Articles in Category: Metal Prices

slider-annualoutlook-blue2016Sourcing steel in 2016? You’ll want to know when to buy as it can be just as, if not more important, than how much you buy and where you buy it from.

When you source can make all the difference in shaving dollars and cents from your bottom line. But what about the risk? Is there more upside risk or downside risk for steel heading in 2016?

Our own Lisa Reisman recently spoke with a well-known consultant/advisor in the domestic steel industry about this very topic. He maintained that there is likely more upside risk in steel, but her stance reflected that of an industrial metal buying perspective: “Yeah? So what!”

Whether the risk is upside or downside is irrelevant unless we also see evidence of a shift in the market, which is not the case. We are firmly in a bear market and as it stands, we only care about what will make us change our buying behavior.

That’s not just for steel, however. If you’re sourcing copper, tin, lead, zinc, nickel or aluminum then take a second to download our complimentary 2016 Annual Metals Buying Outlook.


Typically steel buyers look at short-term steel cycles — inventory cycles. These are what drive short-term pricing trends. Let’s face it. Most buyers think in terms of what their next purchase will be or, maybe at this time of year, the next year’s requirements.

Free Sample Report: Our Annual Metal Buying Outlook

However, from time-to-time, it’s worth sitting back and looking at the big picture; the long-term; over-the-horizon. It’s a useful thing to do. It provides some perspective.

The chart highlights global steel output since 1950. Very simply, we can look at 3 cycles.

  • 1950-73 – steady growth. Post-war investment in North American infrastructure; the development of the automobile; reconstruction in Europe and the emergence of Japan. All drove steel production and consumption higher.
  • 1973-98 – stagnation. The oil shock; light-weighting in cars, packaging, construction and increased efficiency. The end of investment in Europe and North America led to demand falling and only partially offset by the growth in emerging Asia.
  • 1998-2014 – the emergence of China. A country of 1.4bn people industrialised and moved from the country to the city; a development model specifically based on steel-intensive capital investment.

Global Crude Steel Production ( 000 metric tons)


Steel prices since 1950. Source: Steel-Insight.

….and now?

The first two cycles lasted 25 years; the last one has been 15 years.

Europe, North America and Japan (25% of global steel consumption) are mature consumers where steel consumption will perhaps grow 1% over the longer-term, and even that is under threat from aluminum in the automotive industry and lightweighting and efficiency elsewhere.

China (50%) has peaked. Construction is 70-80% of demand and that is a one-off use of steel. Once cities and roads are built, they don’t need to be renewed for a while. Steel consumption has peaked and could fall by 20% from here over the next decade.

Emerging economies (25%) were expanding, but in many cases, they were investing the super-profits of commodity gains from oil, metals and agriculture — from China. Without that bulwark, capital expenditure may plummet.

Free Download: The November MMI Report

That means we could be in for a long period of stagnation and decline — 15-20 years based on previous cycles. It will be marked by mill closures, job losses and low prices. Yet the last period of stagnation gave birth to the minimills and a whole new dynamic group of steelmakers. It is not all doom and gloom.

Steel-Insight is a steel industry price-forecasting publishing company, based in Toronto. James May, the firm’s managing director, has been a steel industry analyst for 15 years and advises some of the major global steel trading companies, steel producers and steel consumers on the outlook for steel pricing and industry trends. For more information, visit

Zinc_228It’s been a bearish year for zinc prices, but last month’s Glencore announcement that 500,000 metric tons of mining cuts saw a brief glimmer of price increases… only to drop back down to a new six-year low.

According to a report from Reuters, last week, the London Metal Exchange (LME) zinc price reached a new six-year low of $1,497.50 per metric ton last week, revealing that the short-lived price increase stemming from Glencore’s announcement had run its course.

“Zinc, like copper, has been coming under sustained bear attack from China, where Shanghai Futures Exchange (SHFE) volumes and open interest have been surging even as the price has been sliding,” Reuters reported.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

Bears coming for other industrial metals

It’s not just zinc, however, that’s feeling downward pressure on prices. According to a report this week from the Financial Times, nearly all industrial metals are hovering near their lowest levels in years, signaling miners across the globe to cut production.

