Articles in Category: MetalMiner IndX

Our monthly MMI saw a boost in October as three metals tied for the biggest gain and markets seemed to tighten as manufacturers started to make decisions for their end of year and early 2017 spending.


There seemed to be a Q4 tightening across most of the metal markets we follow. Sure, the Rare Earths and Renewables MMIs were flat as a board yet again, but Copper, Aluminum, Stainless and Raw Steels all saw strong gains. Our Global Precious MMI gained again but almost immediately suffered a pullback after talk of a Federal Reserve interest rate hike in December and renewed strength from the U.S. dollar.

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As always, we exercise caution when buying. Today’s gain could be tomorrow’s loss.

While domestic grain-oriented electrical steel prices fell slightly this past month here in the U.S., the outlook for GOES globally looks bright.

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According to a recently released study from Future Market Insights, the GOES segment of the market 6 should grow by 7.5% in value in 2016 and 7.3% to 2026 due to increased demand from the energy and power generation industries.


From a geographical perspective, North America, Europe and Japan all contribute to a strong market, however, the Asia Pacific region serves as the largest market by volume with China leading the charge.

Trade Cases

Despite the projected growth of GOES, many flat-rolled steel products have become subject to one form of trade case or another. Despite the anti-dumping duties imposed on China in the case of cold-rolled coil and other countries for hot-dipped galvanized, hot-rolled coil and others, when an exporting country receives a punitive duty, the flow of material merely moves to other exporting nations not identified in the specific trade case.

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Steel prices have been in a steady decline since the beginning of August. At best, trade cases provide a few months of pricing power for domestic producers.

Two years have passed since AK Steel and Allegheny Technologies, Inc. brought their GOES trade petitions to the International Trade Commission. The ITC found the domestic producers “unharmed” by imports. The trade cases resulted in absolutely nothing for the domestic producers — ATI even shut down its GOES line. MetalMiner’s M3 MMI index and actual spot market coil prices have declined since 2014.

The GOES MMI® collects and weights 1 global grain-oriented electrical steel price point to provide a unique view into price trends over a 30-day period. For more information on the GOES MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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Our Aluminum MMI rose 4% in September. Aluminum prices bounced above $1,600 per metric ton.

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However, we still need to see if the will surpass stiff resistance at $1,700/mt, a level that aluminum hasn’t overcome in more than a year.

Supply Down

Why have prices struggled to get above $1,700/mt? The simple answer is overcapacity. Upside momentum was limited this year because many analysts expected Chinese smelters to ramp up production during the second half. However, Chinese aluminum production continues to fall in the second half.


According to data released by the International Aluminum Institute, Chinese production declined 0.8% in August from the same month last year. For the first eight months, production in China has fallen 2.8%.

Demand Up (For Now)

Global aluminum demand is expected to grow 3-5% this year. The key factor here is higher Chinese aluminum demand thanks to a rebound in China’s property market due to government stimulus. On the other hand, some people fear that the impact of these stimulus measures might be fading. Having said that, the possibility of rising supply is a much bigger threat than a slight moderation in demand.

Exports Down

Rising demand combined with falling supply means one thing, falling exports. For the first eight months of the year, Chinese aluminum exports have fallen 4%. Any increase in China’s aluminum supply would cause exports to come back, denting market sentiment. However, as we mentioned above, we haven’t seen that yet.

Japanese Premiums Fall

Japanese Premiums, the price that Japanese aluminum buyers will pay over the London Metal Exchange cash price, fell to $75/mt. This price will serve as the benchmark for Asian physical markets in the fourth quarter, down 20% from the previous quarter and the lowest level since 2009.

What This Means For Metal Buyers

Aluminum markets will record a deficit this year unless Chinese production rises sharply in the remaining four months of the year. That, combined with the ongoing bullish sentiment in the metal complex could put aluminum prices finally back above $1,700.

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Our Renewables MMI was flat this month. While solar and wind still remain hot investment markets, the political discussion going on right now about the next four years greatly overestimates their abilities to provide jobs or a one-for-one replacement of the production of natural gas.


The metals that go into wind turbines, solar panels and other green energy producing instruments are not seeing the fruits of increased adoption. Part of that is still the individual metals markets. Steel, for instance, saw a small increase this month, but it wasn’t enough to make up for losses by silicon and the other metals in the Renewables MMI. Check our our Raw Steels MMI for more on that.

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Democratic nominee Hillary Clinton even walked back her support of solar as a jobs program.

