The International Lead and Zinc Study Group released its initial 2017 report, which found the global market for refined zinc metal was in deficit over the first 11 months of last year with total reported inventories declining over the same time frame.
The ILZSG revealed a significant increase in Chinese output while the world’s zinc mine production fell overall by 1.2%.
“Global refined zinc metal production over the first eleven months of 2016 was at the same level as the corresponding period of 2015 with increases in China and the Republic of Korea offset by reductions in Australia, India, Japan, Mexico and the United States,” the ILZSG report stated.
The rise in worldwide demand for refined zinc metal, to the tune of 3.5%, was mostly due to an 8.8% increase in Chinese apparent usage with European demand at the same level in 2015 and US demand falling 12.7%.
Also of note: Chinese imports of zinc contained in zinc concentrates represented a 42.3% decrease compared to the same time frame in 2015 with the Far East nation’s net imports of refined zinc metal growing 7.9%.
Zinc Benefits from Investor Interest
Our own Stuart Burns wrote last week that aluminum has benefited from renewed investor interest, particularly over the course of 2016, but that it hasn’t experienced the same jolt as zinc and copper have seen.
“Although net long positions have been trimmed back following some recent significant deliveries into LME warehouses, the consensus remains positive regarding prices for 2017,” Burns wrote.
How will zinc and base metals fare in 2017? 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:
The International Lead and Zinc Study Group released its initial report for 2017, which found world refined lead metal supply exceeded demand during the first 11 months of last year with total reported stock levels increasing during that same time frame.
The ILZSG report identified reduced output in China, India, Australia and the U.S. as contributing to the overall reduction in global lead mine production, to the tune of 7.5%, over the first 11 months of last year when compared to the same time frame in 2015.
The ILZSG states: “World production of refined lead metal decreased by 1.2%. This was primarily due to a fall in Chinese production which more than balanced increases in Australia, Kazakhstan and the Republic of Korea (South Korea).”
Furthermore, the 9.1% reduction in Chinese demand was offset, in part, by a 9.5% rise in European usage.
“Chinese imports of lead contained in lead concentrates totaled 697,000 metric tons, a decline of 24.6% compared to the first eleven months of 2015,” concluded the ILZSG’s January report on lead.
Lead Buyers Saw Ample Opportunity to End 2016
Just last month, our own Raul de Frutos wrote about metal buyers finding good opportunities to time their purchases with prices pulling back following a bullish run. For lead in particular, de Frutos wrote:
“Zinc’s cousin, lead, is also retracing near an area where we should see investors coming in to support prices. If this year’s bull market is set to continue, which for now we continue to expect it to do so, lead buyers will find a good opportunity to time their purchases if prices rebound at these levels.”
How will lead and base metals fare in 2017? 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:
Last week, tin prices on the London Mercantile Exchange increased but the real story has been overall commodity pressure to begin 2017.
According to a recent report from the Economic Calendar, tin has ebbed and flowed in a narrow range to begin the year with last week’s upward move attributed to “a slight pullback in the value of the U.S. dollar.”
Donald Levit wrote: “Tin experienced a positive performance in 2016 amid solid demand from China with idled domestic tin capacity resulting in the need for higher imports. However, concerns are that China will start to ramp up its idled capacity, and that will change the market.”
China’s manufacturing PMI registered higher than expected recently, adding to tin’s momentum. In November, China imported more tin ore and concentrates with refined tin imports falling off substantially, the news source stated.
How will tin and base metals fare in 2017? 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:
Set of copper pipes of different diameter lying in one heap
Copper prices increased last week on the heels of Chinese data indicating inflation growth, reassuring strong demand from the world’s largest consumer of the metal.
According to a report from MarketWatch, copper for March delivery grew 2.9% on the Comex division of the New York Mercantile Exchange last Tuesday, which was the largest one-day increase in nearly two months.
“The 2017 growth rate was supported (by) much faster than expected project ramp ups in Peru in particular, and much lower than statistically normal rates of production losses through the year,” Citi wrote, according to the news source. “We believe both of these factors will be difficult to replicate in 2017.”
Overall, a weaker dollar was supporting metals and, in the short-term, a reduction in copper stocks in LME warehouses indicates a tighter market, which could further boost prices.
Copper Bounces Back from December
Our own Raul de Frutos wrote recently that copper prices declined some in December, along with other industrial metals, but the bull narrative is still in effect:
“The recent price decline in copper prices wasn’t that dramatic. So far, it seems like the bulls are still in control. A strong dollar and a possible slowdown in Chinese demand are factors that could bring prices down. Up until now, China’s demand looks strong and the dollar hasn’t had a big impact on metal prices. Therefore, we need actual reasons to turn bearish on copper,” he wrote.
How will copper and base metals fare in 2017? 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:
To begin 2017, aluminum prices inched higher with the U.S. dollar retreating and traders awaiting clarity on the market.