In fact, a group of 10 Chinese zinc smelters announced they would reduce output in response to low prices. However, zinc, which is used to galvanize steel, dropped earlier this week to its lowest point in six years.

“The macro headwinds remain strong and, thus, the the impact of these latest cuts is likely to be fleeting, “Daniel Hynes, senior commodity strategist at ANZ, told the Financial Times.

How will base metals fare for the remainder of 2015 and into 2016? You can find a more in-depth zinc price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

The Midwest aluminum premium has risen as fears about costs set in after Alcoa’s announcement that it is shuttering much of its North American smelting capacity. Despite cuts in China, zinc is still massively oversupplied.

Midwest Premium Rises on Alcoa Shutdowns Announcement

The US Midwest aluminum premium has risen to its highest level in six months, traders told Reuters on Tuesday, but the current forward curve and Alcoa‘s plans to save a US smelter from curtailment were seen pressuring prices in the near-term.

Free Sample Report: Our Annual Metal Buying Outlook

The premium, paid on top of London Metal Exchange (LME) futures prices for physical delivery in the US, has risen to around 8.75 cents a lb., the traders said, citing the continued impact of Alcoa’s plans to shutter the bulk of its US smelting capacity, announced Nov. 2.

Chinese Cuts Fail to Balance Zinc Market

Output cuts announced by Chinese zinc smelters last week will do little to tighten next year’s global supply-demand balance in refined metal because already-known mining cutbacks would have forced smelters to reduce production anyway, Reuters reported.

Free Download: The November MMI Report

On top of that, hard-hit prices will fail to get much of a lasting boost in coming months due to a glut of world inventories, although there may be spikes of short-covering, analysts and investors said.

In honor of Throwback Tuesday, we are revisiting MetalMiner’s Top 50 posts with an eye toward illuminating what’s happening in metals today. #TBT This post, originally published Feb. 26, 2009, about the production of primary aluminum, is as relevant to the LME’s new aluminum contracts as it was to explaining aluminum’s price drop at the time.

Since the aluminum price on the LME dropped below $1500/ton, it has been repeatedly stated that some 60-70% of aluminum smelters are losing money.

What goes into producing aluminum? Source: Adobe Stock/Pavel Losevsky

What goes into producing aluminum? Source: Adobe Stock/Pavel Losevsky.

Electricity alone is generally accepted as representing about a third of the cost of aluminum ingot, although at what sales price that metric is judged is open to debate. We thought it would be interesting to explore what the true costs of production are for a ton of primary aluminum and thereby test to what extent the smelters’ claims that they are losing money are correct.

Free Download: Historical Metal Price Reports, Where Prices Have Been (And Where They’re Going)

As with the steel industry, many of the industry’s woes may have as much to do with low plant capacity utilization as they do with low sales prices.

How Much Does it Cost to Produce One Ton of Aluminum?

Although the newest smelters can be closer to 12,500 kWh per ton, let’s say most smelters are consuming electricity at 14,500-15,000 kWh/ton of ingot produced. With the LME at $1,300/metric ton, that means electricity should be costing a typical smelter $0.029/kWh.

Needless to say, smelters are rather coy about their power cost contracts so it’s hard to verify how prevalent this number is though many smelters are on variable power cost contracts with their electricity suppliers such that the power generators are paid a fixed percentage of the world ingot price. If we take that as one-third, then it’s not only smelters that are losing money – many power generators must be, too.

When US national average industrial and commercial electricity consumers are paying $0.0706/kWh and $0.1013/kWh, respectively, according to the Energy Information Administration, to be selling power to smelters at $0.029/kWh represents a huge subsidy. In reality, power costs to the smaller US smelters are probably higher than this and explains why many have been cut back or idled, but interestingly the same source gives specific power costs for the Pacific Northwest of only two-thirds the national average, suggesting that many NW smelters may indeed still be getting power at ingot-price-related levels.

Read more

Three-month Nickel on the London Metal Exchange fell on Monday to a new 12-year low, falling as low as $8,175 per metric ton. The metal is the biggest loser on the LME this year, losing around 45% of its value on the year-to-date.

3M LME Nickel hits 12-year low

Three-month London Metal Exchange nickel has now hit a 12-year low. Source:

This year, we heard many times that since more than 50% of producers were underwater, prices were due for a recovery. But once again, the market has proven that production costs don’t determine the price of a metal, it’s what people are willing to pay that determines it.

