Articles in Category: Metal Prices

Nickel prices are, finally, on the move.

Owners of shares in nickel mines shouldn’t start popping the champagne corks just yet, it’s going to be a slow burn rise but the landscape appears to be shifting and it is because of, as usual, China. First and foremost, there is a trend among stainless producers this year, particularly in China, to produce more 300 series nickel-bearing grades than last year.

Real Demand is Up

Just as mills and consumers shifted wholesale from 300 to 400 series grades when nickel prices went through the roof in 2010-11, a prolonged period of falling prices has encouraged consumers and designers to switch back to higher-quality grades.

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Macquarie Bank is quoted by Reuters saying global nickel demand will grow by 4.4% this year, largely on the back of a predicted 4% rise in Chinese 300 series stainless production. Likewise, the INSG estimates the global market will fall into a small 600-ton deficit in Q1 of this year, although it must be said the market remains well supplied by huge global stocks. Read more

This week, we asked if cheap Chinese steel imports are really that bad for the U.S.? After all, if Beijing and China’s regional governments are subsidizing steel production exported to the U.S. to the tune of 522% for cold-rolled and 451% for corrosion-resistant, aren’t U.S. manufacturers gaining a huge cost advantage on the finished products they ship back to the People’s Republic? Or even sell domestically?

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U.S. Producers certainly don’t see it that way. Neither do steel producers in most of the developed world, save China. 12 Steel associations from the Americas and Europe released another strongly worded letter to governments around the world, lamenting Chinese overproduction. Just look at those tariffs! The steel associations really mean business this time!

Nice job on the ditch, USA! I’m China, I’m here to fill it back in. Source: Adobe Stock/Kara.

China, of course, doesn’t see it this way at all and has previously said, through its Ministry of Commerce, that its steel industry is merely “export competitive.” It’s certainly a novel defense, but it would also be the equivalent of Tom Brady saying his footballs are only “deflation competitive” without dealing with why they are so. Or Russia saying Crimea is “annexation competitive” without saying why it should stop being a part of Ukraine and start becoming a part of the federation.

What is Protectionism?

Still, U.S. regulators like the Commerce Department and the International Trade Administration may want to tone down their heavy anti-dumping and countervailing duties decisions as 522% and 451% is an awful lot of anti-dumping and countervailing duties and the extreme outlier positions that Commerce has staked out could garner sympathy for China in front of a future World Trade Organization court. Read more

The Commerce Department has delivered a final determination that imports of corrosion-resistant steel from China, India, Italy, South Korea, and Taiwan were illegally dumped in the U.S. The investigation found that countervailable subsidization of imports of corrosion-resistant steel products from China, India, Italy and South Korea occurred and that there were actually no countervailable subsidies of imports of corrosion-resistant steel from Taiwan.

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Companies from China received final anti-dumping duties of 209.97%. Many Chinese companies also did not cooperate with the countervailing duties investigation and were hit with CVD tariffs of 241.07%.

This means many Chinese companies received total import tariffs of 451.04%.

Hyundai Steel Company in South Korea got hit with anti-dumping duties of 40.97%. Read more

Domestic HRC steel prices have surged 67% since they hit a floor just six months ago.

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The duties imposed on steel products caused imports to taper down in a big way this year and U.S. steel mills now have the power to raise their base selling prices. Moreover, China’s stimulus measures boosted demand for steel in this first half, causing prices in China to rise, too.

Domestic HRC prices continue to surge

Domestic HRC prices continue to surge. Source: MetalMiner Index

Earlier this month we’ve heard many analysts say the recent steel price rally was purely speculative, without a fundamental justification for the price swings, as steel-rebar and iron-ore futures traded in China went into sharp decline in recent weeks. However, U.S. domestic prices are rising without looking back, at least for now.

Higher U.S Steel Prices: Is That What We Really Want?

Some firms have lost a ton of money in recent years as China created global oversupply, bringing global steel prices down with massive exports. In the face of rising imports, American production has dropped and U.S. steel producers are justifiably unhappy with the circumstances.

