Articles in Category: Non-ferrous Metals

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This morning in metals news, the Japanese steel industry’s output is expected to grow next year, lenders have a new plan for Essar Steel, and China’s zinc and copper outputs in November were at their highest since late 2014.

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Japanese Steel Sector Set to Ramp Up Output

According to the Japan Iron and Steel Federation, the country can expect to see increased crude steel output in 2018 and 2019.

According to Reuters, Kosei Shindo, the chairman of the Japan Iron and Steel Federation, said “I hope that crude steel output (for next business year) would exceed 10.6 million tonnes.”

A New Plan for Essar Steel

In its insolvency proceedings, lenders to Essar Steel have reduced the time allowed to resolve the firm’s default, according to a report by the Economic Times.

The “single stage” process, according to the report, means any interested bidder has to meet both the conditions to be considered by the bankers, according to the report.

China Zinc, Copper Output Up

China’s output of copper and zinc in November was at its highest since December 2014, according to Reuters.

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According to the report, China’s refined copper output increased 9.8% to 786,000 tons, while zinc production rose 7.5% to 603,000 tons.

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This morning in metals news, Chinese aluminum output fell to its lowest total since February 2015, Liberty House considers buying a large Rio Tinto smelter in France and copper approaches a two-week high.

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Chinese Aluminum Output Falls

Chinese primary aluminum production dropped for a fifth straight month, Reuters reported.

In fact, winter smelting restrictions saw output fall to its lowest in the country since February 2015, according to the report.

Liberty House Eyes Rio Tinto Smelter

According to Reuters, Liberty House is considering a bid for Rio Tinto’s aluminum smelter in northern France.

The Dunkirk plant is valued at around 200 million euros, according to Reuters sources familiar with the matter.

Copper Rises Near Two-Week High

A weakening dollar and positive Chinese manufacturing data saw copper rise on Thursday, Reuters reported.

The Chinese industrial sector grew faster in November than markets expected.

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London Metal Exchange copper traded at $6,760 a ton in official midday rings, according to the report.

We’re another month closer to the end of the calendar year, and there’s much to recap from the last month in metals.

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After four MMIs ticked upward for our November reading, five did so for our latest report.

Hitting some of the high points:

  • The biggest winners of the month were the Automotive, Construction and Raw Steels MMIs. Automotive picked up four points, while Construction and Raw Steels picked up five points apiece.
  • The Aluminum MMI tracked back down, losing four points after a five-point rise the previous month. As Irene Martinez Canorea wrote, a dropping LME aluminum price had much to do with the sub-index’s drop.
  • The Stainless MMI, meanwhile, fell five points on the month. In this case, a 10% decline in nickel prices contributed to the MMI’s fall. Trading volume for LME nickel is still strong, Martinez Canorea wrote, and the outlook for nickel remains bullish.

You can read about all of the aforementioned — and much more — by downloading the December MMI report below.

The Copper MMI dropped one point this month, primarily driven by a 0.6% drop in the LME copper price.

This comes as no surprise as base metal price increases have slowed in November, while LME copper prices saw a small pullback.

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Source: MetalMiner analysis of FastMarkets

During the first week of December, LME copper prices fell sharply. However, we can expect these movements in bullish markets as a mechanism for prices to digest previous gains.

Trading volumes also support the uptrend. LME copper prices remain well above May levels, when MetalMiner provided a “buy signal” to forecast subscribers.

Chinese copper output could increase by 300,000 tons in 2018. Some analysts suggest higher output together with a slowdown in the Chinese real estate market may result in a slight cooldown for copper prices.

However, no signs suggest a cooldown.

According to the International Copper Study Group (ICSG), the market could see a a 50,000-ton deficit for 2017 and a 105,000-ton deficit next year.

Copper Scrap vs. LME Copper

The drop in scrap prices this month appears sharper than the one for LME copper prices. Chinese scrap prices decreased by 2.71% this month. However, both LME copper and Chinese scrap copper do tend to follow a similar trend.

What This Means for Industrial Buyers

As copper prices remain bullish, buying organizations may want to “buy on the dips.”

