MetalMiner IndX

MM-IndX_TRENDS_Chart_July-2015_FNL

There’s no reprieve from the bearish metals environment in this month’s MMI Report.

More Analysis: The July Metal Price Forecast

With the exception of the very specialized grain-oriented electrical steel (GOES) market and the Renewables MMI®, all of our indexes lost ground in June and could not gain traction amid falling commodity prices and a strong US dollar.

The one index that was steady from last month, which tracks raw material inputs of the renewable energy sector, has been stagnant for two years and, until trends show otherwise, its steadiness is more a measure of a lack of market activity than anything close to a turnaround or a new trend toward increasing prices.

The Stainless MMI is flirting with two-year lows and our Raw Steels index is up against lows not seen in years as well. Weakness in the Chinese stock market has put additional pressure on metals that were already reeling from the effect of the strong dollar. This is bad news for steelmakers, miners, refiners and smelters by itself, but coupled with increased supply in most of the metals we track, it’s become a real deterrent to profitability.

Moreover, both Europe and the US have higher-than-normal inventories of semi-finished products at service centers. Mill lead times remain short suggesting weak demand. Weak demand will continue to place downward pressure on prices.















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It's safe to say that the Greece and China crises that have hit the global economy are going to be the biggest issues to watch as far as the precious metals markets – and prices – are concerned.

Over the past month, the monthly Global Precious Metals MMI® fell 4.8% from 84 in June, and it may have further to fall before July is out.

Global-Precious-Metals_Chart_July-2015_FNL

* Read what we said in last month's analysis.

China's Star is Falling

One may think that the Chinese equity market crash may help investors flock to gold as a safe haven – but not so fast.

A leading precious metals consultancy called Metals Focus, which interestingly, according to this article, has booted GFMS as the primary supplier of statistical data to the World Gold Council, points out that due to China being a gambling culture, "reckons there is more the likelihood that weak equity prices may end up adversely affecting physical gold demand. Losses generated by the impact of the stock market crash may well hit jewellery and gold artefact purchases, while the scale of the fall is such that potential investors nursing big losses may well not have the liquidity to move back into gold."

Which would likely mean that gold prices won't see a whole lot of support. As my colleague Raul de Frutos has noted around the office water-cooler recently, "gold’s safe haven thesis" is not really playing out, probably because of a strong dollar.

Saturday Night at the Palladium: Also Down

The palladium prices from all three global markets we track on our IndX (the US, China and Japan) fell by double digits over the past month. Platinum prices also haven't looked so hot, looking at 6-year lows, mainly driven by weakness across other commodities and industrial metals.

[caption id="attachment_70867" align="aligncenter" width="500"]Palladium spot price since 2012 Palladium spot price since 2012. Source: MetalMiner.[/caption]

So what to watch in palladium and PGM markets in general?

  • Keep an eye on that US dollar – a strong dollar means a weak South African rand, and that means good news for SA producers to boost supply
  • Investment activity – ETF and other inflow/outflows
  • Next China PMI -> What that means for China automotive demand -> What that means for China auto production

Actual Gold, Silver, Platinum, Palladium Prices

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Niche markets like grain-oriented electrical steel (GOES) tend to develop their own set of pricing trends.

Free Download: July Metal Price Forecast

In some respects, GOES appears more volatile than most of the other metals we track. In some cases prices bump up $350 per metric ton in a month and in others they fall nearly $200/mt. MetalMiner's monthly M3 index moved up significantly with a 15.2% jump:

GOES_Chart_July_2015_FNL

In the case of the domestic market, we essentially have an oligopoly controlled by a small handful of players who [sort of] set the domestic price.

We say sort of because the customer base for GOES is highly concentrated. In many cases the buying power does indeed rest with the buyer. Despite the volatility, GOES also remains in a bearish trend as well.

Did the Anti-Dumping Case Change Anything?

Last fall, we released a compilation report of multiple GOES stories we ran, covering primarily the US domestic producer anti-dumping filing. For those in the industry who have followed developments closely, the story ended before the Department of Commerce ultimately ruled against the domestic producers.

We say the story ended because large electrical power equipment manufacturers moved their supply chains to alternative locations, primarily Canada and Mexico in anticipation of an unfavorable anti-dumping ruling that would have added duties to the cost of imports.

However, the duties never came, but the proverbial procurement “Plan B” went into effect all the same.

