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Articles on: Metal Prices

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Before we head into the weekend, let’s take a look back at the week that was.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

  • Holidays in India mean an uptick in gold buying — our Sohrab Darabshaw covered India’s holiday gold surge.
  • The fourth round of renegotiation talks focused on the North American Free Trade Agreement (NAFTA) concluded earlier this week. We covered the latest round of talks, which by all accounts have the three negotiating teams at an impasse.
  • As the fallout continues from Kobe Steel’s quality data falsification scandal, our Stuart Burns wrote about what exactly might have gone wrong at Japan’s third-largest steelmaker.
  • The World Steel Association’s Short Range Outlook came out this week, predicting solid, albeit moderated growth for the global steel market.
  • Precious and base metals have been behaving similarly, our Irene Martinez Canorea wrote this week.
  • The U.S. International Trade Commission launched a new Section 337 probe related to automation systems.
  • The value of the U.S. dollar has a significant impact on the fortunes of a number of metals, our Stuart Burns explained.
  • And how about palladium? Burns also touched on the rise of the platinum group metal and its leapfrogging of platinum (for the time being).
  • It’s third-quarter earnings report time. Alcoa and Nucor were among the latest companies to announce their earnings for the latest quarter.

Free Download: The October 2017 MMI Report

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This morning in metals news, Japanese carmakers tested the safety of Kobe Steel products, palladium outshines gold and the global nickel deficit widened in August.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Kobe Steel Materials Pass Safety Checks

Toyota, Honda and Mazda gave Kobe Steel, Japan’s embattled third-largest steelmaker, a touch of good news Thursday by saying its products are safe, despite the recent data falsification scandal.

According to a report in The New York Times, the products fell short of advertised standards, but met with regulators’ standards (as well as those of the carmakers).

Palladium Continues Charmed Run

The palladium price recently eclipsed that of platinum for the first time since 2001 — and the metal’s rise has people taking notice.

The upward trend for palladium has even caught the eye of the gold industry, according to the Financial Times.

Our Stuart Burns covered palladium’s rise in his post earlier this morning.

Nickel Market Showed 6,700-Ton Deficit in August

The nickel market deficit deficit rose to 6,700 tons in August, according to data released by the International Nickel Study Institute.

Free Download: The October 2017 MMI Report

Global production was 176,800 tons, with demand at 183,500 tons.

The price of several metals has traditionally been looked at paired with that of another metal. For example, gold and silver prices are looked at in isolation and relative to each other, in part because both metals make up a major part of the jewelry trade.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

So, too, are zinc and lead prices, where the correlation is not from market applications but from the fact lead and zinc are often co-mined from the same resource.

Like precious metals gold and silver, less prominent platinum and palladium can be both mined and used in very similar applications. The Platinum Group Metals, or PGMs, are often magmatic in origin and rare in economic concentrations. The majority of the world’s platinum and palladium comes from South Africa, Zimbabwe and Russia, where early low-cost surface mines have long since given way to deep, expensive and complex operations.

As the name suggests, platinum as long been the investor’s favorite PGM and enjoys the widest number of applications.

Recently, however, its quiet PGM peer palladium has caught investors’ interest.

Palladium has traded at a discount to platinum because of platinum’s greater cost of extraction and its wider scope of applications. But one application in which palladium does excel is catalytic converters for petrol engines. The diesel engine’s relative loss of favor over the last 12 to 18 months to the petrol engine has boosted demand for palladium, driving up the price to the point that it exceeded that of platinum this month for the first time in 16 years.

On Monday, palladium exceeded $1,000 per ounce on the London market compared to its platinum’s $950 per ounce.

The reasons are not hard to find.

The platinum market is in surplus, but that of palladium is estimated by Joni Teves, an analyst at UBS quoted in The Telegraph, as experiencing a shortfall in production, which could push the market into a deficit of 830,000 ounces this year, as miners have cut back production.

In fact, John Meyer, analyst at SP Angel, is quoted as saying, “Marginal mine shafts have been closing at a rate of knots. We could see production in both palladium and platinum continue to fall as a result of ongoing rising costs. I don’t think the current rally (in prices) is enough to reverse that.”

Meanwhile, market demand is shifting.

Platinum that is used more in diesel engines has seen falling demand. With car sales growth featuring more in petrol-engine-dominated American and Chinese markets, and less in diesel markets like Europe, the demand bias has been for palladium, rather than platinum.

But even within Europe there is gradual shift from diesel to petrol.