Now U.S. policymakers seem determined to follow a protectionist path because, truth to be said, it’s unfair that a company has to go out of business because of the stupidity of Chinese policymakers. These protectionism measures might or might not help the U.S. steel industry in the long-term, however, this raises another question: will this really help the broader U.S. economy?

Steel Exports, Tariff Economics

The cost of import restrictions directly equals the harm they do to manufacturers of value-added products that use steel as an input. According to Department of Commerce statistics, downstream steel manufacturers that utilize steel generate much more jobs and wealth to the U.S economy than what metal manufacturers generate.

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This subject is very controversial and, perhaps, there is not a right answer to the issue as someone is always going to get hurt. What’s true is that China is losing money in the form of subsidies to save its steel industry and keep its massive population employed, and by doing that China is actually transferring so much of its wealth into the U.S. by selling low-priced steel. Which, doesn’t sound as bad as U.S. steel producers make it sound

stainless-nickel-L1Nickel, along with copper, rallied over the past week due in part to relatively mild demand from the consumer industries.

According to a report from the Business Standard, traders are accounting for scattered demand from these industries leading to the rise in both nickel and copper prices.

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!

In a recent report from our own Raul de Frutos, all industrial metals have enjoyed a rally-intensive 2016 with the exception of one month: January. That was when the same metals hit new lows. So what is to account for this rebound? Is it worth noting or simply a mirage?

“Some metals — such as steel, zinc and tin — have gained significantly while others such as aluminum, copper, nickel and lead haven’t made much progress yet,” de Frutos wrote. “The price rally is not really being driven by supply cuts but by a combination of a weak dollar and the sugar rush of China’s stimulus, initiated late last year. We could be witnessing the end of this five-year-long commodity bear market, however, there is something rotten about this rally.”

Raul added that China’s stock market is the most accurate barometer for its economy and, ever since 2011, its stock market along with its commodity prices, have fallen. So what could appease our worry about this particular metals rally?

De Frutos concluded: “A good start would be China’s stock market rising above April’s levels. Otherwise, metal bulls can only hope for a choppy market.”

You can find a more in-depth nickel 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.

 

Anyone looking at the seaborne Asian Iron ore market? A cursory glance at China’s iron ore market and one has to ask, “what’s going on?”

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Iron ore prices have been on a roller coaster this year, yet reports abound of excess iron ore supply, excess steel production, excess steel capacity and falling property prices and, by extension, excess appetite for construction steel.

There is still mine oversupply. Source: Adobe Stock/nikitos77.

There is still mine oversupply. Source: Adobe Stock/nikitos77.

This week, reports of rising port stocks, up 1.6% to 100.45 million metric tons or five weeks of supply should have depressed prices, but the prevailing mood among traders seems to be one of cautious optimism that iron ore consumption and, hence, steel production will continue strongly this year, so much so that iron ore prices actually rose 2.7% to $54.98 per mt late last week. Read more

Jennifer Diggins is the director of Government Affairs at Charlotte, N.C.-based Nucor Corp., the largest steelmaker in the U.S. and North America’s largest recycler of any material (Nucor recycled 16.9 million tons of scrap steel in 2015 at its 23 electric arc furnace mills). Diggins serves as the firm’s liaison to Washington, D.C. MetalMiner’s editorial staff recently had a chance to sit down with Jennifer for a MetalMiner Q&A to discuss recent issues in steel, including Chinese overproduction, the tariffs recently passed against some imports and the role of the international scrap market.

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MetalMiner: Recently, executives from the five leading steel companies in the U.S. told the Congressional Steel Caucus that unfair foreign trade practices have caused an increase in steel imports resulting in the loss of more than 13,000 jobs in the industry this year. How was that number arrived at? Could it be even worse than the 13,000 estimated?

jennifer_diggins_headshot_300_Nucor_052116Jennifer Diggins: There is the potential for the number to be much worse when you factor in job losses in industries that support steel.

