Articles in Category: Metal Prices

U.S. construction spending increased in March to its highest level in more than eight years and our Construction MMI shot up 10% along with it. Gains in home building and nonresidential construction offset a drop in government projects.

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Construction spending rose 0.3% in March after a 1% gain in February, the Commerce Department said Monday. The back-to-back increases raised total spending to a seasonally adjusted annual rate of $1.14 trillion, the highest level since October 2007.

Construction_Chart_May_2016_FNL

Residential construction grew at a 14.8% annual pace in the first three months of the year. It was one of the few sources of strength in a quarter in which the economy grew at an annual rate of just 0.5% — the slowest pace in two years.

Aluminum, steel scrap and copper all saw gains on the index, moves that are in line with the broad metals mix used in nonresidential and residential construction here in the U.S. In China, numbers are similarly positive.

Chinese housing data for March showed another increase in home sales, putting a dent in China’s housing oversupply and helping the construction reset there. As lower rates and yields work with a lag, sales growth could stay strong in China this year. A reduction in the requirement for a down payment by the central government is also underpinning increasing sales.

While China’s manufacturing purchasing managers index from Caixin Media and Markit Economics fell to 49.4, missing economists’ estimates for 49.8 and down from 49.7 in March, the construction numbers in the People’s Republic remain strong and could, theoretically, pick up the slack this year if manufacturing there remains depressed.

A total of 83.19 million metric tons of iron ore was discharged at Chinese ports during April, according to ship-tracking data compiled by Thomson Reuters Commodity Research and Forecasts.

This was up from the 81.76 mmt offloaded in March, suggesting that China’s iron ore import volumes will show an increase when preliminary customs data is released in the next few days.

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China is back to producing steel at a high rate. Even zombie mills have come back from the dead. While this might not be good for the oversupply situation, it is a good thing for construction estimators and procurement professionals looking for as many options as possible to fulfill orders and reduce prices via competition.

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MonthlyMetalBuyingOutlook_May2016_210This month, What appeared to be a rally led by anti-dumping actions involving several different steel products turned into something bigger as China implemented stimulus measures, boosting demand growth not only for steel, but also for the rest of the base metal complex.

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Our Monthly Metal Buying Outlook allows you to receive short- and long-term buying strategies with specific price thresholds. If you would like to trial our metal price forecast, click below to get two free months of reports.

U.S. shredded scrap prices started 2015 at $350 per long ton delivered to Midwest steel mills.

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Barring a very brief rally in June, the price fell every month over the year and dropped to $170/long ton in December. Indeed, if we look at the chart, U.S. ferrous scrap prices have been in a downtrend since late 2013.

U.S. Shredded Scrap Prices ($/long ton delivered US Midwest Mill)

steel_insight_scrap_300_050116

Source: Steel-Insight.

When prices fall every month, scrap yards and steel mills reduce their purchases to the bare minimum as they expect to be able to procure material at a lower price the very next month. Read more

How do interest rates impact the value of a currency? Let’s review:

Higher rates mean higher borrowing costs, which usually make a currency more attractive to investors seeking higher yields than in other currencies. That’s exactly what happened to the U.S. dollar during 2014-2015 when we saw a dollar bull market built on expectations that the Federal Reserve would raise rates domestically while central banks around the globe would keep on lowering interest rates.

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However, the Fed is not hiking rates as fast as markets had expected. On top of that, there are many questions regarding the ability of banks in Europe and Japan to lower interest rates more from here. This caused the U.S. dollar to weaken this year, having a bullish effect on commodity markets and therefore, metal prices.

Japan Holds on Rates

Japanese Yen appreciates against the dollar

The Japanese yen appreciates against the U.S. dollar. Source: Yahoo! Finance.

The Bank of Japan kept interest rates unchanged last Thursday despite coming under pressure to take further action. The yen surged more than 3% against the U.S. dollar after the announcement, its biggest one-day gain since May 2010. Read more

stainless-nickel-L1The Shanghai Futures Exchange (ShFE) is experiencing increased trading of nickel, which is creating a pull on physical units and causing a domino effect on the global refined metal supply chain.

According to a recent column from Andy Home of Reuters, nickel volumes and interest have increased significantly since the metal’s contract launched on the ShFE last March. In fact, volumes have already surpassed those on the London Metal Exchange (LME) which has ruled the wholesale nickel trading market in recent years.

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!

“The take-away is that although Shanghai nickel may be prone to the same day-trading investment crowd flooding other local markets, its success is founded on bigger, more institutional players who are prepared to hold positions for longer,” Home wrote for Reuters.

It’s also important to note that nickel trading on the ShFE rose so quickly that it created issues in the form of a squeeze on shorts for the July contract last year. This led to the delivery of three brands of Russian nickel in order to satisfy short position holders wanting to settle their positions with physical metal. With this development, both flows and stocks of refined nickel around the world were altered.

Non-Ferrous Metal Update

Nickel, itself a non-ferrous metal, along with iron ore and steel are seeing their prices drop following a decision by the Chinese government to increase trading margins and fees futures exchanges in Dalian, Shanghai and Zhengzhou. In response, the most-traded contracts were down up to 4.6%, according to our own Stuart Burns.

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.

 

Anti-dumping stories are our bread and butter here at MetalMiner. Nary a week goes by when we don’t cover either anti-dumping or countervailing duties cases brought by domestic metals producers against cheap imports that are getting a helping hand from foreign governments or purposely devalued foreign currencies.

