Metal Prices

Screen Shot 2015-07-01 at 11.56.49 AMIt’s been a wild ride, but after three months of adding, subtracting, nip/tucking and perfecting, we are finally at the July metal buying outlook – the third and final complimentary MetalMiner™ Monthly Metal Buying Outlook – the only July metal price forecast and market commentary you will ever need.

Lisa Reisman, CEO, Azul Partners and executive editor, MetalMiner, is back with her tool kit and expert insight into the industrial metals aluminum, copper, nickel, lead, zinc, tin and steel (HRC, CRC, HDG, Plate) so you can formulate your short- and long-term buying strategy.

While this is the last complimentary Monthly Metal Buying Outlook, we are excited to announce the launch of the commercial product on Aug. 1.

Beginning in August, we will offer the Monthly Metal Buying Outlook for $899/year. That’s less than $75/month for 12 reports, or an annual subscription.

Check out the complimentary July report!

More About Lisa

A third-generation metals enthusiast, Lisa Reisman founded MetalMiner in 2007 – 13 years after she began trading semi-finished aluminum metals and 3 years after she was tasked by the CEO of a Tier 1 automotive company to save his company some money on their direct material spend. Lisa is an ex-big 5 consultant who built MetalMiner into the largest online publication for metal-buying organizations, and has the experience and depth of insight to produce this one-of-a-kind invaluable monthly report to impact your industrial metals purchasing strategy.

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A recent study by SNL Metals & Mining reported that delays in the US mine permitting process diminish the value of minerals and mining projects – underscoring a need for a streamlined permitting process.

This September: SMU Steel Summit 2015

The study, “Permitting, Economic Value and Mining in the United States,” commissioned by the National Mining Association, found that duplicative permitting processes can delay mining projects a decade or longer and those processes, both federal and state, are hindering US mining industry’s ability to meet a rising demand for minerals.

SNLstudyimage

It can take three to five times as long to receive a mining permit in the US than in Canada or Australia. Source: NMA/Minerals Make Life.

Some mining projects lost as much as half of their value while awaiting state or federal approval. Three domestic mines in Arizona, Alaska and Minnesota served as case studies for the research. In one example, SNL found that after eight years of delay the value of Arizona’s Rosemont mine dropped by $3 billion. Alaska’s Kensington mine suffered 20 years of mining delays, while the capital cost of building the mine increased by 49%.

Where Have Exploration Dollars Gone?

“Why aren’t we attracting the exploration dollars we should be? Back in the mid-’90s we attracted about 20% of the worldwide exploration budget for mining. Now, it’s only about 7% and I do think it’s this delay on the return on investment that makes a big difference,” said Katie Sweeney, senior vice president, legal affairs, and general counsel at the NMA. “Are you going to put your money in Australia where you can get a permit in a couple of years or here where it’s 7 to 10? The process is definitely broken.”

The study details a veritable alphabet soup of permitting processes in all three states as well as the federal process. It quantifies incremental, production and additional risk. There is a comparison with the processes in Australia and nearby Canada in the report as well, one that’s not favorable to the US as both clock in with an average permit time of two years compared to seven or more for US projects.

The timeline for the government to respond is more clearly outlined in those countries, the permitting agency leading the process is identified from the outset and responsibility for preparing a well-structured environmental review is given to the mining company, not the government. In the US not only is a primary permitting agency not defined, but several groups with competing interests could be lining up for review.

New Legislation

There are bills pending in both the US House and Senate to streamline federal processes.

“On the House side we should see the bill move through. It’s passed the lower chamber the last two congresses so I would anticipate it will get through this congress as well,” Caswell said. “On the Senate side we think there is more opportunity than in previous congresses. Senator Lisa Murkowski (R. Alaska) is a champion of this bill and with her in position as Chairman of the Energy and Resources Committee, she has more opportunity to promote moving this bill forward. When she held the last hearing on this bill there seemed to be wide support among the committee members present. We are hopeful of making progress in the Senate this time.”

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While US steel producers have reason to celebrate the signing of a trade package that includes Trade Promotion Authority (TPA) and Trade Adjustment Assistance (TAA), other manufacturing organizations will also benefit from the opening up of new markets. However, procurement professionals may perceive the legislation less favorably.

Free Download: Latest Metal Price Trends in the June MMI Report

MetalMiner asked Jennifer Diggins, Director of Public Affairs at Nucor, to explain why these trade initiatives are so important for all manufacturers and specifically how the legislation will positively impact metal buyers.

jennifer diggins nucor stillMetalMiner: A lot of your customers purchase imports. How is this legislation helpful to them in any way?

