Business Insider.

The note added: “We expect China’s refined copper imports to decelerate over the remainder of the year, and will remain wary of any other rapid movements in inventories.”

Copper MMI gains just a single point

Our own Raul de Frutos noted that copper on the LME continues to trade up and down with the metal struggling near $5,000 for the ninth straight month. Citing the International Copper Study Group, de Frutos stated that refined copper balance for Q1 2016 reveals a production deficit of around 119,000 metric tons (seasonally adjusted to 129,000 mt.) compared to a production surplus of around 13,000 mt. (seasonally adjusted to 12,000 mt.) for the same time frame in 2015.

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.

Aluminum lines on a conveyor belt in a factory.

Aluminum lines on a conveyor belt in a factory.

Aluminum futures closed a bit lower this week, declining 0.6% due in part to pressure on the base metals complex from a rise in the value of the U.S. dollar.

According to a recent report from the Economic Calendar, the dollar climbed in comparison to rival currencies with Automatic Data Processing releasing positive private payroll data. Donald Levit, a strategist for the Economic Calendar, wrote: “A higher U.S. dollar is negative for dollar denominated commodities because it decreases demand for the commodities from holders of international currencies.”

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!

Economic Calendar speculated that aluminum upside could be on the horizon with buyers in China locking in prices for October shipments. That is a popular month for the Far East nation to stock up on the metal in time for winter when inclement weather can hinder shipments.

Domestic Construction Spending Hits One-Year Low

With China close to stocking up on aluminum for its upcoming construction projects, the U.S. Commerce Department recently announced domestic construction spending declined 0.6% to its lowest point since June 2015, reports our own Jeff Yoders.

Yoders wrote: “Economists polled by Reuters had forecast construction spending increasing 0.5% in June after a previously reported 0.8% drop in May. Their June estimates were largely based on the government’s assumptions for private residential and nonresidential construction spending in the advance GDP report.”

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.