For LME copper prices, buying organizations can also read more about longer-term copper price trends with our free 2018 Annual Outlook, or take a free trial now to the Monthly Outlook.

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Actual Copper Prices and Trends

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The Renewables MMI dropped 2.5% for the month of December, ending at a value of 78.

Here’s What Happened

  • Since our recalibration of this index back in May 2017 to better take into account cobalt price fluctuations, the Renewables MMI has been slowly but surely gaining ground the latter half of 2017, hitting a high of 84 in September.
  • Within this basket of metals and materials used in the renewable energy industry, the Big Heavy is the U.S. steel plate price. Yet from November to December, that price point only dropped a single dollar per short ton.
  • The China steel plate price, however, did move much more – increasing 4.3% on the month.

What’s Going On in the Background?

  • The biggest news for the renewables industry has been the controversial tax plan put forth by legislators and still awaiting final House/Senate reconciliation – mainly, the fact that the Base Erosion Anti-Abuse Tax (BEAT) has been kept intact in the latest version of the Senate bill.
  • As Sydney Lazarus wrote in MetalMiner last week, currently, “many companies have large multinational corporations finance wind or solar energy projects, and in return, give the latter the renewable energy credit that the government provides.” But the BEAT tax, which is meant to discourage multinationals from moving profits abroad — and which the Senate bill kept intact — would make the crucial solar investment tax credit (ITC) and wind production tax credit (PTC) “unusable for multinational banks and other corporations who have low tax rates,” according to this article.
  • It’s unclear if this move was intentional or not, but regardless, it injects huge uncertainty into the renewable energy industry as the bill hurtles toward law. (Some, such as American Wind Energy Association’s Peter L. Kelley, say it “could put an end to more than half of the country’s wind projects,” as reported by Lazarus.

What Metal Buyers Should Look Out For

  • Keep an eye out on steel plate’s raw material inputs — iron ore prices increased over the past month, as we reported in our December Monthly Buying Outlook, while coal prices decreased. Although steel plate prices appear a bit sluggish at the moment, China’s demand is something worthy of paying attention.

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The Construction MMI, tracking metals and raw materials used within the construction industry, surged 5.5% to a value of 95 for December.

Here’s What Happened

  • Every single price point comprising the Construction MMI — including ferrous, non-ferrous and scrap components from the U.S., Europe and China — rose as of Dec. 1, with the exception of U.S. steel bar fuel surcharges.
  • The biggest mover appeared to be the Chinese rebar price, spiking 17.7% from November to December.
  • We’ve breached new territory with this month’s reading. Not since May of 2012 has the Construction MMI performed this strongly.

What’s Going On in the Background?

  • Here’s what we wrote back in May: “We’re in the salad days for the U.S. construction sector, at least as far as 2017 is concerned.” According to the Associated General Contractors’ analysis, construction spending was at record levels for the second straight month in March,” as quoted by forconstructionpros.com. Well, after a bit of a summer slowdown, it’s looking even better this month to round out 2017 as a pretty great year for the sector.
  • The Commerce Department said last week “that construction spending increased 1.4 percent to a record high $1.24 trillion, the swiftest advance in five months,” according to Reuters, exceeding analysts’ expectations and driven by state, local and especially federal government spending.
  • To boot, the AIA announced mid-last month that “the monthly Architecture Billings Index (ABI) came in at a score of 51.7 in October, up 2.6 points from September’s score of 49.1.” The ABI is a leading economic indicator of U.S. construction activity, and “reflects a nine- to 12-month lead time between architecture billings and construction spending nationally, and regionally, as well as by project type,” according to the article linked above.

What Metal Buyers Should Look Out For

  • Interestingly, a longer-term ABI uptrend appears to be firmly in place — since 2012, the index looks to be achieving “higher highs” each time it peaks.
  • “As we enter the fourth quarter, there is enough design activity occurring that construction conditions should remain healthy moving through 2018,” said AIA chief economist Kermit Baker, Hon. AIA, in a press release, according to Architect Magazine.
  • MetalMiner analysts are generally bullish on both the industrial (especially base) metals complex and commodities overall, which can be seen directly in this month’s surges of our MMI sub-indexes such as Construction and Automotive.
  • Although prime contracting season usually starts in the November period and steel prices historically tend to rise this time of year, steel prices’ behavior has not shown enough strength to spur bullishness. Get more insight on that in our latest Monthly Outlook Report. (Free two-month trial here.)

