Articles in Category: Non-ferrous Metals

After rising strongly for the last month or more, copper prices now appear to be buffeted by every scrap of news that comes out.

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“Copper prices fell this week as investors cashed in gains after the previous session’s rally,” news.com in Australia reported yesterday. The gist of the argument seems to be the 23% rise in the copper price last month was a step too far. The site quoted Caroline Bain of Capital Economics saying “You only have to look at the levels of investor buying to see that quite a lot of these rallies have been based on euphoria rather than grounded in fundamentals. We think we will see some profit-taking inevitably as we end the year”

Reuters, on the other hand, took a somewhat contrary view, reporting copper prices climbing mid-week, buoyed by a pickup in U.S. manufacturing. The newspaper reported new orders for U.S. factory goods recorded their biggest increase in nearly 1-and-a-half years in October, evidence that the manufacturing sector is gradually recovering after a prolonged downturn and as demand signals from China also improve. Read more

Our Aluminum MMI inched lower in November. A rising dollar put some pressure but prices held well overall. Indeed, we see some potential on the upside.

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Something that has concerned aluminum investors throughout the year is the potential increase in Chinese aluminum production. However, restarts seem to be less than what the markets were expecting earlier. Rising costs of production will likely limit additional restarts.

Aluminum_Chart_December_2016_FNL

China’s clampdown on coal mining and supply disruptions in Australia has led to a spike in seaborne coal prices. Thermal coal prices in China have more than doubled this year. In addition, alumina, which is then processed to produce raw aluminum, has risen steeply in price over the last couple of months.

Meanwhile, even the most pessimistic estimates put the annual demand growth rate at about 4%. Not only that, but Chinese aluminum demand has been better than expected. Chinese demand from infrastructure and construction has been robust this year. The automotive sector, another big industry for aluminum demand, continues to look strong.

In October, China’s passenger car sales rose 20% from the same month last year, the sixth consecutive month that car sales have risen by double digits in China. Last year, China announced a 50% cut in the sales tax for cars with small engines to last until the end of this year. Some analysts expect that China will extend the tax cut to next year but if that’s not the case, we could see some moderation in China’s car sales numbers.

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Adding to the bull case for demand growth in China is the expected boost in U.S. infrastructure spending following republican nominee Donald Trump’s election victory. During the second half, aluminum prices took support above $1,600/mt from better-than-expected Chinese demand combined with lower-than-expected Chinese output. Trump’s election is helping fuel a rally across the industrial metals complex. It wouldn’t be a strange thing to see aluminum prices comfortably trading above $1,800/mt in 2017.

On another note, recently a massive stockpile of 500,000 metric tons of aluminum has been trucked out of the Mexican city of San José Iturbide and shipped to a remote port in Vietnam.The Wall Street Journal reports that the stockpile is believed to be related to the product of Chinese aluminum producer China Zhongwang. We don’t see this news impacting prices immediately but news like this could potentially bring up the case for increasing trade barriers between China and the U.S., especially under the lead of Trump, who has vowed to bring more jobs back home during his campaign.

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The copper market will go into deficit by 2020, just when Rio Tinto‘s, extension to the Oyu Tolgoi mine in Mongolia comes online, the company said on Tuesday.

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The Anglo-Australian mining major gave approval in June for a $5.3 billion expansion of Oyu Tolgoi, one of the world’s largest copper mines and a project central to the major’s efforts to become less dependent on iron ore.

Traders Still Skeptical of OPEC Output Cut

The Organization of Petroleum Exporting Countries‘ output set another record high in November, rising to 34.19 million barrels per day from 33.82 million bpd in October, according to a Reuters survey.

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Oil prices pared losses slightly after inventory data released late Tuesday from the American Petroleum Institute showed U.S. crude stocks dropped more than expected last week despite a hefty build of 4 million barrels in Cushing, Oklahoma.

Renewed economic confidence followed the election of republican nominee Donald Trump and Americans snapped up new vehicles at a rapid pace in November, giving the U.S. auto industry a chance of breaking its all-time record for full-year sales.

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The Automotive MMI was up, too, jumping 8%.