Sales of diesel cars in western Europe fell from 45.1% of the market to 42.7% this year, according to industry research group LMC, with a forecast it will continue to decline to 39% by 2022 as petrol gains favor and hybrid or electric vehicle sales grow.

Some, though, are voicing caution.

Much of the enthusiasm for palladium has been investor-led — it is a small and relatively illiquid market, meaning not a large volume of positon taking is required to dramatically boost prices. Given time — and it would take time — catalysts could be altered to accommodate more platinum to the detriment of palladium demand, if the palladium price stayed at a premium to platinum over time.

In the longer term, electric vehicles are expected to sound the death knell for both metals (at least, with respect to automotive demand). Counter to this is the upcoming move by predominantly petrol engine China to increase its emission standards to the much tighter China 6a standards by 2020. Johnson Matthey says many manufacturers could leapfrog even this standard and aim to future-proof themselves to the yet more stringent China 6b standard expected in the middle of the next decade.

The enhanced PGM loadings such a move would require will maintain palladium demand — certainly well into the next decade — and could be the basis of investors’ longer-term enthusiasm for the metal.

Free Download: The October 2017 MMI Report

Either way, for the time being palladium has come out of the shadows and is having its day in the spotlight. For how long, we will have to see.

There are a number of variables that drive commodity prices, and at any one time that mix of factors will vary depending on the global economy, specific country performance, and supply and demand fundamentals, to name but a few.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

But one variable that has had a consistent impact over time has been the strength of the U.S. dollar relative to other currencies.

A strong dollar is bearish for commodity prices, as the dollar-priced commodity costs more in other currencies when the dollar exchange rate is strong. Conversely, the reverse is often true — a weakening of the U.S. dollar will see a rise in commodity prices.

So while it is far from the only driver of price, keeping an eye on the exchange rate and holding a sense of trend direction for the currency can be a useful indicator of price direction.

As the Financial Times notes, the U.S. dollar has performed poorly so far this year, falling about 6% on a trade-weighted basis. Investors were wrong-footed, the Financial Times states, early in 2017 when they bet that U.S. tax reform would push the dollar beyond already lofty valuation levels and help the American economy continue to outperform the rest of the world.

In support of our argument, metal prices have performed well this year, as the dollar has weakened. Where the dollar goes from here could have a bearing on whether the market continues to rise or goes in reverse.

The Impact of Proposed Tax Reforms

The dollar has followed the fortunes of the market’s view on President Donald Trump’s proposed tax reforms.

From the time he won the election through to the end of last year — when tax reform was much in the news and markets first considered the benefits of tax cuts and repatriation of foreign-held profits — the dollar strengthened some 5%.

Since then, it has depreciated steadily, hitting a 33-month low last week, according to another Financial Times article.

Much of that decline has been due to the market’s perception that growth is slowing in the U.S., while at the same time the prospects of tax reforms have dwindled in the face of a divided Congress.

At the same time, growth and confidence have picked up in Europe. The Euro, the world’s second-most highly weighted currency, has done correspondingly better.

Growth in Asia has also remained more robust than observers may have expected 12 months ago. At the same time, the market’s expectation of a December Fed rate rise has fallen to less than 30% probability with next June the more likely date. Meanwhile, in Europe the talk is more about rolling back quantitative easing.

The dollar’s performance could be transformed if Congress could agree on tax reforms. Even if many economists disagree on the actual benefits of the income tax reforms, most agree the repatriation of foreign profits holiday would have a profound impact on the economy and the dollar.

Free Download: The October 2017 MMI Report

At present, agreement on anything seems a long way from probable.

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This afternoon in metals news, renegotiation efforts focused on the North American Free Trade Agreement (NAFTA) appear to be at a standstill, Chile’s state copper commission boosts its 2018 copper forecast and a European agency advises plane manufacturers to suspended their use of products from embattled Japanese steelmaker Kobe Steel.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

NAFTA Deadlock

The fourth round of renegotiation talks regarding the 23-year-old NAFTA concluded yesterday, but the U.S., Mexico and Canada appear to be no closer to a consensus.

According to Bloomberg, initial hopes for a quick resolution have fizzled, as talks will now be extended into 2018 (which was previously hoped to be avoided, given the scheduled elections in each country next year).

The next round of talks is scheduled for Nov. 17-21 in Mexico.

Cochilco Forecasts Copper at Nearly $3/Pound in 2018

Chile’s state copper commission, Cochilco, on Wednesday put out a forecast for 2018 including a prediction of the average global copper price hitting $2.95/pound.