Key Movers and Shakers: Exact Prices

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The Aluminum MMI dropped four points this month, falling to 95. The drop came on the back of lower LME aluminum prices for November. Aluminum prices decreased by 5.6% during this month.

MetalMiner expected this retracement because aluminum prices rallied since August, and broke our own resistance levels (upper price ceiling). When prices pull back, buying organizations can buy on the dips. Despite November’s price declines, the early days of December show price increases.

Source: MetalMiner analysis of FastMarkets

SHFE aluminum spot prices also decreased in November. The SHFE tends to follow LME trends. We could see the SHFE spot prices increase at any time.

Source: MetalMiner analysis of FastMarkets

Both LME and SHFE prices have traded sideways since the rally back in August, holding above the $1,970/mt level. Trading volumes still signal upward momentum, so buying organizations need to consider their longer-term buying strategies.

Macro-economics also support aluminum prices. November saw a higher CRB index (which we will cover in depth in an article tomorrow), driven by skyrocketing oil prices as well as other raw materials such as iron ore and alumina. Aluminum faces significant raw material price pressure. Generally, increasing raw material and gasoline prices result in aluminum price increases.

Gasoline prices. Source: MetalMiner analysis of Stockcharts.

MetalMiner previously reported that the Commerce Department announced a new self-initiated antidumping and countervailing duty investigation on imports of Chinese common aluminum alloy sheet at the end of November. The estimated dumping margin is in the range of 56.54% to 59.72% for Chinese imports.

Low-Carbon-Footprint Aluminum

Low-carbon aluminum is becoming more popular among carmakers. Low-carbon aluminum differs from traditional alloys by the way it is produced — using hydropower instead of high-emission fossil fuels. Low-carbon aluminum can cut emissions by half by changing the way aluminum is produced (averaging around eight tons of carbon dioxide in Europe and the U.S.). But producing and buying low-carbon aluminum is not free. Aluminum smelters will charge “green premiums” for the newest trend in aluminum. Will buying organizations be paying this new premium?

Aluminum Scrap

Another trend aluminum smelters have deployed involves using aluminum scrap instead of raw materials. Recycled aluminum requires only 5% of the energy used for the complete process. Recycled aluminum includes up to 75% of aluminum scrap, but cannot be used in every industry. The auto industry, for example, requires higher-quality aluminum.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese aluminum scrap prices increased and appear in a long-term uptrend since 2016. However, the latest drop in LME and SHFE aluminum prices also results in a drop in aluminum scrap prices. Chinese scrap prices decreased this month by 9.5%.

What This Means for Industrial Buyers

Despite aluminum prices dropping this month, aluminum remains bullish. Therefore, adapting the “right” buying strategy becomes crucial to reduce risks by knowing when to buy. Oil and gasoline prices have breached their sideways trend and have supported aluminum prices.

Actual Aluminum Prices and Trends

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MetalMiner’s Monthly Buying Outlook
report for December is now available!

Sharpen your sourcing strategies for buying aluminum, copper, nickel, lead, zinc, tin and multiple forms of steel, complete with our coverage of drivers, market commentary, polished charts and more.

If you’re a metals buyer in North America, this is the ideal report for you.

The report provides short- and medium-term industrial buying strategies for the rest of the metals that you buy, helping you avoid unnecessary spending.

This month, you’ll also learn:

  • Repercussions of the Tax Cuts and Jobs Act. The House of Representatives passed the bill in November, and the Senate followed suit on December 2. The legislation could have a big effect on the steel and manufacturing industries.
  • What was behind the recent skid of the DBB industrial metals index
  • Why the U.S. dollar’s downtrend remains stronger than the recent two-month uptrend, and why buying organizations should expect even more movement
  • Why steel prices failed to breach resistance levels in November

Individuals, small- and mid-sized manufacturers are encouraged to subscribe to our annual buying outlook. You can sign up at any time and receive the next 12 monthly reports emailed directly to you. Learn more and subscribe today!

