Articles in Category: Non-ferrous Metals

So, will aluminum receive a similar tariff shield as steel has enjoyed in India? The shield refers to a minimum import price (MIP) that is generally imposed on cheap commodities entering India, just like cheap steel from China.

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In the case of aluminum, too, the main “culprit” seems to be China. Yet, the stance of the Indian government vis-à-vis an MIP is still not clear, as various ministries concerned with the development have given divergent opinions. Read more

There has been considerable concern in the U.S. and elsewhere that China’s exports of primary aluminum are damaging global prices. China would maintain that it imposes an export duty on primary aluminum explicitly to prevent the export of primary metal, largely seen as exporting energy due to the high power cost associated with producing each metric ton of the metal.

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Many outside China believe a considerable amount of metal leaks out of the country in the nominal form of semi-finished products which avoid the export duty, and, indeed, attract a value-added tax refund, only to be subsequently remelted. Large volumes of exports from China make their way to Vietnam, and it is believed much of this material is remelted in the country before being sold.

The Impact of Chinese Aluminum

However, our concern in this article is not so much the impact of primary metal leakage, considerable as it may be, but rather the growing threat of Chinese value-add product manufacturers and the impact they are having on western firms that had previously had the field cornered for automotive and aerospace — to name but two high-tech applications for aluminum — applications.

Chinese material at the end of the last century was considered a joke in terms of quality, but over the first 10 years of this century the country has invested heavily in European and Japanese extrusion, rolling and heat treatment plants and equipment. By the beginning of this decade, Chinese extrusions and commercial sheet/plate were being given equivalence to material from many other sources such as Russia, Turkey, South Korea, Taiwan and other locales.

Are aluminum slabs welded together really "deep-processed extrusions?"

Are aluminum slabs welded together really “deep-processed extrusions?”

Such material is still sold at a discount to European or North American semi-finished products, but its growing penetration and the willingness of major distributors to hold a proportion of their inventory as Chinese material, speaks volumes for its growing acceptance, particularly in terms of quality.

The Lucrative Automotive Market

Still, while China — and to a lesser extent mills in places like Malaysia, Turkey and other locales — gradually ate into western mills’ commodity products, those same western mills moved upstream, investing heavily to meet growing demand for automotive sheet and castings, aerospace sheet, plate and extrusions. Read more

Chinese authorities have frozen money invested by commodity trader Trafigura in a copper smelter there and Venezuela claims that an Organization of Petroleum Exporting Countries  (OPEC) agreement to curtail production will come together soon.

Trafigura Sees its Chinese Copper Smelter Stake Frozen

Chinese authorities have frozen part of commodity trader Trafigura’s investment in a Chinese copper smelter as part of a years-long probe into the Swiss firm’s oil trading, according to documents from the police and banks reviewed by Reuters.

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In October, police in the northern Chinese city of Cangzhou, froze $32.9 million Trafigura Pte Ltd had injected into the metals project, a joint venture with Chinese metals producer Jinchuan Group Co Ltd  in the southwestern city of Fangchenggang, documents dated Oct. 28, 2015 show.

OPEC Output Deal Imminent?

Venezuelan President Nicolas Maduro said on Sunday that OPEC and non-OPEC countries were close to reaching a deal to stabilize oil markets and that he aimed for a deal to be announced this month.

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OPEC members may call an extraordinary meeting to discuss oil prices if they reach consensus at an informal gathering in Algiers this month, OPEC Secretary-General Mohammed Barkindo said during a visit to Algeria, the country’s state news agency, APS, reported on Sunday. Venezuela’s economy has been facing complete collapse for more than a year now as oil prices have seen prices fall by more than half during that time.

The industrial metals complex saw prices slip nearly across the board in August as volatility
returned to stock markets and investors lost confidence in central banks’ ability to increase
growth.

MM-IndX_TRENDS_Chart_September2016_FNL-TOPVALUE100

Even the vaunted Global Precious MMI, which has enjoyed large gains this year due to safe
haven status, dropped this month. It experienced a 4.5% loss. Our Construction MMI and the Grain-Oriented Electrical Steel MMI indexes saw increases this month, but every other sub-index either saw a 2-5% loss or held flat.

