Articles in Category: Non-ferrous Metals

Copper prices rose in July on expectations that policymakers’ efforts to spur economic growth will increase demand for the metal.

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Expectation of a new round of infrastructure spending in China is giving investors reasons to bet on the metal.

China’s Imports Are Up

In June, China imported 420,000 metric tons of unwrought copper and copper products, up 20.3% from June of last year. For the first half of the year imports increased 21% compared to the same period in 2015. The growth in imports has helped support metal prices, too. However, there are different opinions on whether those imports are actual demand or just stockpiling into warehouses.

Prices Test $5,000/mt

3M LME copper struggles near $5,000

Three-month LME copper struggles near $5,000/mt. Source: FastMarkets.com.

So the whole metal complex is performing well, investors are optimistic that they’ll see more stimulus coming from China and copper imports are strong. This all sounds bullish for copper prices this month but copper only recently passed that 5,000-$5,100/mt level that it has failed to overcome several times this year.

Free Download: The July 2016 MMI Report

If sentiment in copper is actually shifting to bullish, we should see that reflected in the price soon, with prices climbing into new ground as we’ve witnessed in other base metals this year. We’ll have to wait and see if the bulls have found enough reasons to overcome the bears at the level prices are approaching this month.

The U.S. and the European Union filed a joint World Trade Organization challenge against China on July 19 over its use of duties and export quotas to control shipments of metals such as tin, tantalum, lead, copper, chromium, cobalt and others.

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The E.U./U.S. effort comes after the U.S. government’s original request for consultations filed on July 13. It also comes after the European Union failed to resolve a dispute with China over its use of duties and export quotas during bilateral meetings with China last week.

Chinese imports are allegedly being dumped in the EU and other foreign markets. Source: Adobe Stock.

Chinese export quotas are being challenged by the U.S. and the E.U. Source: Adobe Stock.

The new request adds challenges to export duties on chromium to the original list of antimony, cobalt, copper, graphite, indium, lead, magnesia, talcum, tantalum and tin. The new request also includes China’s export quotas imposed on antimony, indium, magnesia, talc and tin.

Trade Rep Speaks Out

During last week’s announcement, U.S. Trade Representative officials said export duties on the raw materials ranged from 5 to 20% and enabled Chinese companies to produce lower-priced goods than their U.S. competitors. China also used the lower cost of raw materials to encourage U.S. companies to move production to China, the office of the U.S. Trade Representative charged. Read more

The Steel Market Development Institute (SMDI), a business unit of the American Iron and Steel Institute (AISI), today released statements about the release of the draft Technical Assessment Report (TAR) by the U.S. Environmental Protection Agency, Department of Transportation and California’s Air Resources Board.

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The report is the first step in the mid-term evaluation of fuel economy and greenhouse gas emissions regulations and it examines a wide range of technology factors relevant to the 2022-2025 automotive model year standards.

Hybrid Car

Can a 54.5-miles-per-gallon average for all cars on the road be reached by 2025? Source: Adobe Stock/6th Gear.

The main question the report was created to address is should federal authorities adjust miles-per-gallon calculations in order to meet greenhouse gas reduction targets for the 2022-2025 model years. The stated goal by the Obama administration is to cut carbon emissions radically with rules that tighten to a nominal 54.5 mile-per-gallon average by 2025. Read more

Gold and most precious metals are still gaining from the bounce they received after the U.K. voted to leave the European Union and most bankers and analysts expect that to continue. In contrast, European aluminum premiums are falling.

Poll: Gold’s Brexit Bounce Has Legs

Britain’s vote to leave the European Union has led analysts to raise their gold price forecasts again this year, after the decision shook up financial markets and sparked a rally in the precious metal to two-year highs.

Free Download: The July 2016 MMI Report

A poll of 25 analysts and traders over the last two weeks returned an average price forecast for this year of $1,280 an ounce, up from $1,209 in a similar survey in April, and nearly 15% higher than a poll at the start of the year.

European Aluminum Surcharges Keep Falling

Surcharges for physical aluminum in Europe are expected to gradually extend their recent decline due to sluggish demand as metal is released from warehouses when finance deals become less lucrative.

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The premiums, which consumers pay on top of the London Metal Exchange cash price for immediate delivery, were quoted at $115-$120 a metric ton for duty-paid metal in Rotterdam, down some $10-$15 in recent months and from $140-$150 in early February.

Six little letters have dominated the political and economic news cycle over the past month or so: BREXIT. While the long-term effects of Britain’s vote to exit the European Union won’t be felt for awhile, the surprising result has already roiled global markets, including commodities in general and metals specifically.

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Our biggest winner of the Monthly MMI series, the Global Precious Metals MMI, gained the most from June to July, primarily driven by gold prices (themselves driven by near-term investor moves over to safe-haven assets brought on by the Brexit vote).

MM-IndX_TRENDS_Chart_July2016_FNL-TOPVALUE100

Some have indirect Brexit connections, such as our Renewables MMI and the consequences of the U.K. announcing it won’t make E.U. 2020 climate reduction goals… which it won’t need to if it completes its exit before 2020 (likely). Others, like our GOES MMI, were not affected at all.

The value of the U.S. dollar, China’s import/export activity, and international trade cases (especially those in the ferrous realm should continue to be watched by industrial metal buyers during these dog days of summer. However, we wish our British colleagues well in these politically uncertain times and offer our recent webinar to help them navigate the newly choppy purchasing waters.