When asked by an audience member, “What steps will your energy policy take to meet our energy needs while at the same time remaining environmentally friendly and minimizing job loss for fossil power plant workers?” Clinton said that the U.S. is, for the first time energy independent and also “we are, however, producing a lot of natural gas, which serves as a bridge to more renewable fuels. And that’s an important transition,” she said.

This is much closer to an “all of the above approach” than what Clinton said last month, implying that production of solar panels could replace coal and oil and gas jobs.

“We’ve got to remain energy independent,” she continued. “We have enough worries over there without worrying about that,” Clinton said.

Bridges to Clean Energy

Natural gas as a bridge to future renewable sources for electrical power generation has long been touted by shale drilling tycoons such as T. Boone Pickens as a cleaner burning alternative to coal and an excellent backup source of power until wind and solar are able to provide stored energy when the sun doesn’t shine or the wind doesn’t blow.

On his website, Pickens says, “Natural gas is not a permanent solution to ending our addiction to imported oil. It is a bridge fuel to slash our oil dependence while buying us time to develop new technologies that will ultimately replace fossil transportation fuels.”

The new generation of gas-fired “flex” power plants, many of which have recently been built in California, are designed to ramp up and down quickly to accommodate shifting supply from wind and solar. Facilities like these bolster the idea that the notion of a “bridge” is misguided and that gas can act as a destination fuel as a backup for solar and wind for generations. But, that wouldn’t get us to cleaner energy, either.

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The push-pull between renewables and back-up sources will continue to play out over at least the next five years. It’s a debate that only storage technologies can decide for good.

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Our Rare Earths MMI was flat for a fourth straight month as the market remains oversupplied and stale ever since China lifted quotas on the magnetic and energy storage metals, the end of a long-running World Trade Organization dispute.


That happened in January 2015 and rare earths have not moved much since. The elements are still highly important for defense, power and green energy applications but prices show no signs of jumping due to Chinese export embargoes or, really, anything else.

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This has caused a somewhat dangerous lack of urgency about fixing domestic supply problems as there’s currently no real urgency to create another U.S. supplier like Molycorp. U.S. Rare Earths Inc. looks like the only viable option for the foreseeable future.

This is by design, too, as China is still consolidating its rare earths industry and will likely drive prices even lower during that process.

What Does Consolidation Mean?

A report from BMI Research says the Chinese government will continue to ramp up exports even as it consolidates companies and shuts down some mines. Better management allowing better production at underperforming operations is what Beijing envisions.

Dysprosium and cerium have seen prices fall from $65,865 a metric and $883 per mt, respectively in May 2015, to $37,524 per mt and $685 per mt by September, according to BMI. If you’re not already a member, join MetalMiner membership to see how closely that mirrors or MetalMiner IndX values. See below for those of you in the know.

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BMI expects that, in a bid to regain pricing power, the Chinese government will pursue a strategy of consolidating the country’s domestic rare earths sector and increasing exports over the coming quarters. That means even lower prices than what we’ve seen over the last two years.

BMI believes that Australia, Russia, Greenland and the U.S. (U.S. Rare Earths) hold significant rare earths output growth potential over the long term. The analysts from BMI do not expect that these countries will be able to overtake China’s market share any time soon due to the low-price environment.

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Our Stainless MMI rose 4% in September. The complexity and uncertainty of the supply equation is giving support to nickel prices, so far, this year.

Philippines To Close More Mines

Philippine nickel production is down 24% for the first seven months of this year. The Philippines had already suspended eight nickel mines in previous months and more suspensions were expected. On September 27th, the government announced that 20 more of its mines would be suspended for environmental violations.


The suspended mines and those at risk represent nearly 60% of output in the Philippines, the world’s largest producer of nickel ore and top supplier to top buyer China. China’s imports of nickel ore and concentrates from the Philippines fell 21.3% in the first eight months of year to 17.99 million metric tons.The uncertainty surrounding Philippines’s output is the bullish side of nickel’s story.

Indonesia in Play

Meanwhile, it looks like Indonesian production is now in recovery mode. Indonesian supply rose 30% in the first seven months this year. Ferronickel is an intermediate stage product between ore and refined metal, and Indonesian exports of ferronickel to China have surged this year.

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At the same time as refined nickel production in Indonesia is rising, as the popualce wanted, Indonesia is also considering whether to resume raw nickel ore exports. The decision is expected within weeks. Nickel smelters now fear the rule changes as they could weaken nickel prices, especially those companies that make semi-finished and refined metal.