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Yet, this week, a major union representing aluminum workers and a major steelmaker took things a bit further. The aluminum industry was first up, when the United Steelworkers union recently filed a petition with the U.S. International Trade Commission for the U.S. to invoke a global safeguard under Section 201 of U.S. trade law and impose tariffs of up to 50% on primary unwrought aluminum.

Imports of Chinese semi-finished aluminum

Imports of Chinese semi-finished aluminum products. Source: The Aluminum Association.

Section 201 is nothing to mess around with. Section 201 requires that the injury or threatened injury to a domestic industry be “serious” and that the increased imports must be a “substantial cause” of that serious injury. Serious business, people. Read more

Screen Shot 2016-04-06 at 9.37.41 AMOur most popular complimentary research download, the Annual Metals Outlook has recently been updated for Q2. This is an essential tool for your direct material sourcing toolkit as it informs your long-term strategic approach to metals buying. Have you locked in your steel prices yet? They’ve been on the rise since Q1 and we’ve called it every step of the way in our monthly reports. We’ve also been on top of steel price movements since the original 2016 annual outlook was released last October. Now is your chance to claim your copy of our Q2 update as you continue to make forward-thinking industrial buying decisions.

The Financial Times wrote this week that a key driver of bullish sentiment for many asset classes, particularly emerging markets and commodities, has been the U.S. Federal Reserve lowering its estimate of policy tightening this year, but for metals the knock-on effect of that has been a weaker U.S. dollar which — as my colleague Raul De Frutos has written recently — remains a key driver of both price direction and sentiment.

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Equally, if not more important, though, has been the sugar rush of China’s not-so-mini fiscal stimulus, initiated late last year which has really picked up momentum in the first quarter. Across a number of metrics, China’s economy has surged this year driving a risk on sentiment among investors, the strength of which has caught many by surprise.

Stimulus-Driven Bull Market

Chinese speculative investors have piled into the country’s commodity markets betting the upturn has the potential to boost demand for those materials. Wider sentiment has helped, according to the London Telegraph, new home sales jumped 64% in March from a year earlier. Housing prices have risen 28% in Beijing, 30% in Shanghai, and 6% in the commercial hub of Shenzhen. Read more

Allegheny Technologies, Inc., hosted its first quarter earnings call yesterday morning and reported higher earnings for many of the specialty metal markets it serves, while admitting it has not yet “right-sized” its flat-rolled products business. ATI booked a net loss of $101 million ($0.94 cents per share), a loss that was less than most analysts anticipated.

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Revenue for the first quarter fell 33% year-over.year to $758 million.

ATI's Brackenridge facility is the future and commodity stainless is its past. Source: ATI

ATI executives noted during yesterday’s conference call and webcast the company’s Brackenridge production facility is only open three days, with three shifts each day. ATI would like to increase production there. Source: ATI

“Our High Performance Materials and Components segment is well positioned for profitable growth over the next five years, driven primarily by strong and growing demand from commercial aerospace,” ATI CEO Richard Harshman said. “We are committed to making the tough decisions to return our flat-rolled products segment to sustained profitability. This requires the business to be repositioned and restructured and to be more focused on differentiated products that have higher technical barriers to entry and serve markets that are global with attractive long-term growth prospects.”

Aerospace Products

Harshman and ATI’s executive team reported that the commercial aerospace market, which ATI has pursued as a growth market for the last two years, was starting to show dividends.

“ATI sales to the aerospace and defense markets grew 12% in the first quarter of 2016, compared to the fourth quarter 2015,” Harshman said. “Breaking that growth rate down by specific end markets, sales to the commercial aerospace market grew approximately 20%, with jet engine sales growth of nearly 15% and airframe sales growth of nearly 30%.”

Quarterly Numbers

The overall sales total of $758 million was up 3% over the fourth quarter of 2015, even though it was down year-over-year. High-performance materials and components sales were $493 million, up 8% over Q4 2015. Flat-rolled product sales, though, totaled $265 million, down 6% over Q4 2015. Harshman and the other ATI executives blamed the long work stoppage that ATI weathered for more than 8 months and said that production would increase with United Steelworkers personnel back on the job. ATI attributed $26 million of pre-tax costs to the work stoppage and labor contract return-to-work provisions.

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ATI also booked a $9 million for severance packages from recent flat-rolled products layoffs.

The recent steel rally seen in China is triggering some warning signs. Fitch Ratings recently announced prices for the metal increased, in part, due to rising speculation about an inevitable slump.

According to a report from Bloomberg, the sharp increase in steel prices isn’t sustainable as mills are expected to fall back on idled capacity, thus increasing supply. The steel price rally has been driven, in part, due to a seasonal recovery that was further supported by increased speculation in the futures market.

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!

“The rapid increase in Chinese steel prices so far this year is not sustainable, as it is largely due to a seasonal pick-up in construction and elevated speculation in the steel futures market,” the Fitch report said. “With prices now surging, many of the suspended plants have resumed production.”

Steel prices have risen dramatically in 2016 with rebar up 48% after Chinese policy makers touted growth and added stimulus, boosting property prices, according to Bloomberg. These gains have helped mills’ profitability bounce back.

Metals Round-Up

Meanwhile, aluminum prices have joined the broader metals rally, hitting a nine-month high this week. Our own Raul de Frutos wrote: “The data shows us that many signals suggest that this rally in commodity markets could continue. Aluminum prices are starting to pick up and so are other industrial metals. Watch oil prices, the U.S. dollar, commodities markets and the price performance of other industrial metals. Don’t get caught as prices find momentum. In this period it is extremely important to understand the big picture and have a defined purchasing strategy.

You can find a more in-depth steel 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.