According to a recent report from the Economic Calendar, downward pressure on aluminum has been the story since December, but over the course of 2016 the metal saw a 13% increase. The reason? falling supply with the closure of capacity while demand grew as the result of China’s infrastructure initiatives.
Donald Levit, writing for the Economic Calendar, said: “Even though it is typical for aluminum prices to retreat in late fall and winter, prices held steady through mid-December after Donald Trump won the U.S. presidential election in November. Trump made a campaign promise to move to further stimulate the U.S. economy, and that stimulus could potentially include infrastructure spending. That would boost aluminum demand.”
What does 2017 have in store for aluminum prices? Volatility could be the word with traders attempting to assess how the market will evolve as the year progresses.
The Auto Industry and Aluminum
Our own Raul de Frutos echoed the sentiments of aluminum’s struggles in December after a 2016 of growth. But what does the auto industry have to do with it? Raul writes:
“The auto industry is a key driver of aluminum demand. Auto sales in US and China (the world’s biggest car market) finished the year on a strong note. Total vehicle sales in the U.S. hit an 11-year high in December, aided by a fourth-quarter surge in demand that exceeded expectations. In China, car sales hit an all-time record in November, up 17.1% year-on-year.”
How will aluminum and base metals fare in 2017? 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:
Steel rebar prices in China dropped more than 2% to end 2016, reversing previous gains made earlier in the final week of the year.
According to a report from Reuters, coke and coking coal also remainder under pressure due in part to concerns about slowing demand from volatile trading that typically takes place at the end of the year.
“The pullback shows traders are not confident about the steel market and future demand during the winter,” Wang Yilin, steel analyst at Sinosteel Futures, told Reuters.
For the week leading up to the New Year, steel prices have been seesawing back and forth due to low turnover from major international exchanges having the ‘Closed’ sign up for the holiday season.
It’s also important to note, cites Reuters, that steel mills usually curb output in a slow construction period, which is typically the case during the winter months ahead of the Chinese Lunar New Year holiday.
2017: the Year of Steel?
Our own Raul de Frutos recently covered the top 3 reasons why steel prices will rise in the next year. He cites a Trump presidency and investors betting on steel companies, as well as rising Chinese steel prices and an overall industry metals boom as those reasons.
“We are witnessing powerful moves across the board. Even copper, a metal whose fundamentals didn’t look appealing, recently rose near 20% in a matter of days. The bullish sentiment across base metals is another reason the expect a rebound in steel prices,” de Frutos wrote.
How will steel and base metals fare for the remainder of 2016 and into 2017? 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:
As we continue to look back at our highest-rated posts of 2016, it’s no surprise that another price predictions article was among the most-read. Contributor James May of Steel-Insight gave us his price outlook for the second half of 2016 and, yes, 2017. Enjoy this best of metalminer post with an eye toward next year. — Jeff Yoders, editor.
U.S. flat-rolled steel prices appear to abhor a vacuum — they seem to either go up or down.
Moves this month, therefore, have to be perceived as efforts to hold pricing, even though they are pitched as price increases. For now, the moves appear to have worked; hot-rolled coil is steady at $620 a short ton out of minimills and $640/st from integrated mills with cold-rolled coil at $820-840/st.
Amid lower scrap prices, the minimills certainly have room to negotiate. Meanwhile, buying tends to slow over the summer. Import deals are also firming up given the spread. As such, it is our view that the bias is to the downside, but discounting — at least initially — will be limited. Hot-rolled coil lead times remain at around six weeks, although some minimills are closer to four to five weeks. Cold-rolled coil and hot-dipped galvanized remain in the eight to 10 week range — down from their peak, but not long enough to allow distributors much leeway in negotiation. Moreover, with some mills having downtime in August, there is no incentive to cut prices to fill schedules.
US Hot-Rolled Coil Prices ($/metric ton ex-works Midwest) Margins Widen
Falling scrap prices and high steel prices are leading to rising spreads for minimills, a further reason to maximize output. Slab re-rollers are still seeing their spreads widening as well. At around $350/mt free-on-board Black Sea, the spread to U.S. domestic steel is around $300/mt over landed slab, an enormously profitable spread. It is, perhaps, no wonder that provisional semi imports in May were over 700,000 mt. We would expect them to move higher as buyers take advantage of the arbitrage. However, we caution that this could be another contributory reason for U.S. prices to drop later in the year as rising supply of coil hits the market. Read more
Nickel prices edged up higher to end the year in the futures market following speculators widening their positions.
According to a report from the Economic Times, the spot nickel market is seeing a trend of increased demand from alloy makers and other industries that consume the metal. This has covered up short positions from speculators ahead of monthly figures, influencing nickel futures.
A report from Economic Calendar last week found nickel prices hovering near year-long highs. Closing this year on a positive note can be attributed to a tightening supply chain for the metal.
Writes Donald Levit for the news source: “While the supply side adjustments was the major price driver, an improvement in demand also contributed to the rally. While nickel has soared, continued potential for further supply cutbacks have continued to push the metal higher, and last week news of a potential, major shutdown added even more upside impetus to nickel’s rally.”