In November, U.S. auto sales rose 3.7% compared with a year ago, according to Autodata Corp. On an annualized basis, that equaled a rate of 17.87 million units. November sales growth projections had ranged from 2.7% at Edmunds.com to 4.2% at Kelley Blue Book. Total sales for November were 1.38 million, that shattered a record for the month that was set in November 2001.

Automotive_Chart_December-2016_FNL

The month’s annual sales rate, adjusted for two extra selling days this November, was 17.9 million vehicles, more than the 17.7 million average estimate.

A contributing factor to the solid month was the Thanksgiving weekend and Black Friday sales, which are having an increasing effect on the month’s output. With one month to go, the auto industry has a decent chance to match or exceed its 2015 full-year record of 17.47 million vehicles sold.

Automotive sales and metals prices are both benefiting from bullish sentiment among buyers and investors. Steel companies stock prices have increased after Trump’s election just as aluminum and copper prices in the bullish metals markets.

Another factor in new car sales is the enduring low prices for both oil and gasoline, which might change soon now that the Organization of Petroleum Exporting Countries and other producers such as Russia have finally agreed to a production freeze.

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Rising oil prices, however, might not be the detriment to auto sales that they have in the past. Hybrid vehicles and simply more efficient fuel consumption have blunted the impact of gasoline prices on new car sales. One of the reasons that the gas tax has become such a poor funding mechanism for the federal Highway Trust Fund is that motorists simply have to buy less gas for today’s efficient, newer vehicles.

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A massive stockpile of 500,000 metric tons of aluminum has been trucked out of the Mexican city of San José Iturbide and shipped to a remote port in Vietnam, according to shipping records and people familiar with the matter.

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The Wall Street Journal reports that the stockpile is believed to be related to or entirely the product of Chinese aluminum producer China Zhongwang. As a result of moving the massive stockpile, Vietnam has become a major importer of aluminum extrusions this year.

Preliminary Steel Exports Down

Based on preliminary Census Bureau data, the American Iron and Steel Institute reported that the U.S. imported a total of 2,682,000 net tons of steel in October, including 2,225,000 nt of finished steel (down 3.4% and up 4.7%, respectively, vs. September final data).

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On the year-to-date (YTD), through 10 months of 2016, total and finished steel imports are 27,486,000 and 22,017,000 nt, down 19% and 19.8%, respectively, vs. the same period in 2015. Annualized total and finished steel imports in 2016 would be 33.0 and 26.4 million nt, down 15% and 16.1%, respectively, vs. 2015. Finished steel import market share was an estimated 26% in October and is estimated at 25% on the year.

Global automotive giant Volvo is currently taking part in a European Union research project which involves replacing the various cables in trucks with wireless sensors.

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The result is expected to be a dramatic reduction in the amount of copper and plastic used. Every year the Volvo Group should be able to dispense with around 3,000 miles (5,000 kilometers) of cabling, which is the equivalent of 18 metric tons of copper and 33 metric tons of plastic.

Volvo is saying goodbye to miles of cabling in its truck division. Can IoT sensors replace all that expensive copper and plastic? Source: Volvo.

Volvo is saying goodbye to miles of cabling in its truck division. Can IoT sensors replace all that expensive copper and plastic? Source: Volvo.

“The savings could amount to a large number of hours, sometimes even days. In the factory, the cables are awkward to handle and time-consuming to fit in the right place,” said Jonas Hagerskans, a development engineer at the Volvo Group. “The wireless sensors are much simpler to install. The cables are also sensitive to dirt and rust and prone to faults. By replacing the cables with wireless sensors, it is possible to prevent all the potential cabling faults. When trucks come into the workshop for repairs, identifying faults in long cables that are difficult to access is very time-consuming. In the future, our customers could get their trucks back from the workshop more quickly.” Read more

India’s mining sector has the potential to contribute as much as $70 billion to the country’s economy by 2030 and generate about 6 to 7 million jobs, believes the country’s industry association, the Confederation of Indian Industry.

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A report titled, Mining Opportunities – Realizing Potential was recently released by the CII, though with an added a cautionary note: clearances “still remain an impediment for a smooth transition from auction stage to implementation stage.”