Price Outlook

It’s worth noting that while nickel has performed strongly this year, it’s still well below the levels five years ago when the metal peaked near $29,000/mt. It seems that prices have room on the outside but more tightness is needed in nickel markets.

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Indonesia relaxing the 2014 export ban could add pressure to nickel prices. On the other hand, prices might continue to get a boost while The Philippines keeps on punishing mines that don’t meet environmental standards.

Stainless Markets

The Department of Commerce found that Chinese stainless steel sheet and strip producers illegally dumped — sold at less than fair value — their products in the U.S, assigning a preliminarily dumping margin of 64-77%.

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Our Copper MMI rose two points in September. Copper prices have remained range-bound in the between $4,500-$5,100 per metric ton for almost the whole year.

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Why did copper prices rise in September?

Pretty simple, because all base metals rose in September. Copper’s fundamentals still look pretty bearish and nothing relevant within the copper industry occurred in September. Investors bought copper as improving sentiment in the industrial metals complex is keeping each individual metal alive, even those without a bullish story, like copper.


In Q1, China’s copper imports were running at record levels, but over the past few months imports are coming down. In August, China imported 350,000 mt of unwrought copper and copper products. This is the fifth consecutive month that imports have declined on a monthly bases and the lowest figure in a year.

Rising Inventories

Now, as Chinese refined imports start to taper down, we are witnessing inventory build up in the London Metal Exchange‘s warehouse system. In September, LME copper stocks rose to 380,000 tons, the highest levels in more than two years.

Global production of copper concentrates rose by 6% in the first half and much of this abundance of raw material is going to China because it is where most smelter and refinery capacity is located. This means that if prices were to increase to attractive levels, China’s capacity would be able to absorb more raw material, increasing its refined copper exports.


Unlike other metals where we’ve seen supply disruptions, there is not much going on with copper. However, copper buyers need to keep an eye on those macro drivers that could move copper prices.

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One of the drivers supporting copper prices is crude oil. Oil prices rose to near $50 per barrel this week. In September, the Organization of Petroleum Exporting Countries reached an understanding that a crude-oil-production cut is needed to lift prices. The cartel could start to tackle the supply in November, which might help lift prices in Q4, improving investors’ sentiment on metals too.

What This Means For Metal Buyers

While industrial metals continue to rise, we don’t expect copper prices to fall significantly. On the other hand, investors are still trying to find a good fundamental reason to get on copper and make prices finally take-off significantly.

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U.S. builders and contractors trimmed spending on construction projects in August for a second straight month with housing, non-residential and government activity all seeing declines.

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Construction spending dropped 0.7% in August after a 0.3% slip in July, the Commerce Department reported Monday. It was the third decline in the past five months. Our Construction MMI fell 3% from 70 to 68 as well.


The unexpected drop hit all sectors of U.S. construction. Residential construction decreased 0.3%, while non-residential activity was down 0.4%. Spending on government projects fell 2%, dragged down by a sharp drop in activity at the state and local level, which has fallen to the lowest point since March 2014.

Infrastructure spending continues to be a key issue in the presidential campaign and these numbers back up arguments, from both candidates, that our roads and bridges are crumbling while governments at all levels turn a blind eye to the problem. The question the democrats and the republicans disagree on, and Hillary Clinton and Donald Trump are no different in this regard, is where will the money for a federal construction spending plan come from?

The Construction MMI saw prices drop nearly across the board. A week-long National Day holiday in China crimped copper prices as demand wasn’t even that strong in the world’s largest consumer before the shutdown. The cities of Guangzhou and Shenzhen are the latest to impose new measures to cool overheated real estate markets in China, including higher mortgage down payments and home purchase restrictions.

The Slowdown Lowdown

While U.S. prices weren’t expected to drop as much as they did, a slowdown was certainly expected at the end of the summer construction season and during China’s shutdown. As winter arrives in the U.S., a traditional slowdown in purchasing usually takes place. Ultra-low interest rates and a growing economy are what many economists say will keep the slowdown a short one. If that was the case, though, why wasn’t spending more robust in the summer months? The Construction MMI, like the overall U.S. economy, has been mired in slow-to-no-growth for most of the year with only a few strong months keeping it net positive (especially May).

That the “natural rate” of interest has fallen to low levels could mean the economy is stuck in a low-growth rut that could be hard to escape, Federal Reserve Vice Chair Stanley Fischer said on Wednesday. It’s hard to expect builders and contractors to buy more steel I-beams and copper wiring when they, themselves, are not increasing the number of projects they’re billing clients for.