Lamentations About Laminations

In January of this year, the International Trade Commission created several new HTS codes to track product movement for laminations for incorporation to stacked cores (HTS code: 8504.90.9534) and transformer parts (HTS Code: 8504.90.9546).

Imports of transformer parts continue to ratchet up as the latest trade data from Zepol shows:

[caption id="attachment_71337" align="alignnone" width="551"]Source: Zepol Source: Zepol[/caption]

Notably, Japan has taken the second-place spot in terms of dollar value of imports. We can only surmise that some domestic buyers require the more demanding GOES materials only produced by the Japanese, and the Japanese may be more comfortable shipping a semi-finished product to the US market vs. actual grain-oriented electrical steel.

Imports for laminations for stacked cores remain small in comparison.

The Actual GOES M3 Price

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While domestic prices remained stable in June, Chinese steel prices plunged with its stock market. Also, the non-liquid London Metal Exchange steel billet contract fell sharply, weighing on our index.

Free Download: The July Metal Price Forecast

The monthly Raw Steels MMI® registered a value of 56 in July, a decrease of 5.1% from 59 in June.

Raw-Steels_Chart_July-2015_FNL

Chinese Market Reeling

Chinese steel prices are at their lowest level in more than 20 years. Chinese demand seems to be getting worse and industry analysts point out that the fall might not even be close to an end. This threatens the survival of smaller Chinese steelmakers, who are still reluctant to cut production in order to maintain cash flow and bank credit, while other small mills have already shut down.

Construction data shows that demand from the sector has slowed during this first half. Moreover, China's demand for steel could take a further hit as construction eases over the summer.

Finally, China's recent stock market turmoil is adding more doubts about its economy. This is definitely not good for steel prices and other industrial metals which we've seen falling sharply this month.

What This Means For Metal Buyers

Domestic prices have sort of stabilized over the past couple of months. However, the sharp decline of Chinese steel prices could keep putting pressure on US prices, especially under the bearish commodity environment we are in.

Free Download: Compare With the June MMI Report

The Raw Steels MMI® collects and weights 13 global steel and raw material price points to provide a unique view into global steel price trends over a 30-day period. For more information on the Raw Steels 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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After months of rancorous trade battles, a funny thing happened to the crystalline silicon solar photovoltaic panel market. Prices in market leader Europe suddenly went up. For the first time in a decade.

Free Download: July Metal Price Forecast

Prices for solar panels in the European spot market have risen by about 6% so far this year, according to pvXchange, a solar market consultancy based in Bremen, Germany.

Renewables_Chart_July-2015_FNLFlat is the New Up!

Our monthly Renewables MMI® doesn't track panel prices per se, only the silicon raw material that goes into them, but still registered a value of 58 in July, on par with June's value. Flat is the new up in this bearish commodity market.

Despite the modesty of the increase, it's a huge turning point for European solar as the increase represents an abrupt reversal of historical trends. In 2011, the average price of a solar panel in Europe fell by nearly one-third compared to the previous year. In 2012, solar panel prices in Europe plunged by nearly another third. Just last year, the price of a solar panel in Europe fell by more than 14% compared to the previous year.

What's even more astounding is that this increase could have been caused by the real price of silicon finally being quoted in a majority of European retailers. We have long lamented that government subsidies for both silicon exports in China and for local solar installation in destination markets have artificially eroded the price of silicon.

Tariffs to the Rescue?

A trade war was waged in the US largely between Germany's Solarworld, Inc., and small Chinese manufacturers who received government support for silicon exports at home and possible kickbacks abroad from installers who specified their thin-film products over higher-quality silicon products from companies such as SolarWorld. The real price fight, though, was always in Europe where solar could make up 12% of power generation by 2030.

The European Commission renewed their own tariffs on Chinese silicon recently and it looks like those duties were finally enough to keep the cheap imports out of their markets. A robust European solar market is good news for silicon refiners and producers such as Solarworld as higher prices mean more profitability for them.

It's too early to tell if this turnaround will ever be felt in the highly subsidized the US market, but it's certainly a good sign.

The Renewables MMI® collects and weights 8 metal price points used extensively within the renewable energy industry to provide a unique view into renewable energy metal price trends over a 30-day period. For more information on the Renewables 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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Nickel on the London Metal Exchange fell to a fresh low this week, trading as low as $10,440 per metric ton on Tuesday.

Free Download: July Metal Price Forecast

The metal is experiencing huge sell-offs as the Chinese stock market plunges. We can't really put all the blame on nickel since this is not the only metal falling. Weakness in China and a strong dollar keep punishing commodities and, even more stridently, industrial metals.