Mining Reforms Having an Effect

The current Modi government initiated reforms in the mining sector, which underperformed during the previous regime, many say, due to red tape. One of the most important steps was the clearance of the National Mineral Exploration Policy (NMEP) by the government in.

NMEP has the following main features for facilitating exploration in the country:

  1. The Ministry of Mines will carry out auctioning of identified exploration blocks for exploration by the private sector on a revenue-sharing basis. If exploration leads to auctionable resources, the revenue will be borne by the successful bidder of those auctionable blocks.
  2. Creation of baseline geoscientific data as a public good for open dissemination free of charge.
  3. A National Geoscientific Data Repository was supposed to be set up to collate all baseline and mineral exploration information generated by various central and state government agencies and also mineral concession holders and to maintain these on a geospatial database.

While these policy changes have been welcomed overall, there has been some criticism over the implementation. The CII report, for example, talks of the “inordinately long time that is required for obtaining this clearance and the cumbersome process involved therein.”

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The report was recently released at the International Mining and Machinery (IMME) and Global Summit 2016. It said that the Environment and Forest clearance processes take a long time and added that there was significant room for improvement in the clearance system in terms of efficiency, speed of decision making, predictability and transaction.

There’s also unexpected criticism from another quarter on the new mining policy. A report in the DNA newspaper, quoting global miner Anglo American PLC, said the Indian auction system discourages foreign direct investment as the auction process does not provide adequate risk-reward incentive.

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In the report, John Vann, group head of exploration at Anglo, said the auction system makes it difficult to see India competing with other countries where Anglo American invests. According to him, the granting of licenses rather than auctioning off mines would give confidence to foreign investors.

Lead prices rose sharply last week, adding to the year’s gains. From its January lows, lead is up 52% on the year to date. Not bad for a metal whose fundamentals looked neutral at best.

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The International Lead and Zinc Study Group recently convened in Portugal to deliver its forecast for the coming year. The group anticipates that, through the end of the month and year, supply will exceed demand in the global refined lead metal market by 42,000 metric tons. In 2017, the group predicts a closer balance, but still a surplus of 23,000 mt.

3M LME lead price hits a three year high. Source: MetalMiner analysis of fastmarkets.com data

The 3-Month LME lead price hits a three-year high. Source: MetalMiner analysis of Fastmarkets.com data.

Perhaps if you narrowed your view to lead’s supply/demand fundamentals you missed this rally. However, if you payed attention to the ongoing monster bull market in the metal complex, you shouldn’t have. Read more

Remember when Barack Obama defeated republican presidential nominee Senator John McCain? Or Usain Bolt’s first appearance in the Olympic games? Well… that’s how far back you need to go if you want to see zinc prices as high as they are now.

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Last week, zinc closed just short of $2,300 per metric ton on the London Metal Exchange, the highest level since early 2008. Zinc is the first industrial metal we can say that about (and possibly not the last one).

Zinc Hits an eight-year high. Source: MetalMiner analysis of fastmarkets.com data

Zinc hits an 8-year high. Source: MetalMiner analysis of Fastmarkets.com data.

Zinc markets moved into deficit this year following the shutdown of some big mines. The International Lead and Zinc Study Group (ILZSG) anticipates that global usage in 2016 will exceed production by 349,000 mt. In 2017, the market is expected to remain in deficit with the extent of the shortage forecast at 248,000 mt.

How our subscribers bought zinc this year

How our subscribers bought zinc this year. Source: MetalMiner analysis of Fastmarkets.com data.

Whether fundamentals justify zinc’s spectacular rally or not is debatable. What’s not debatable is that there is no way you can time your purchases by just looking at the fundamentals. You need to understand how prices move, or have someone do it for you. Read more

Copper has had a phenomenal run the last few weeks.

After being range-bound in the mid $4,000’s per metric ton for much of the summer, the runaway price caught many by surprise at the turn of the month, rising dramatically to peak at over $5,500/mt on the London Metal Exchange before easing back this week.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Many have put the surprise win of President-elect Donald Trump as the cause of Copper’s strength, but in reality the rise started before the date of the presidential election. Read more