Jennifer Diggins: The legislation is not targeting fairly traded imports. The American steel industry does not have a problem with imports; imports will always be part of our market. But we do have a problem with unfairly traded imports, where governments break trade rules they agreed to and provide illegal subsidies that allow foreign steel producers to sell products below costs.

If a company cheats on price, it raises serious questions about other ways they may be cutting corners to gain an advantage, which could ultimately come back to hurt their customers. We know China has tried to evade duties on some of their steel products by routing them through third-party countries to hide the point of origin and avoid the trade duty. Steel producers in China have also added chemicals to products to avoid trade duties. Several years ago, China added boron to cut-to-length plate to avoid a duty. Nucor brought that case to the attention of the Department of Commerce who ruled that the boron added did not change the product and was subject to the trade duty.

Behavior like this should raise concerns for any customer. If China is willing to bend the rules like this, can you trust claims of product quality? Do you really know what you are buying? A free, transparent marketplace is best for both producers and consumers.

MM: Arguably the Chinese have done a lousy job curbing excess production and shutting down excess capacity. Do you think this legislation will provide the stimulus necessary for Beijing to finally shutter excess and obsolete production? Why/why not?

JD: The main goal of the legislation is to provide more effective tools to enforce our trade laws to ensure that countries sending products to our market are playing by the rules. The provisions in this legislation should create a disincentive to dump products in our market, but the legislation is not intended to address overcapacity issues in China.

The capacity problem is a much larger issue and won’t be meaningfully addressed until China gets serious about moving away from being a state-run economy to a market-based economy. Unfortunately, there are few signs they are serious about doing this. Earlier this year, China issued a draft of its Steel Industry Adjustment Policy, saying – as it has for years now – that this new policy will resolve its excess capacity problems. The major steel industry associations from North America, Latin America and Europe issued a joint response, expressing their disappointment that the Policy still shows that China insists on a top-down, state-controlled approach to the steel market. We are all in agreement that the Policy actually is less interested in eliminating excess capacity in China, but instead would seek to transfer capacity overseas through government-supported foreign investments and acquisitions.

It’s clear that China has no interest in letting market forces dictate the size of its steel industry. And so long as China maintains this state-supported approach to market competition, it’s hard to see how they can have a place in any free market economy. This legislation is an important step, and should help any company from any nation that fairly competes in the American marketplace. But so long as China can be successful dumping steel in other foreign markets, it is unlikely the Chinese government will get out of the steel business. We need more concerted action from our trading partners to force China to comply with WTO rules.

MM: Why, in general, is excess capacity (steel production capacity) a bad thing for steel buying organizations? Most might say it’s a good thing because buyers can get lower prices. How do chronically low prices harm the industry and eventually your customers?

JD: I think it’s important to note here that we are talking about artificially low prices – not competitively low prices. In a free market economy, overcapacity would be eliminated through the balancing of supply with demand. So in a situation of excess production, customers would buy steel from the companies that best meet their needs, and the other steel companies would go out of business. This kind of competition drives quality up and prices down. In a truly free market, efficient producers survive while inefficient ones go out of business.

However, the global steel market is not a true free market. Chinese steel companies are being artificially sustained by their government, creating the risk that efficient foreign steel companies will go out of business while inefficient Chinese companies survive. With state support, they can produce an overabundance of steel at absurdly low prices, and drive their competition out of the marketplace. The market will not be well served if inefficient steel producers survive at the expense of efficient ones. At some point, customers will have no choice but to buy product from those steel companies. There will be no diversity in the market place – no competition. Just one source of state-owned suppliers. And they won’t be accountable to their customers for their success. The only entity they will have to keep happy is their government’s bureaucracy. In that scenario, you can bet the absurdly low prices will disappear with no guarantee that customers will be getting a quality product.

China’s real goal is not only to dominate global steel production, but also to transfer the global downstream supply chain to China (in order to maximize job creation in China). To ensure the reliability and survival of the supply chain in the United States, including both suppliers and downstream consumers, we need to ensure that global supply chains are free from market distortions.

Disclaimer: Nucor is a sponsor of MetalMiner.

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Recently we wrote about how zinc and lead were struggling to rally. Just three weeks later, both these metals are testing new lows.

Free Download: Latest Metal Price Trends in the June MMI Report

June was an even worse month for base metals but these this pair fell particularly hard.

3M LME Zinc Price 1 year out

3-month London Metal Exchange Zinc price, one year out. Source: MetalMiner.