Stainless_Chart_July-2015_FNL

The monthly Stainless MMI® registered a value of 68 in July, a decrease of 6.8% from 73 in June.

Bearish Fundamentals, Too

Nickel's supply and demand fundamentals, however, agree with the bearish picture the market is painting. We see a couple of factors weighing on prices:

  • First, the Indonesian government banned unprocessed mineral exports in January. The ban on unprocessed nickel and aluminum exports still remains in place. However, after the country already relaxed restrictions on exports of copper, the Indonesian government is considering a relaxation of export restrictions on aluminum and it's possible that nickel will be the next unprocessed ore to have its ban lifted.
  • Second, most analysts were expecting that LME stockpiles would level off. However, nickel stockpiles surged in June, adding to concerns that production is outstripping consumption. Although we've pointed out before that there is not always a good correlation between stockpiles and metal prices, many people might be pointing out that the underlying demand isn't that strong.

What This Means For Metal Buyers

As nickel free-falls, prices are approaching the record low levels of 2009. Nickel could be the first base metal hit that floor. Nickel would have to fall another 17%, but with the pace we are seeing prices falling, it wouldn't be a surprise to see this happen at some point...

* Get the complete prices every day on the MetalMiner IndX℠

The Stainless MMI® collects and weights 14 global stainless steel and raw material price points to provide a unique view into stainless steel price trends over a 30-day period. For more information on the Stainless 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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Substitution continues to plague the rare earths market as our high-tech metals index fell from its already low, entrenched lull.

Free Download: July Metal Price Forecast

Many manufacturers have found non-rare earth elements to use in battery, magnet and other applications or found a way to reuse and extend the life of the rare earths they already buy.

Rare-Earths_Chart_July-2015_FNL

Rare Earths Light

Lanthanum, dysprosium, cerium oxide and europium oxide have all steadily fallen in price since 2011. These lighter rare earths were certainly helped down the slope by China ending its export quotas for rare earths but, honestly, the slide happened way before that thanks to substitution and reuse.

Cerium, for instance, is used to polish glass and silicon wafers commonly used in photovoltaic solar panels. Solar manufacturers have found ways to collect it and reuse it. Simple reuse has cut demand for cerium by 70%. This has been happening since roughly 2012 and cerium's price has fallen in lockstep as purchasers stretched their cerium further.

The monthly Rare Earths MMI® registered a value of 24 in July, a decrease of 7.7% from 26 in June and close to its all-time low of 23 last year. Yes, our lowest index fell nearly 8%.

Molycorp Files Chapter 11

This substitution problem is the bane of the only US-based rare earths miner, Molycorp, Inc., whose business is based almost entirely on light rare earths. The heavy rare earths, such as yttria, are scarcer and have more specific uses. It came as no surprise, then, to regular MetalMiner readers that Molycorp filed for chapter 11 bankruptcy protection this month.

* Get the complete prices every day on the MetalMiner IndX℠

Molycorp has secured interim financing and is still operating, paying employees and selling product to clients such as Siemens AG for its wind turbines, but, long-term, it will need to sell products that can't be as easily substituted or reused if it is to survive.

Actual Rare Earths Prices, Light and Heavy

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Weak demand, a flood of Chinese exports and robust Western supply, in spite of earlier smelter closures, have created a perfect storm of surplus in the aluminum market.

Aluminum_Chart_July-2015_FNL

Shares of Alcoa Inc. stock have been collapsing over the past few months, falling more than 20% in only 8 weeks.

Alcoa's Slide

The aluminum giant, with earnings ahead on Wednesday, has experienced powerful earnings growth over the past four quarters; however, lower aluminum prices are weighing on its stock price.

[caption id="attachment_71232" align="aligncenter" width="500"]Alcoa Inc (AA) Stock Price 2 years out Alcoa, Inc. (AA) Stock Price 2 years out. Chart: MetalMiner.[/caption]

It should come as no surprise that the monthly Aluminum MMI® registered a value of 83 in July, a decrease of 3.5% from 86 in June.

Download MetalMiner's July Metal Price Forecast

World aluminum production in May is up almost 12% year-on-year. That is the fastest growth rate since 2011.

LME Price Falling

Aluminum on the London Metal Exchange is back again below $1,700 per metric ton. This level acted as a floor in March 2014 and Alcoa investors are wondering if aluminum prices will rebound again this time, which would give a boost to Alcoa's shares.