Why is Nickel Still Falling?

Nickel has fallen on a poor outlook for its struggling steel sector as well as a strong dollar and China’s slowing growth. These two have also driven the entire metals complex down this year.

Nickel is the first metal falling below its 2009 low. With this, we believe the chances of other metals suffering the same fate have increased. Some base metals like copper are still trading well above their recession’s lows. Aluminum however, could be next.

US construction continues to post robust numbers fueled, in part, by low materials prices. The London Metal Exchange’s new contracts haven’t drummed up support yet, but it’s still VERY early.

Nonresidential Construction Soars

Nonresidential construction in October soared 32% in October from the September level, according to a report by Dodge Data & Analytics, and the value of construction starts was up 13%.

Free Sample Report: Our Annual Metal Buying Outlook

Residential construction was up 9% for the month, helped in part by 11 multifamily projects, each worth $100 million or more.

New LME Products Not Drawing Interest Yet

The London Metal Exchange‘s new aluminum and steel contracts failed to attract much interest at their launch on Monday, highlighting the struggle they face to gain traction and liquidity.

Free Download: The November MMI Report

Aluminum producers are in a race to the bottom, desperately trying to reduce their production costs so they can maintain output and, by extension, continue to flood the market with metal that it doesn’t need.

Free Sample Report: Our Annual Metal Buying Outlook

As UC Rusal’s third quarter earnings plunged 11% and it announced plans to cut a further 200,000 metric tons of capacity, US smelters have been closing capacity like the metal is going out of style, as we reported earlier this month.

Pile of aluminum bricks waiting for transport. Source: iStock.

Pile of aluminum bricks waiting for transport. Source: iStock.

But, if you think business is bad for western smelters, out in Asia it is almost worse. Japan is the worlds largest seaborne aluminum market, importing metal rather than using high-priced domestic power to smelt the metal at home.

Japanese Premiums Plummet

As such, the Japanese physical delivery premium has long been a benchmark for the supply-demand balance of the physical market. As in Europe and North America, physical delivery premiums in Asia have collapsed this year, with Q4 premiums just being fixed at $90 per metric ton, according to Thomson Reuters‘ Andy Home, recently.

Read more

In part one of this series, we analyzed how metal prices have fallen in three selling waves. In this section, we will analyze the current sell-off (third wave) in metal prices that a rising dollar is producing.

Free Sample Report: Our Annual Metal Buying Outlook

Investors expect that the Federal Reserve will rise interest rates in December for the first time since 2006 while the European Central Bank plans to continue with more easing monetary policy. This, and the fact that growth prospects look brighter in US than they do overseas both add to the dollar’s attractiveness. Indeed, we suspect that the bullish move in the dollar over the past few weeks could be the beginning of a bigger move which could depress metal prices even more down the road.

Let’s take a snapshot of industrial metals to see the individual impact of a rising dollar since mid-October.


3M LME Aluminum

Three-month London Metal Exchange aluminum. Source: MetalMiner analysis of data.

Aluminum prices are trading below $1,500 per metric ton, the lowest level since 2009. Notice how prices fell sharply as the dollar surged in mid-October (red arrow). Read more

The London Metal Exchange (LME) today launched its first new contracts in more than five years. LME Aluminum Premiums, LME Steel Rebar and LME Steel Scrap, are the new contracts.

Free Sample Report: Our Annual Metal Buying Outlook

“Today’s announcement highlights the LME’s new approach to market engagement,” said Garry Jones, CEO of the LME. “This has been an extremely customer-focused product launch, and we have collaborated with participants throughout the metals value chain to ensure we have created contracts that people want to trade.”

The new scrap and rebar contracts will be traded on LMEselect, allowing industry participants to reduce their risk exposure by hedging more steps in the steel production process. The contracts are cash-settled against physical Turkish scrap and rebar price indexes.

The new ferrous contracts will be supported by market-making programs to optimize market depth and tightness of spreads.

Free Download: The November MMI Report

With the physically settled aluminum premiums contract, participants can now hedge the regional all-in price to ensure the metal they receive is readily available in a non-queued LME warehouse at a convenient location