Rarely do a government’s stated aims and the aspirations of industry align quite so perfectly as they do in today’s India regarding steel.

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Prime Minister Narendra Modi’s government has been championing a “Make in India” mantra since coming into power in 2014. It has manifested itself in various ways and most intensely with the state-run enterprises who are more open to government pressure. Even so, it has become a pervasive theme across the entire national economy, coercing companies to finds ways of buying domestically in rupees rather than directly importing materials and paying in foreign currency. Read more

China, this year, is becoming more than just the world’s largest metals consumer, it’s also taking a larger role in setting metals prices. While oil prices have crept up this summer, another selloff could be caused when refined products in storage finally come to market.

China is Taking a Bigger Role in Setting Metals Prices

The prices of metals from aluminum to zinc have long swayed to the beat of the world’s largest manufacturing nation, Reuters’ Andy Home writes.

Free Download: The June 2016 MMI Report

But this is the year that China has emerged from the limelight to take center-stage in the trading of those metals. On one day alone, March 10, trading volumes on the Dalian Exchange iron ore contract exceeded one billion metric, more than the combined annual output of the world’s biggest three producers, Rio Tinto Group, BHP Billiton and Vale SA.

Another Oil Glut is Likely Due to Products in Storage

In its July Oil Market Report, the International Energy Agency warned about shockingly high levels of refined oil products sitting in storage. Gasoline, diesel and heating oil are built up to such high levels in so many parts of the world, that a sharp rise in crude oil prices is unlikely in the short run, oilprice.com reported.

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The IEA said that “the fact that crude oil has in the past two months moved within a range in the high $40s/bbl should be a relief for some producers.” But it went on to caution that “the existence of very high oil stocks is a threat to the recent stability of oil prices.”

Goldman Sachs has revised its base metal outlook for the year and Alcoa, Inc., has opened earnings season by reporting lower-than-expected Q2 profits.

Goldman Sachs Joins Base Metal Bulls

Goldman Sachs on Monday raised its outlook for zinc, aluminum and nickel prices anticipating supply inequalities to continue across the metals sphere throughout the second half of the year.

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“In our view, the impact of the prior stimulus is still set to result in sufficient demand growth such that we will continue to see supply differentiation across the metals space during the second half of 2016,” the bank said in a note to investors.

Alcoa Reports Lower-Than-Expected 2Q Profit

Alcoa, Inc. on Monday reported a lower quarterly net profit, with falling aluminum and alumina prices pressuring revenue while plant operations have been scaled back ahead of a spinoff of its traditional smelting business later this year.

Free Download: The June 2016 MMI Report

Alcoa reiterated its forecast for global automotive production growth in 2016 of 1% to 4%, but said continued weakness in the North American market would offset anticipated growth in heavy-duty truck, trailer and bus production in China.

Before anyone with shares in nickel mines goes out and orders their new Maserati, a word or two of caution is in order.

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Yes, by some accounts nickel swung into deficit this year after five years of surpluses as global demand rose by some 4% and supply has been constrained by a lack of new investment, Indonesia’s export ban on nickel ore exports and, more recently, a fall in exports from challenger Chinese supplier, the Philippines where low prices have reduced output.

Investors Are Cashing In

The euphoria among investors is not simply due to a change in outlook. Nickel prices have surged this year by some 13% according to the Financial Times with the latest boost coming from the Philippines’ new environmentalist mining minister Gina Lopez, who has announced plans to audit domestic mines for compliance with environmental standards, the expectation is up to 70% could fail resulting in them potentially having their licenses revoked. Two have already lost their licenses. Read more

Like most industrial metals, copper saw an increase in June. However, the metal is still lacking the strong upside action we have seen in other metals and it continues to struggle near the $5,000 per metric ton mark on the London Metal Exchange.

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The latest trade data showed a huge spike in Chinese copper exports, which increased by 256% in May from a year earlier. This raises fears about domestic demand. Domestic production is also rising strongly, up 7% year-on-year in May. With these figures, it’s tempting to view May’s export surge as a warning sign that the Chinese market is saturated.

Copper_Chart_July-2016_FNL

In addition, Chinese manufacturing data came in weak in June. The Caixin Manufacturing PMI, which focuses more on small-to-medium-sized private firms, stood at 48.6 in June. That reading missed estimates and was the weakest number since March.

Uncertainty Still Looms

Given the disappointing industrial data and the ongoing economic uncertainties after the U.K.’s decision to leave the European Union, the market is expecting more economic stimulus from China. That stimulus, if it happens, will be critical for copper prices to finally pick up steam.

On a side note, although most people focused on the export surge, China’s imports were robust. China has imported 1.77 million mt of refined copper so far this year, up 24% from the same period last year. Even with May’s high exports, net imports are also up by 22% for the first five months. That gives copper bulls hopes that China is starting to work off its previous glut.

But to make this issue even more complex, inventory levels also rose sharply last month. Copper warehouse levels in the LME system increased by almost 40% in June. Along with the LME copper inventory, bonded copper stocks held in free trade zones in China have climbed this year. Higher inventory levels are, perhaps, limiting the upside potential of copper prices.

Although copper rose in June, the outlook remains neutral and, due to all of this uncertainty, we could continue to see choppy price action in the coming months.

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