The new forecast is up significantly from Cochilco’s mid-year estimate of $2.68/pound. Greater Chinese demand is cited as a supporter of the global price.

Kobe Steel Saga Continues

The fallout from the Kobe Steel data falsification scandal continues, as the European Aviation Safety Agency (EASA) advised plane manufacturers to suspend their use of products from the firm, the third-largest steelmaker in Japan, according to CNN Money.

According to the report, EASA advised those manufacturers to find alternative suppliers and conduct a “thorough review of their supply chain.”

Free Download: The October 2017 MMI Report

A number of global heavyweights use Kobe Steel products, including GM, Boeing, Ford and Toyota, according to the report.

Precious metals dynamics have looked similar to base metals during these last couple of months.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The four precious metals (gold, silver, palladium and platinum) rallied since July, and peaked in September. In September, precious metals saw a price pullback, as did the base metals.

Gold spot prices (see graph below) reflect this movement perfectly.

After the price retracement in September, gold spot prices increased again. The gold rally that started at the beginning of 2017 appears set to continue. More movements to the upside could occur for the rest of the year.

Source: MetalMiner analysis of FastMarkets

Silver prices, however, have traded sideways, showing less of a bullish sentiment than gold. However, silver has shown the same price movements (in different price ranges) from July to October (see chart below).

Does this set the foundation for a new long-term uptrend?

Source: MetalMiner analysis of FastMarkets

As Fouad Egbaria noted: “As of Oct. 1, palladium closed higher than platinum. The last time that happened? Sixteen years ago.” Palladium prices rallied, as did gold prices, while platinum prices traded sideways, similar to silver.

Palladium prices. Source: MetalMiner analysis of FastMarkets

Platinum prices. Source: MetalMiner analysis of FastMarkets

However, both palladium and platinum showed the same price pattern since July. Those price movements may point toward an ongoing bullish market.

As reported by Reuters, the commodities outlook for Q4 looks bullish. MetalMiner also remains bullish on both commodities and base metals, and expects more movements to the upside while the U.S. dollar remains weak.

Free Download: The October 2017 MMI Report

A complete analysis of commodities and base metals for 2018 is published in our free Annual Outlook report. 

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This morning in metals news, Kobe Steel’s share price continues to plummet in the wake of its data falsification scandal, London copper hits a three-year high and palladium is having a strong 2017.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Kobe Steel Shares Hit Lowest Price Since 2012

Kobe Steel, Japan’s third-largest steelmaker, continues to see its share price drop on the heels of its data falsification scandal.

The fallout from the scandal has already seen Kobe lose approximately $1.8 billion in market value, Reuters reported.

On Friday, Hiroya Kawasaki, Kobe’s chief executive, said about 500 companies received falsely certified products from Kobe, which was more than double a previously released number, according to the Reuters report.

LME Copper on the Rise

London copper is on the way up again, this time rising to hit a three-year high, Reuters reported.

The metal eclipsed the $7,000 mark, powered in part by good news on the Chinese economy, according to the report.

Palladium Powered by Automotive Demand

Recently, the palladium price recently eclipsed that of platinum for the first time in 16 years.

It’s been that kind of year for palladium.

Free Download: The October 2017 MMI Report

According to a CNNMoney report, 78% of palladium demand this year came from the automotive market.

If you were in India right now, someone is bound to tell you that it’s that time of the year.

He or she would be referring to the almost-three months of festivals and wedding season, which India sees starting from sometime late August and continues until early September. More specifically, just under a week remains before that “mother of all Indian festivals” — Diwali, the fest of lights.

All this also means an uptick in shopping, but, more specifically, gold shopping.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Indians love their gold, and any excuse is enough to buy some more of the yellow metal. But Dusshera (a major Hindu festival preceding Diwali) and Diwali are special occasions, reserved for buying as much gold as possible. All of this makes India the second-largest gold-consuming market in the world.

This year, there was a slight damper on Indians’ demand for gold.

As part of the new tax reforms, the government included jewelers in the Prevention of Money-Laundering Act (PMLA) in August. This meant a compliance requirement on part of the buyer for any purchase above US $760 (Rs 50,000), including providing their income tax identity.

Incidentally, gold and real estate are the two investment opportunities that were often misused by hoarders of cash or those dealing in the black economy.

For some time, then, there were no “high value” deals as jewelers across the country, their associations and potential customers protested.