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This was somewhat expected as metals such as steel and aluminum remain in a global oversupply situation and metal prices don’t move in a straight line. They zig-zag. Our metal price benchmarking service has thousands of transaction prices to reference as evidence of that.This could be merely a one-month correction or it might signal that the weakness in metals markets is finally denting the bull run of strong price performers such as gold and platinum. Stay tuned next month for more.

SSAB released a new high-temperature steel in its Hardox line, well suited to abrasive conditions in hot environments, back in April.

But evidently they REALLY want buyers and manufacturers to know about it, as their message hit the wires again today.

According to SSAB Product Manager Jenny Brandberg Hurtig, Hardox HiTemp wear plate’s “high temperature performance is achieved by using high-quality raw material in combination with a carefully controlled manufacturing process.

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Hardox HiTemp can be cut, welded, machined and cold formed by the same kind of workshop machinery and technology as other Hardox grades and conventional steel.

All this adds up to making Hardox HiTemp an ideal choice for high temperature wear applications in many areas—particularly in process industries such as steel, cement and coal power plants, and recycling and asphalt industries.”

AEC Ups the Fight vs. China Aluminum Subsidies

Read more

Copper prices have been on the decline this summer, depressed by reports of oversupply and, worse, an exodus of inventory from top consumer China.

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Indeed, we recently wrote about the rise of metal coming out of Shanghai bonded warehouses ending up in London Metal Exchange stocks around Southeast Asia, leading to a 60% increase in LME stocks last month.

Why Are Exports Slowing?

We speculated this was probably a result of slowing domestic demand and unwinding of financing deals. But a recent Reuters article reports that exports have slowed and imports of refined copper have picked up in China after the price plunged to 12-month lows last month.

Reuters suggests this is due to price declines taking copper into territory where investors once again feel it is oversold and, on the back of a pick-up in demand after the summer, ripe for restocking.

Source Reuters

Source: Reuters

The article states a flood of new supply will still prove too much for the copper price and 2017 will see prices remain under pressure. Read more

There are conflicting messages out there.

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Last month, Business Insider ran a piece saying “Recent movements in copper inventories highlight the lack of significant demand for the metal, particularly in the ever-important Chinese market.”

Shanghai Futures Exchange inventories are falling while, London Metal Exchange inventories are rising, suggesting metal is flowing out of Shanghai bonded warehouses into local Asian LME sheds. The contango has grown, allowing traders to store and hedge metal on the LME supporting the move but the fact that refined metal is flowing out China suggests industrial demand is weak. BMI calls the move a red flag and says it expects imports of refined metal to fall in the coming months.

Copper_Chart_September-2016_FNL

Copper supply in LME sheds might be up, but our copper MMI is down.

Yet, just last week, better-than-expected official industrial PMI numbers unexpectedly rose to the highest level since 2014, according to Bloomberg, resulting in a bounce in copper prices, share prices in Hong Kong  and London and a fall in bond prices.

What’s Up With Copper?

So, what does this mean for copper? Was the export surge a temporary phenomenon prompted by the market moving into contango? Or is this truly a sign of an underlying weakness in demand?

China imported a record amount of refined copper in the second half of 2015, partly fueled by a relaxation of credit controls and encouraged by Beijing’s stimulus plans. Domestic refined production also increased significantly, but refiners are now cutting back and appear well supplied with concentrate in what remains an oversupplied market. Read more

Our Copper MMI fell 5% during the month of August. The price drop is no surprise. Copper has struggled near $5,000 per metric ton multiple times this year and as we pointed out last month, buyers could expect prices to retrace in August.

Copper_Chart_September-2016_FNL

Weaker Chinese imports over the past few months and the bearish calls of some major banks have contributed to the recent price fall. Unlike other base metals, sentiment about copper is still sort of bearish, making this metal the worst performer among its peers this year. In our monthly outlook, we haven’t recommended buying copper forward yet.

Chinese Imports Lose Momentum

China isn’t self-sufficient when it comes to its copper needs and is the largest importer of the red metal. Rising Chinese imports signals increasing demand for the metal. In metals such as zinc and nickel, we’ve witnessed a surge in Chinese imports this year, adding fuel to the bull (market).

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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.