Zinc fell 9% in June, or 15% since May and just hit a 14-month low, driven by the bearish sentiment afflicting industrial metals.

3M LME Lead 1 year out

3-month London Metal Exchange lead price, one year out. Source: MetalMiner.

Similarly, lead fell 7% in June and 16% since May, sending the metal near its lowest level in five years.

What This Means For Metal Buyers

Two of the best performers among base metals got hit hard and are now hovering now near multiyear lows. Meanwhile, other industrial metals are nosediving. Things are simply not looking good for metal producers this year…

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MetalMiner™ invades “Hotlanta!” Yes, you heard right: Join us Sept. 1-2 at the Georgia International Convention Center for Steel Summit 2015. The SMU Steel Summit Conference is composed of manufacturing companies, fabricators, service centers, steel mills, trading companies, wholesalers and other industry providers. We strongly encourage you to attend for the impressive list of speakers, […]

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Nickel hit a six-year low yesterday as Greece’s debt crisis obliterated confidence in global growth.

Free Download: Latest Metal Price Trends in the June MMI Report

The London Metal Exchange’s Index of six industrial metals is heading for a fourth-straight quarterly loss, the longest such streak since 2001. Greece’s standoff with its creditors is adding to economic concerns amid a slowdown in China.

Stainless_Chart_June-2015_FNL

Nickel for three-month delivery retreated 4.9% to settle at $11,835 a metric ton at 5:51 p.m. on the LME, the biggest drop since Sept. 9. The price touched $11,730, the lowest since May 2009. The metal has lost 22% of its value this year.

Daily LME data showed nickel stocks rose 870 mt to 459,018 mt, halting a falling trend seen since the start of June and again sowing doubts that the market is poised to tighten significantly.

The Shanghai Futures Exchange (ShFE) approved three new nickel brands – including OAO Norilsk Nickel – today for delivery against its contracts as persistently high stockpiles and risk aversion over Greece weighed on the market.

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Home sales surged in May and major producer Australia cut its iron ore forecast further.

US Home Sales Hit 9-Year High

Contracts to buy existing homes in the US rose in May to their highest level in over nine years, boosting the housing market and the broader economic outlook.

Free Download: Latest Metal Price Trends in the June MMI Report

The National Association of Realtors said on Monday that its pending home sales index, based on contracts signed last month, increased 0.9% to 112.6, the highest level since April 2006. Contracts have now increased for five straight months.

Australia Cuts Iron Ore Price Forecast

Australia, on Tuesday, cut its price forecast for iron ore in 2015 by 10% to $54.40 a metric ton, citing a weak outlook for the commodity’s main market, China’s steel sector. The forecast by the Department of Industry and Science is a sharp decrease from the $60.40 per mt predicted three months ago and is way off the $94 a mt touted in January.

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We recently wrote about platinum prices sinking. Well, palladium seems to be following its sister metal.

In April we noticed that palladium was heading into trouble and it certainly was, only this month the metal dropped 15%, falling to its lowest level in two years.

Palladium spot price since 2012

Palladium spot price since 2012. Source: MetalMiner.

Unlike platinum, palladium finds more application in gasoline engines and is, therefore, more exposed to the Chinese and US markets than to European markets.

Automotive Demand Stalls

Slowing growth in Chinese auto sales may have scared investors away from this precious metal.

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Another bearish factor is that supply concerns eased amid signs of recovering mining output this year. Although, there are different opinions on this and some experts are still saying there will be a continuing deficit.

Palladium Follows Platinum

As with platinum, we believe that a main driver has been a stronger dollar which puts pressure on commodities and gives South Africa’s miners an incentive to keep producing as their currency depreciates against the dollar. Meanwhile, it is clear that investors are not pouring money into precious metals and this trend is hurting palladium as well.

Free Download: Latest Metal Price Trends in the June MMI Report

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Today, the Greek debt crisis touched all markets, including commodities, and a bipartisan group of US Senators unveiled the long-term highway bill that the construction industry has long clamored for.

Greek Debt Crisis Roils Markets

Commodities could not escape the market turmoil caused by Greece’s capital controls and a hefty drop in Chinese equities, with the stronger dollar and risk aversion hitting raw materials led by oil and metals.

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On the London Metal Exchange, amid a sea of red for industrial metals prices, nickel plumbed a six-year low. The metal, an ingredient for stainless steel, fell 4.6% to $11,855 a metric ton, while aluminum was off 1.5%, copper fell 0.5% and tin dropped 2.5%.