So, while September import figures of gold (in the month of Dusshera) were robust, they could have been even higher if the PMLA was not in effect, some associations claimed.

According to a report put out by news agency Reuters, India imported 48 metric tons, equivalent to $2 billion at today’s prices, in September. But since Dusshera fell in September instead of October this year (it follows the lunar calendar), the import figures compared to September 2016 were up, though on a month-on-month basis, it was lower, because of the uptake being down due to the PMLA.

But a decision by the government a few days back has brought back the cheer in the lives of gold consumers in India.

The PMLA has been put on hold for now, which means people can go ahead and buy gold without providing any of the previously required documents. Jewelers are hopeful the gold-buying spree, normally seen during these festive months, will at least revive in October, especially around Diwali. Imports are expected to go up to about 70 metric tons per month.

Just to give readers an idea of Indians’ love of gold, Indian households have the largest private gold holdings in the world, standing at an estimated 24,000 metric tons. That figure reportedly surpasses the combined official gold reserves of the United States, Germany, Italy, France, China and Russia.

This year, even the Indian government wants to take advantage of the festive gold bonanza.

Showing impeccable timing, it has announced the launch of new sovereign gold bond schemes. Never before has such a scheme been announced around festival time.

Free Download: The October 2017 MMI Report

The bonds issue opened Oct. 9 and remain so until Dec. 27, covering the festivals of Diwali and Christmas.

The government has also made important changes to attract high-value investors, raising the annual investment limit per person from 500 grams to 4 kilograms. For trusts and similar entities, the limit was raised to 20 kilograms. This higher limit will make the scheme attractive for high-net-worth individuals who had not participated in earlier schemes, as they found the 500-gram limit to be too low.

Before we head into the weekend, let’s take a look back at the week that was. 

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

  • In case you missed it, our October MMI report is out. Make sure to check out the free PDF download for the rundown on the last month for our 10 MMI sub-indexes: Automotive, Construction, Aluminum, Copper, Renewables, Rare Earths, Raw Steels, Stainless Steels, GOES and Global Precious.
  • Also, our Annual Outlook is out, too. Check it out for a comprehensive look ahead to 2018.
  • Coal India Ltd. is looking to diversify beyond coal, Sohrab Darabshaw wrote earlier this week.
  • Aluminum officials are in “wait-and-see mode” when it comes to the ongoing Section 232 probe vis-a-vis aluminum imports. The investigations into the national security impact of aluminum and steel imports were launched in April and have a January statutory deadline; at that point, Secretary of Commerce Wilbur Ross must present President Donald Trump with a report and recommendations.
  • Glencore bet big on zinc — and won, our Stuart Burns writes.
  • Although oil prices are well below 2014 numbers, supply cuts in some cases have seen the price start to climb. Are more cuts on the way, further constraining global supply and driving up prices? Burns wrote about the subject and what OPEC Secretary General Mohammad Barkindo called a “rebalancing process.”
  • In big news, Kobe Steel is in hot water for a data falsification scandal, one which threatens the firm’s credibility among consumers and manufacturers. The scandal has already had major financial ramifications, as the company’s share price has been in free fall since the news hit.

Free Sample Report: Our Annual Metal Buying Outlook

Life is full of ups and downs.

So, too, is the world of metals.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Last month, all 10 of our MMIs saw upward movement. This month? Not so much.

Eight of 10 MMIs tracked back this month, albeit several of them fell by small amounts. The GOES MMI, meanwhile, picked up a point, while the Aluminum MMI posted no movement.

If you’ll remember, copper and aluminum had big months in August, as we detailed in last month’s MMI report. After a cooling period last month, though, so far in October copper has tracked back upward — so maybe it was just a September slump for the good Dr. Copper.

“However, market watchers can see a new rally taking place within the base metals industry,” wrote our Irene Martinez Canorea in her Copper MMI report. “Copper prices — along with lead and tin — increased sharply on heavy trading volumes. Buying organizations can expect upward movements within the bullish market.”

Meanwhile, as for aluminum, the flat month is actually an encouraging sign for the metal’s strength.

“Aluminum traded sideways in September,” Martinez Canorea wrote. “This trading pattern suggests resilience, as aluminum prices digest price gains and become strong again to continue the uptrend. Trading volumes continue to support the current rally, driving aluminum prices to a five-year-high in September.”

The aforementioned represents a small snippet of the analysis available in this month’s report.

You can read about all of the aforementioned — and much more — by downloading the October MMI report below.