People often fail to appreciate the broad impact the steel industry has on the rest of the economy. Every one job in the steel industry supports seven other jobs in the economy. These are jobs in businesses that supply steelmakers with raw materials, contractors who do maintenance work at steel mills, truck drivers who transport our products, just to name a few. When steel production decreases like it has, workers in these supporting industries also are impacted. Read more

The scrapping of rare earths export quotas late last year resulted in soaring exports from China which produced 84% of total world rare earths output of 124,000 metric tons, but prices have fallen to multiyear lows in 2016 in response to low demand and oversupply.

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Oxide shipments more than doubled in Q1 2016 at 11,956 mt. March was the second best month on record. That was despite expectations that exports were expected to drop off dramatically this year after December when cargoes hit a record high of nearly 5,000 mt as users built up inventories ahead of the Chinese new year.

Exports Up, Demand Down

Exports of dysprosium surged five-fold while neodymium shipments jumped more than 300%. The Chinese government plans to complete the consolidation of its rare earth industry under six large state-owned firms — Chinalco, Northern Rare Earth, Xiamen Tungsten, China Minmetals, Southern Rare Earth and Guangdong Rare Earth — by the end of June, deputy industry and information technology minister Xin Guobin said.

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Much of the expected consolidation in China was slowed in the first two quarters by the weak market and stimulus at home that has led miners and domestic producers of smartphones and cars to increase production despite demand not moving much at all. If rare earths are to make a comeback in the second half of the year, actual end user demand will have to increase independent of government stimulus.

All industrial metals have rallied this year after they hit new lows in January.

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Some metals — such as steel, zinc and tin — have gained significantly while others such as aluminum, copper, nickel and lead haven’t made much progress yet. The price rally is not really being driven by supply cuts but by a combination of a weak dollar and the sugar rush of China’s stimulus, initiated late last year. We could be witnessing the end of this five-year-long commodity bear market, however, there is something rotten about this rally.

Chinese Stock Market Has Yet to Find Traction

China stock market ETF weakening since April

China stock market ETF weakening since April. Source: @StockCharts.com.

China’s stock market is possibly the best benchmark for China’s economy or at least investors’ sentiment on China. The slowdown in the Chinese economy (weak demand while too much capacity) explains why industrial metals peaked in 2011.

Ever since, China’s stock market has fallen with commodity prices. Earlier this year we witnessed a rally in the Chinese stock market but the rally has been shy so far and it has, indeed, weakened since mid-April amid worries that Beijing might pull back on monetary stimulus while it steps up structural and financial reforms even as the economic recovery struggles to gain traction. The stock market weakness also comes after worse-than-expected economic data for April, suggesting that the financial stimulus package unleashed in China earlier this year could be losing its impact.

Base metals ETF (in brown) rising with China stock market ETF (in blue)

Base metals ETF (in brown) rising with China stock market ETF (in blue). Source: @StockCharts.com.

In the chart above we see how China’s stock market rose as China unleashed its stimulus program back in 2009 and how metal prices surged with it.

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While overcapacity is still a problem, we’ll likely need to see China’s stimulus measures make a significant impact and that should be reflected in its stock market. A good start would be China’s stock market rising above April’s levels. Otherwise, metal bulls can only hope for a choppy market.

Business news is full of doom and gloom for the metals sector, but for consumers it really couldn’t be better.

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Goldman Sachs is reported in a recent article as saying recent price gains this year may be seen as a swansong for the sector and prices are expected to fall back later this year as the underlying fundamentals reassert themselves over the recent speculative euphoria that has driven prices higher, particularly in China.

There is still mine oversupply. Source: Adobe Stock/nikitos77.

There is still mine oversupply. Source: Adobe Stock/nikitos77.

As we have come to expect with metals prices, so much has to do with China, whether it is demand in the case of iron ore, copper, nickel or supply as in the case of steel or aluminum, China dominates the landscape and calls the shots — whether its intends to or not. Read more