Senators Unveil Long-Term Highway Bill

A bipartisan coalition of senators on Tuesday introduced a six-year bill that would boost overall spending on US roads and bridges.

Working against a July 31 deadline, the senators acknowledged that it will be an uphill effort to corral their Senate colleagues and the House to pass a bill.

The six-year bill would increase highway spending by almost 13% over the current level, bumping it up by more than $2 billion each year. It includes a new program to spread more than $2 billion a year among states to invest in improvements for freight facilities that move goods and products.

It further streamlines project approval, cutting federal red tape that state officials say has slowed projects down. It holds flat at $819 million the money for pedestrian and cycling improvements and for roadway landscaping. Senator Barbara Boxer (D.-Calif.) joined Sen. James Inhofe (R-Okla.), the committee’s chairman, and Sens. David Vitter (R-La.) and Thomas R. Carper (D-Del.) in writing the bill. The cost of the bill is estimated to be about $350 billion and would require new funding if it is passed.

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The US Steel industry has long said that a wave of cheap and illegally subsidized imports is crushing its ability to compete.

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While not turning a blind eye to the situation, Washington has not been as responsive to the situation as many in the domestic steel industry would like. The lobbying efforts of domestic steel have largely fallen on deaf ears when it comes to enforcing existing trade laws and placing tariffs that would be punitive enough to stop foreign nations such as China from overproducing.

Yet, today, a key bill supporting tougher anti-dumping enforcement has passed the House, has a path to passing the Senate and even more customs protections could be passed as early as next week. All from a Congress known more for not passing legislation than passing it. How did this happen? First, let’s see how we got here.

WTO Claims Chinese Imports Aren’t Subsidized

Some relatively modest tariffs were revoked a year ago when the World Trade Organization said the US broke the rules for imposing duties on Chinese steel products, solar panels and other goods.

The WTO’s judges said that under the 1964 Marrakesh accords (which also set up the WTO) countervailing duties can only be levied when there is clear evidence that state-owned or partially state-owned enterprises passing on the subsidies are “public bodies.”

The panel found that Washington had produced insufficient evidence to prove subsidization, and was also at fault in its calculations of the value of the subsidies to Chinese firms. This was a very novel reading for the WTO as there is…

Actual Proof That Chinese Steel is Subsidized

Last year, and now, evidence exists that Chinese steel is subsidized on the state and national level and exports are sold below cost.

This history of ignoring evidence is why we didn’t expect big things for steel this week. Maybe more ambiguous language about actually enforcing existing law as a sweetener in the Trade Promotion Authority bill that both the president the republican congress support, but nothing more.

How, then, did steel become the big winner?

TPA Goes Down in Flames

When democrats in the House refused to approve TPA it looked like the bill, that would ensure an up or down vote for future trade agreements such as the Trans-Pacific Partnership, wouldn’t move forward.

When TPA was separated from a worker aid package for those displaced by future trade deals known as Trade Adjustment Assistance, we still didn’t think it would result in help for domestic steel, yet competing interests that put free-trade Republicans and the Obama administration on one side and more liberal democrats on the other worked in the industry’s favor.

Long Live TPA

TPA, once separated from TAA, passed the House and then the Senate. It still looked like more trade deals and no help for steel or US manufacturing. But with TAA still stuck in the House, guess what the perfect sweetener to get democrats on board become? Support for the US steel industry. The Congressional Steel Caucus is a bipartisan group that spans several key states. Senators and congressmen and women from the midwest, south and southwest coalesced around their support for local steel.

TAA Passes With Stronger Steel Support

Not only did the House leadership promise new safeguards for the steel industry as part of the revamped TAA bill that passed yesterday, but a customs enforcement bill that would force US Customs and Border Protection to enforce anti-dumping laws as written also passed both houses earlier in the week. It awaits a conference committee negotiation, one that the American Iron and Steel Institute favors the Senate version of the bill in. Everything’s suddenly coming up steel.

TPA passed both houses by midweek and TAA passed the Senate and, after being sweetened with support for the steel industry, the House yesterday. Even more customs enforcement protections are still waiting in the conference committee.

“We commend the House for passing legislation today that will improve the effectiveness of our anti-dumping and countervailing duty laws to combat unfairly traded imports,” said Thomas Gibson, president and CEO of the AISI. “These modifications to the trade laws come at a critical time for the steel industry, as we are currently faced with a surge in steel imports that are causing injury to the domestic industry, including significant reductions in domestic steel production and job losses. We look forward to President Obama quickly signing this bill into law.”

It’s about time.

Free Download: Latest Metal Price Trends in the June MMI Report

 

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