Unfortunately aluminum prices might need to fall further in order to cause further non-Chinese closures to balance the market. Furthermore, the Chinese stock market is having a rough go of it. The Shanghai index is off over 30% from highs reached in June. Finally, the fact that commodity prices keep falling across the board makes a rebound in aluminum prices more unlikely. Aluminum buyers and Alcoa investors might want to think twice before betting on a rebound in prices...

The Aluminum MMI® collects and weights 12 global aluminum price points to provide a unique view into aluminum price trends over a 30-day period. For more information on the Aluminum MMI®, how it's calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

Free Download: Compare With the June MMI Report

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Through half of 2015, US auto sales are on track to hit record levels not seen in 15 years. After climbing more than 4% through July annual sales could approach the previous annual record of 17.4 million if they stay on this pace.

Yet, none of that demand seems to be helping automotive metal prices.

Free Download: Last Week for the June MMI Report

As robust as the US automotive market is, it can't entirely make up for sluggish sales elsewhere that are depressing demand for metals such as steel, aluminum and copper and pushing our index further down. Even the exhaust system metals, platinum and palladium, saw a deep dive this month.

Chinese New Car Sales Barely Growing

New car sales grew just 1.2% in China this May. Further complicating matters, is the fact that the nation of 1.37 billion is starting to develop a used car market and it's looking very much like Chinese consumers like paying less for a used car, rather than paying more for a new one. What a shock?

This is, of course, bad news for raw materials suppliers as the massive Chinese auto market only recently transitioned to automobiles being the main form of transportation. Less-metals intensive bicycles and motorbikes had filled that role until recently.

Chinese steel and aluminum manufacturers had been counting on more robust growth from the domestic new car market and a strong used market could stunt the advances many were planning to reap from new car sales.

Bearish Market Hits Home

The monthly Automotive MMI® registered a value of 82 in July, a decrease of 3.5% from 85 in June.

Automotive_Chart_July-2015_FNL

As we have documented liberally, the strong US dollar has created a bearish environment for all metals and automotive inputs are no exception. The steep fall observed this month in palladium, a metal that had previously held our automotive index up, was an example of just how much the bearish market is affecting even metals with strong demand. Palladium hit a two-year low this month and the bottom, subsequently, fell out of an already listing price index.

Copper, zinc and lead also fell significantly.

What This Means for Automotive Metal Buyers

* Get the complete prices every day on the MetalMiner IndX℠

The drama surrounding Greece's debt is compounding the bear market and, while it hasn't yet caused strong currencies such as the dollar to see significant gains, its potential to do so threatens all commodities.
This September: SMU Steel Summit 2015

The Automotive MMI® collects and weights 7 metal price points used in automotive production to provide a unique view into automotive metal trends over a 30-day period. For more information on the Automotive MMI® constituent metals and their exact price movements, log in or register below!

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The monthly Copper MMI® registered a value of 73 in July, a decrease of 2.7% from 75 in June.

Copper_Chart_July-2015_FNL

Copper suspiciously rallied in the first quarter, gaining almost 20% from trough to peak.

Free Download: Latest Metal Price Trends in the June MMI Report

However, copper prices fell again in May and June and those previous gains have almost vanished. The copper rally was always suspect at best.

Chinese Construction Feeding the Bear

The bearish commodity market is definitely not encouraging investors to pour money into copper. Another big factor that doesn't help to lure investors into copper is weak Chinese demand for the metal. The latest Chinese numbers show poor demand from key sectors:

  • In the first five months of current year, real estate development firms purchased 76.50 million square meters of land, a year-over-year (YoY) decline of 31%. The floor space of completed buildings declined 13.3% YoY as of May. Finally, Chinese real estate firms have started construction on only 503 million square meters as of May, falling 16% YoY.
  • A lower growth rate in China's automobile sector also hits copper's demand. China’s passenger car sales only grew by a mere 1.2% YoY in May, sliding 3.6% from the previous month.

Meanwhile in May, China produced 0.65 million tons of refined copper, a 6% YoY increase.

What This Means For Metal Buyers

The latest figures don't give investors reason to think that copper's fundamentals are set to tighten up and, overall, the market sentiment on commodities is bearish. We shouldn't expect copper to make significant upside moves.

* Get the complete prices every day on the MetalMiner IndX℠

This September: SMU Steel Summit 2015

The Copper MMI® collects and weights 12 global copper metal price points to provide a unique view into copper price trends over a 30-day period. For more information on the Copper 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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