Nickel Mine Suspensions Also in Play
The Economic Calendar report also announced the closure of the second-largest nickel miner in the Philippines, pending an appeal. This suspension (as it stands) would have a significant impact on the supply and demand balance for today’s nickel market.
How will nickel and base metals fare for the remainder of 2016 and into 2017? 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:
Over the holidays, we are republishing and revisiting some of our most well-read posts of 2016. While this one technically doesn’t fall into the 2016 (it was initially published December 14, 2015) but we are still looking back at it anyway since it deals with predictions about metal prices for the year we’re about to leave behind. It also gathered the second-most traffic of any post we published in 2016 despite predating the year by a few weeks.
At the time, my colleague Raul de Frutos wrote “Currently, some key Chinese indicators we are tracking are giving us no reason to expect higher metal prices in 2016.”
Yet, we have seen higher metal prices in 2016 and we are now in a full metals bull market. The reason we are is because of everything Raul cited in his post. He was 100% right that “the longer it takes China to clean up its mess, the later metal prices will hit bottom.”
China cleaned up its mess, hit bottom early in 2016 and turned global commodities demand around remarkably fast, all things considered. This reminds us that markets can make a turn around quickly. The future is unpredictable and we need to take the market day by day. Just four months after this post, we went from bearish to completely bullish on industrial metals. Enjoy the second of our Best of MetalMiner in 2016 series. -Jeff Yoders
As you well know, the main cause of the commodities meltdown has been China’s slowdown. Since China makes up half of the world’s demand for commodities, the economic slowdown means lower demand which has led to a situation where a glut of materials can’t find a home.
The role that China plays in commodity prices is so big that the future of metal prices is totally dependent on China. The longer it takes China to clean up its mess, the later metal prices will hit bottom. Currently, some key Chinese indicators we are tracking are giving us no reason to expect higher metal prices in 2016.
Imports to China dropped 8.7% to $143.14 billion in November from a year earlier, extending a slump in imports to a record 13 months, suggesting that government stimulus measures are failing to boost growth.
China Imports (millions $) Source: TradingEconomics.com from Customs Administration Data.
Meanwhile, Chinese exports declined 6.8% to $197.24 billion in November from a year earlier, marking the fifth straight falling month. The fact that China is struggling to increase its exports demonstrates that global demand is weak and that China will have to find a more painful solution to balance its surplus. The trade surplus and the inability to find a home for the excess of materials flow will continue to keep a lid on China’s growth, depressing commodity prices.
China Exports (millions of dollars). Source: TradingEconomics.com
Yuan Falls To Four-Year Low Against The Dollar
Chinese authorities want to see a smooth depreciation of the yuan/renminbi as China faces external pressure not to devalue its currency too quickly. A sharp depreciation would probably hurt the country’s credibility at the same time China wants to attract more foreign capital. In addition, it would raise criticisms that China is keeping its currency artificially low to encourage more exports.
Yuan versus dollar. Source: Yahoo Finance.
Recently, China’s central bank cut its reference rate to the lowest level since 2011. The yuan fell against the dollar to the lowest level since 2011. Although China has said that it has not allowed the yuan to slide to boost the economy or increase exports, it seems that the market is taking these developments as desperate actions from China’s government to help the economy, raising concerns among investors that the country’s slowdown might worsen.
China’s Equity Markets’ Slump Continues
We believe that equity markets are the best benchmark for the performance of China’s economy, or at least investors’ sentiment about China. We’ve analyzed before the link between China’s stock market and commodity prices. Currently, this link is even more noticeable.
China FXI shares continue to fall. Source: @StockCharts.com.
After the huge slump this summer, equity prices mildly recovered, but since October we see that equities are heading south again. The poor performance of Chinese stocks demonstrates that investors are still worried about the future of the country and not lured by its government actions.
Global zinc mine production dropped by 1.8% compared to the same 10 months in 2015 with the overall reduction attributed to drop-offs in Australia, Ireland, Peru and India. Of note were Bolivia, China and the Russian Federation which posted increases this year.
China and the Republic of Korea (South Korea) posted increases in refined zinc metal output, but the global output declined slightly due to activity in Mexico, India, Australia and the United States.
The report stated: “A rise in global usage of refined zinc metal of 3.7% was primarily influenced by an increase in Chinese apparent demand of 9.3% that more than offset a 14% reduction in the United States. Usage in Europe rose by 0.9%.”
ILZSG concluded that Chinese imports of zinc fell by nearly half, 44.5% to be exact, but the country’s net imports of the metal grew 26%.
Buying Zinc at the Right Time
Our own Raul de Frutos wrote of the ILZSG report, and added some insightful analysis on what buyers of the metal should consider this time of year:
“During this year’s rally, zinc buyers had several opportunities to buy forward. Buyers now need to pay close attention to the recent price pull back. If you see a rebound in prices near that support level, that would be a good time to buy some volume.”
How will zinc and base metals fare for the remainder of 2016 and into 2017? 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: