Articles in Category: Metal Prices

Last week I watched “The Big Short.”

Free Download: The February 2016 MMI Report

The movie portrays, really well, how unregulated capitalism set itself on fire less than a decade ago during the meltdown of the housing market. As I was watching it, my mind would link each of the events that preceded and followed the housing crash to the commodities crash we are living through today and, if history repeats itself, I could even picture what comes ahead.

The Bubble Shapes

All bubbles share similar characteristics. It all starts with strong demand for some object, whether it’s stocks, homes, commodities or tulips. In a very simplified way, the housing bubble started as banks gave loans to any individual, regardless of their income. As anyone could get a loan to pay for their home, housing prices started to pick up as demand increased. But higher prices weren’t a reflection of growth, they were just caused by easy money given out by banks.

In commodities, a bubble formed on hopes that China’s rapid growth would feed an ever-expanding appetite for raw materials. Moreover, in 2008 China launched a huge $586 billion economic stimulus plan, leading to higher demand for commodities and, therefore, rising prices. But prices weren’t reflecting real growth, either. They were inflated as fake demand was created on the construction of excessively extravagant government buildings and uninhabited “ghost cities” in China.

The Bubble Gets Bigger

During the housing bubble, everyone was making money. Banks were making interest money from  their loans. House owners saw the value of their assets rise and everyone was pouring money into the housing market. Everything was built on hopes that housing couldn’t crash.

Similarly, everyone was making money as commodity prices rose. Huge infrastructure was built around the world to produce those commodities. Banks were making money on interest as producers took debt to build this new capacity. China was achieving its fake percentage growth rate and billions of dollars of capital investment were poured into commodities markets as an effective way to bet on China’s economic development. Everything was built on hopes that China would continue growing at that pace forever.

Prices Start Falling

Home prices (in balck) peaked in 2006 while stock markets (in blue) sold-off two years later

Home prices (in black) peaked in 2006 while stock markets (in blue) sold-off two years later. Source: MetalMiner analysis of data.

House prices peaked in April 2006. Over the next couple of years, people believed that the decline in home prices was only a setback. That housing in the US was strong and prices could only continue to go higher. It wasn’t until 2008 until the market really acknowledged that both the home industry and banks were in big trouble. Read more


The trends from our February Metal Price Index were more flat than down in February and it still looks like a bearish market for most of the metals we track.

Free Sample Report: Our February Metal Buying Outlook

Only the Renewables and GOES sub-indexes had price increases for the February MetalMiner IndX reading.

Many producers are seeing their profits decline to the point where capacity shutdowns are necessary. Freeport McMoRan’s stock price fell 45% in the first two weeks of January, after it hit a 13-year low in December.

Alcoa, Inc. — already in the process of splitting itself into two companies and curtailing its smelting business — saw its shares reach a seven-year low this month.

Brazilian miner Votorantim Metals announced in January its intention to suspend two nickel operations. In Australia, Clive Palmer’s Queensland Nickel said it would lay off 240 workers near Townsville. These announcements are definitely a sign that mining companies are starting to struggle because of the low prices.

After shuttering its grain-oriented electrical steel operations, Allegheny Technologies, Inc., further signaled it would not supply commodity-grade stainless steel at all this year.

With all of these cutbacks one would think that supply, eventually, would have to be constrained but it’s difficult to measure just how much overcapacity is truly out there.

China’s propensity to dump — and the resultant export market saturation — has still not been curtailed in any significant way. China is producing too much steel, aluminum, copper, solar panels and other goods such as plate glass and chemicals for the domestic market, and usually exports the excess at cut-rate prices. This was reflected in our metal price indexes in this month.

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Base metals are bouncing off lows in February, helped by a weaker dollar. Although the long-term view for the dollar remains bullish, the currency is suffering some setbacks.

Free Sample Report: Our February Metal Buying Outlook

Last week, the US dollar index fell to its lowest level in three months.

Dollar index hits 3-month low

US dollar index hits a 3-month low. Source:

Last Wednesday, the dollar logged its largest one-day drop versus the euro since early December, on a lower than expected reading of U.S. service-sector activity.

The Institute of Supply Management non-manufacturing index fell to 53.5% from 55.8% in December, the slowest pace in almost two years. Some investors now fear a softer than expected US economy, potentially making the Federal Reserve put interest-rate increases on hold.

Higher rates make currencies more attractive for yield-seeking investors. The market had expected the Fed to raise rates for a second time in March and investors had probably priced in those hikes. The  indication that the Fed might hold off on increasing rates is having a depressing effect on the dollar.

Also in February, crude oil prices gained some ground. This helped commodity currencies, including the Russian ruble and Canadian dollar, to recoup some losses against the US dollar. Longer-term, the currency should hold its value well, especially while the rest of the world’s central banks keep up with their stimulus measures.

Last Week For The January 2016 MMI Report

But in the short term, a turbulent dollar is giving a boost to metal prices. Zinc, lead are tin were particularly strong as February started. So far, the moves seem like normal price reactions after previous declines. Whether the upward moves will continue or not will significantly depend on the fate of the dollar.

Roller Coaster Hill InclineIt was a volatile January for copper, in addition to other key metal, mineral and energy commodities, and isn’t set to change much despite the calendar turning over to a new month.

ANZ research is reporting that they are expecting further weaknesses in the oil and iron ore markets. “Both have ongoing supply side issues,” Daniel Hynes, senior commodities strategist, told ABC News.

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With copper (as well as nickel), significant declines have been the story, but a minor rebound in the copper price was a welcome sight after it hit six-year lows. “The import numbers we saw into China in December were particularly strong for copper and some other base metals, and there are some falling inventories on global exchanges,” Hynes added.

Our own Raul de Frutos wrote recently that despite better-than-expected copper imports in China to close out 2015, there is little to no reason to anticipate a turnaround with the copper markets. “While the slump in commodities continues and global markets slide, copper has little upside potential,” de Frutos stated.


You can find a more in-depth copper 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:


Copper prices continued to make new lows in January. Prices fell below $2 per lb. for the first time since May 2009. Our Copper MMI tracking prices globally fell 5% to 58 points.

Free Sample Report: Our February Metal Buying Outlook

Some investors see copper not only as a benchmark for base metal prices, but also as a benchmark for the state of the global economy. Right now, there is not much going in favor of copper. The global economy is having its worst moment since the global recession of 2009, at least from an investor’s perspective. Meanwhile, commodity markets continue to slide driven in part by a slump in oil prices.

The combination of lower copper and oil prices is specially hurting some copper producers that also have energy assets such as Freeport-McMoRan. The company is the world’s largest copper producer while oil and gas accounts for almost one-sixth of Freeport’s revenues. The company’s stock price fell 45% just in the first two weeks of January, after it hit a 13-year low in December.


Copper investors are closely watching Chinese economic data, as China is the world’s largest consumer of copper. The year started on a weak note after the China’s PMI came at 48.4 in January. The index has been in contraction territory (below 50) since March 2015.

The Copper Lining

On the other hand, copper bulls could find some bright spots in January’s data. China is not self-sufficient in its copper requirements, so it imports the metal in large quantities. December’s trade data showed that Chinese copper exports increased sharply, rising hopes among copper bulls that the country’s copper demand might not be as weak as the current price trend depicts.

Copper import data will be something to watch in the months ahead as it will provide insight on whether the spike seen in December imports was something sustainable or more of a one-time blip.

Better than expected copper imports in January could give some support to copper prices although if China’s copper imports start dipping that could spoil investors’ sentiment.

Free Download: The January 2016 MMI Report

Another factor that could have some positive impact on copper prices is the recent dollar weakness. The dollar and dollar denominated commodities are inversely correlated. The Fed not rising rates in March could potentially cause the dollar to weaken in the months ahead. On the other hand, rising rates could trigger more sell-offs in copper and the rest of base metal prices.

What This Means For Metal Buyers

Other than better-than-expected Chinese copper imports in December, there is little going on to expect a turnaround situation in copper markets. While the slump in commodities continues and global markets slide, copper has little upside potential.

Exact Copper Prices and Market Trends

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A small 3% price bump in the monthly GOES M3 index doesn’t tell us a whole lot, however, it suggests that prices may have found a floor back in the November/December 2015 time frame.

Free Sample Report: Our February Metal Buying Outlook
Part of finding that floor may have come from good, old-fashioned supply and demand. Consider that the comments from Allegheny Technologies, Inc., Chairman, President and CEO Rich Harshman recently indicated that he would be taking “rightsizing actions” to return ATI’s flat products group to profitability as quickly as possible.


Furthermore, speaking of two recent closures he said, “The future restart of the Midland and GOES operations respectively will depend on future business conditions and ATI’s ability to earn an acceptable return on invested capital on products produced at these operations.”

This type of action, particularly the shutdown of the ATI GOES line, helps to bring some additional balance to the market. The rest of the steel industry will need to follow suit to support HRC prices, but that’s another story.

Free Download: The January 2016 MMI Report

In addition, TEX Reports suggests that one of the big Chinese mills will suspend two of its commodity grain-oriented sheet lines. MetalMiner could not identify any corroborating source as of press time.

Meanwhile, the most recent import trade data shows a 19% decline in transformer part imports:

Source: Zepol

Source: Zepol

While wound cores held steady:

Source: Zepol.

Source: Zepol.

Actual GOES Prices and Trends

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A major customs enforcement bill could be voted on in the U.S. Senate this week and Goldman-Sachs is bearish on metals for 2016.

Customs Bill Senate Vote

American Iron and Steel Institute President and CEO Thomas J. Gibson said the U.S. Senate could vote this week on a long-delayed bill to strengthen customs and intellectual property enforcement, facilitate shipments at U.S. ports and implement a permanent ban on taxing Internet access.

Free Sample Report: Our February Metal Buying Outlook

This echoes a statement from the National Association of Manufacturers on Friday that said it expects the Senate to vote on the customs bill this week as well.

Goldman-Sachs is Bearish on Metals

Goldman Sachs on Monday said metals, particularly copper and aluminum, are set to underperform oil in the near future on subdued global demand growth and a sluggish Chinese economy.

Last Week For The January 2016 MMI Report

“Around mid-2016 and through 2017, we expect that the oil market will adjust, while metals markets are set to weaken further, particularly copper and aluminum, resulting in substantial downside to metals prices relative to oil over the period,” the bank said.

The Stainless MMI fell by one point to 51 in February. Although nickel prices didn’t decline sharply in January, prices made a new 12-year low.

Free Sample Report: Our New February Metal Buying Outlook

Nickel was the worst performer among industrial metals in 2015. Interestingly, now analysts see nickel as having the greatest recovery potential. On average, analysts expect nickel prices to rise 20% this year and by almost 40% next year.


The main reason why analysts expect such a recovery is because nickel has fallen harder than any of its peers, being the only metal trading below the price lows of the 2008 financial crisis. However, to us, the fact that a metal has fallen in price is not reason enough to expect higher prices any time soon.


Another factor making analysts turn bullish on nickel is that they believe nickel is likely to see immediate cutbacks. Brazilian miner Votorantim Metals announced in January its intentions to suspend two nickel operations, which would mark the first meaningful shutdown in the West.

Also, in Australia, Clive Palmer’s Queensland Nickel said it would lay off 240 workers near Townsville. These announcements are definitely a sign that mining companies are starting to struggle on low prices, but companies can struggle for a long time before shutdowns actually occur. The nickel market is facing the same issue as any other industrial metal: supply is doing anything it can before shutting down.

Believing that a wave of shutdowns is about to come among nickel producers seems like too much to expect from producers. Shuttering capacity remains challenging from both financial and social perspectives. In addition, non-China producers keep convincing themselves that Chinese nickel pig-iron producers will close first, partly because of the nickel ore constrains after Indonesia’s export ban and partly because of the perception that NPI makers are at the top of the global cost curve.

The issue with that prediction is that NPI producers have managed to cut costs and find a substitute to Indonesian ore — supply from the Philippines.

Compare Prices With the January 2016 MMI Report

We believe that shutdowns will probably come gradually since any individual closure will give hopes of survival to the rest of the market participants as they face less competition, encouraging those left over to keep running.

What This Means For Metal Buyers

Some people might see nickel as an attractive asset just because it looks “cheap” compared to historical levels. That could be true in the long term, but the timing could be way off. Right now, we don’t see any signs of a bottom. Nickel prices will likely turn around with the rest of the base metal complex, but that time hasn’t come yet. Stainless buyers should stay disciplined to their buying strategy.

Exact Stainless MMI and Nickel Prices, Trends

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Our Rare Earths MMI held steady at 17 this month. This is not news to anyone who has followed RE prices for any extended period of time as the trend line for this sub-index has remained markedly flat in this bearish market and even in better times for commodities.

Free Sample Report: Our February Metal Buying Outlook

REs enjoyed some movement in 2011 during the China-Japan RE price struggle, but the sub-index has remained flat from the time we started tracking the MMI in 2012. The magnets, phosphors and other high-tech elements just have not shown any real


Lately, RE producers are either up for sale out of bankruptcy court, as in the case of Molycorp, Inc., or struggling under heavy debt loads as they are undercut by Chinese producers who don’t have any of the set-up costs of western miners.

However, if a recent study is to be believed, that could all change dramatically. A new study, Popular Science reports, shows it might be possible to extract RE elements from coal in the U.S. by rinsing discarded coal in a chemical solution.

“Essentially, REEs are sticking to the surface of molecules found in coal, and we use a special solution to pluck them out,” says Sarma Pisupati, an author of the study. “We experimented with many solvents to find one that is both inexpensive and environmentally friendly.”

Chinese Mining Crackdown

China is also stepping up efforts to restrict illegal mining and exporting of rare earths by setting up a system to certify the origin of supplies from the country. Beijing is also poised to impose a bunch of new environmental regulations including green export certificates and new taxes that are based on the value of the minerals, rather than on volume as is the case at present.

Compare Prices With The January 2016 MMI Report

New processes and better policing of exports could help this index see some price recovery later this years. Figures from the China Rare Earth Industry recently showed that about 90% of China’s RE producers are currently operating at a loss.

Actual Rare Earths Prices

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Screen Shot 2016-01-29 at 10.12.15 AMAre you making day-to-day metals purchases and spot buys? Or do you need a longer-term perspective for budgeting and planning, improved negotiation of contracts with customers and more effective SLAs and contracts with suppliers? We have the complimentary report that will do all that, plus help you manage your hedging strategy.

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