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This afternoon in metals news, the U.S. renewable energy industry has reason to worry about the Republican tax proposal, union members at the Quebrada Blanca copper mine in Chile move closer to a strike, and precious metal prices fall.

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Renewables Market Pushes Against BEAT Tax

While the Republicans’ latest attempt at an overhaul of the U.S. tax system is receiving the usual praise and criticism, the renewable energy sector is concerned – and understandably so. As Dino Grandoni explains in the Washington Post, the bill may inadvertently end investment in wind and solar energy.

Currently, many companies have large multinational corporations finance wind or solar energy projects, and in return, give the latter the renewable energy credit that the government provides. But these credits may be cancelled out as part of the base erosion anti-abuse (BEAT) tax, which is meant to discourage multinationals from moving profits abroad.

According to the American Wind Energy Association’s Peter L. Kelley, the BEAT tax – if it is not amended to exempt renewables credits – could put an end to more than half of the country’s wind projects.

Strike Brewing at Quebrada Blanca Mine

A quarter of the workforce at the Quebrada Blanca copper mine in Chile moved closer to a strike, as the 106-member union rejected Canadian miner Teck Resources’ contract offer on Wednesday, Reuters reports. Ninety-six percent of the union voted to reject the offer and strike, said the president of the union. Read more

The U.S. Department of Commerce. qingwa/Adobe Stock

The U.S. Department of Commerce announced an action that it hasn’t taken in over a quarter of a century.

On Tuesday, the department announced it had self-initiated countervailing duty (CVD) and anti-dumping (AD) investigations with respect to Chinese common alloy aluminum sheet.

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“These historic investigations, the first in over a quarter century, were self-initiated pursuant to the authority granted to the Secretary under the Tariff Act of 1930, as amended,” the Department of Commerce said in a prepared statement.

Secretary of Commerce Wilbur Ross underscored the administration’s goal of targeting what he called “unfair trade practices.”

“President Trump made it clear from day one that unfair trade practices will not be tolerated under this administration, and today we take one more step in fulfilling that promise,” Ross said in the release. “We are self-initiating the first trade case in over a quarter century, showing once again that we stand in constant vigilance in support of free, fair, and reciprocal trade.”

According to the department, imports of common alloy sheet from China were valued at an estimated $603.6 million in 2016.

Typically, such investigations are prompted by petitions filed by entities within the domestic industry. The secretary of commerce, however, has the authority to self-initiate a CVD or AD investigation if it is determined that such a probe is warranted.

The department last self-initiated a CVD investigation in 1991, when it investigated softwood lumber from Canada. The last self-initated AD case came in 1985, when the department looked at semiconductors from Japan.

According to the release, the merchandise subject to investigation is “common alloy aluminum sheet, which is a flat-rolled aluminum product having a thickness of 6.3 mm or less, but greater than 0.2 mm, in coils or cut-to-length, regardless of width.” The material is typically used in building and construction, transportation, basic electrical applications, and appliances.

“The Department has self-initiated these investigations based on information indicating that the United States price of common alloy sheet from China may be less than the normal value of such or similar merchandise and that imports of common alloy sheet from China may be benefitting from countervailable subsidies,” the department release added. “The Department also has evidence that imports of common alloy sheet from China may be materially injuring, or threatening material injury to, the domestic industry producing common alloy sheet in the United States.”

The domestic aluminum industry applauded the announcement from the Department of Commerce.

“The Aluminum Association and its members enthusiastically support the decision announced today by the Department of Commerce and Secretary Wilbur Ross to self-initiate unfair trade investigations concerning imports of common alloy sheet from China,” said Heidi Brock, president and CEO of the Aluminum Association, in a prepared statement. “We are extremely grateful for the efforts and leadership of Secretary Ross in vigorously enforcing the U.S. trade laws.

“The Aluminum Association and its members seek to help ensure that common alloy sheet from China entering the United States is fairly traded.” 

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Final determinations by the Department of Commerce in the cases are scheduled for April 2018 for the CVD investigation and July 2018 for the AD investigation.