What Growth?

Private construction is barely making up for public shortfalls. The strongest sector over the past year has been non-residential activity, which is up 4.2% from a year ago, followed by residential construction, which has risen 1.4%. Total public construction, however, is actually down 8.8% from last October, reflecting a squeeze on spending from efforts to control budget deficits at all levels of government.

This is where economists such as the Associated General Contractors of America‘s Chief Economist, Ken Simonson, say a federal infrastructure spending plan would help.

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“While demand for construction remains robust, it is no longer growing like it was earlier this year,” Simonson said. He also said the building industry could get a welcome boost if government policymakers moved to upgrade “our aging infrastructure.”

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Major automakers posted lower September U.S. sales this week despite big consumer discounts, as pickup truck volumes fell for market leaders General Motors and Ford.

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With the top six U.S. market leaders reporting, deliveries fell 0.6% from last year, but sales were still strong at 17.8 million vehicles on a seasonally adjusted annualized basis.

GM, the top-seller in the U.S., posted a 0.6% decline. Ford reported an 8% drop, and Fiat Chrysler Automobiles was down 1%.


The drops for individual automakers weren’t as steep as last month‘s and our Automotive MMI held its value from September despite the drop-off in end-use sales. Automakers are still on track to sell the second-most cars and trucks in any year in U.S. history, but evidence that sales plateaued in August is affirmed in the September numbers. There’s little chance that 2015’s sales record will fall in December.

Investors Abandoning PGMs?

More troubling for automotive metals is this week’s fall in investment demand for the catalyst metals, platinum and palladium. People are not snapping up the incentives that automakers are offering and inventory is, naturally, piling up. The average industry incentive increased by more than $400 in September compared with the same month a year ago, according to executives at two automakers.

The increasing cost of PGMs was keeping the Automotive MMI in positive territory for most of the first three quarters of 2015. The pullback in precious metals prices could pull the rug out from under automotive, too. The catalyst metals never took off for investors the way that gold did and that’s bad news for their prices as supply was never really in much doubt without more investor interest.

Steel and aluminum both posted increases this month, but face stronger headwinds as the year winds down. Construction, another market that uses similar metals and products, saw new home sales, which usually correlate closely to pickup truck sales, fall 7.6% in August, the Commerce Department said on Monday.

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The focus of automotive buyers, it seems, should be on how long this plateau will last and how quickly it might turn into a slope.

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Our Global Precious MMI was up a point this month, climbing to 86 from 85 last month, an increase of 1.2%, but this may be the last increase we see for awhile as gold experienced its biggest single-day post-Brexit drop yesterday. It closed at $1,268.40 an ounce, a slide of 3%, down from $1,311.20 on Monday. It’s around $1,275 as of this writing.

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The yellow metal was dragged to its lowest point since the Brexit vote in June which was driven mainly by a bounce in the U.S. dollar after upbeat data triggered a break of key support at $1,300 an ounce. As speculation grows that the Federal Reserve may finally raise interest rates in December, the dollar has been given a boost and a selloff in gold has ensued. Losses in silver and platinum group metals have followed, although none fell as dramatically as gold this week.


We warned, earlier this month, that the first half investment appeal of precious metals was waning. The relatively tepid increase in September was a sign that the metals, as a group, simply could not keep the momentum of the first half. Most are blaming this pullback on the dollar, and that certainly has a lot to do with it, but the fact that economic fears about the U.S. economy have been quelled might be the real culprit.

U.S. manufacturing rebounded in September after contracting in August. New orders and production at factories increased, although employment fell. The Institute for Supply Management said Monday that its manufacturing index rose to 51.5 in September from 49.4 in August. Any score above 50 is a net expansion in manufacturing activity.

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While gold is the most for-investment metal of the group, the others are experiencing similar effects as gold and their supply/demand fundamentals aren’t much better. Silver is more industrial, but acts as a safe haven, too, a veritable poor man’s gold. Platinum and palladium are more tied to the automotive and other catalyst markets. Still, they are moving largely in lock-step right now and have been doing so since the dollar bottomed out in May. Platinum is receiving a particularly cold shoulder from investors. The metal is well-supplied even if investment demand increases.

What Does This Mean for Precious Buyers?

A stronger dollar and better economic data about the U.S. economy is bad for the investment appeal of precious metals. More data will come out in the days leading up to the presidential election but precious metals’ gains of the first half are likely a thing of the past.

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