The Non-Ferrous Laggard

Unlike zinc and nickel, remember we pointed out earlier this year that the increase in Chinese copper imports in Q1 wasn’t exactly backed by end user demand. Some of the Chinese refined copper imports found their way into the Shanghai Futures Exchange system, with inventories rising to record levels.

Now, as Chinese refined imports start to taper down, we are witnessing inventory buildup in the London Metal Exchange‘s warehouse system, with copper stocks in the LME rising to a one-year high. Combining LME, SHFE and Chinese bonded stocks, most would agree that global copper inventories have risen this year, keeping a lid on prices.

Supply Runs High

Copper is among the metals wherein top consumer China actually gains if prices stay lower, unlike aluminum or steel. The country is the largest copper importer. Therefore, lower copper prices bode well for China. This also helps explain why Chinese copper imports rose earlier this year. When prices are low it makes sense for China to import more copper instead of producing more domestically.

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Another factor weighing down on investors’ sentiment is the recent bearish calls by investment banks such as Goldman Sachs. The bank notes that the majority of the major global copper producers have already increased output by 5% during the first half, and it estimates that those same producers will ramp up supply by 15% over the next year.

What This Means For Metal Buyers

Any price rally could continue to be limited this year, especially if Chinese demand does not pick up and we see the supply increase that some banks are forecasting. On the other hand, an improving sentiment in the metal complex this year should support and keep copper prices from experiencing significant declines.

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Source: Ronnie Chua/Adobe Stock

Source: Ronnie Chua/Adobe Stock

China disrupted the global aluminum market when it became the world’s biggest producer of the metal, creating a surplus that forced competitors to shutter as profits plummeted.

Now, China wants to expand its reach and make higher-value products with aluminum and took a big step toward doing so last week with the acquisition of Cleveland-based Aleris Corp.

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According to a report from Bloomberg, Chinese aluminum entrepreneur Liu Zhongtian acquired Aleris for $2.3 billion and gives him greater access to technology primarily enjoyed by the Western world, in addition to buyers that include aerospace manufacturer Boeing Co. and automakers like Audi.

“This was a different kind of move by a Chinese company,” Yi Zhu, analyst at Bloomberg Intelligence, told the news source. “Previously, China went after raw-material assets abroad, but this is about going to the downstream, and it fits with the Chinese government’s goals to upgrade manufacturing and the economy.”

China emerging as the world’s biggest producer of aluminum also spelled doom for Alcoa Inc., a longtime domestic producer for more than 100 years, which closed smelters in the United States.

Zhongtian Embroiled in U.S. Anti-Dumping Cases

Our own Jeff Yoders wrote on this acquisition last week and noted Zhongtian’s issues with the United States. “The cases against Zhongwang allege that the firm has been selling aluminum extrusions at below cost and that the Chinese entity receives state aid in the form of financing and other benefits giving it an unfair advantage. If Liu had a U.S. company, though, he could produce extrusions here and avoid the entire mess,” Yoders wrote.

MetalMiner’s aluminum prices provide accurate benchmarks for 3003-H14 sheet. They are based on a proprietary database of more than 31 million benchmarks collected from more than 1,100 companies operating in 19 industries.

 

Aluminum-industry representative Jeff Henderson says he is convinced that China Zhongwang Holdings Ltd., a Chinese aluminum giant controlled by billionaire Liu Zhongtian, tried to evade U.S. tariffs by routing aluminum through Mexico to disguise its origins, a tactic known as transshipping.

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Nearly one million metric tons of aluminum was discovered stockpiled neatly stacked behind a fortress of barbed-wire fences in rural San Jose Iturbite, Mexico two years ago. The stockpile is worth around $2 billion and represents roughly 6% of the world’s total inventory and it quickly became an obsession for the U.S. aluminum industry.

“My Moby-Dick has been Zhongwang,” Henderson, president of U.S. trade group the Aluminum Extruders Council told the Wall Street Journal.

U.S. executives contend that the mysterious cache was part of a brazen scheme by one of China’s richest men to game the global trade system.

Zhongtian denies any connection to the Mexican aluminum or transshipping, but company records, trade documents and legal filings reviewed by The Wall Street Journal, along with interviews of people who have done business with Mr. Liu, raise doubts about his account.

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The Commerce Department says it is investigating the Mexican aluminum’s origin now as part of a slew of trade complaints by the domestic metals industry against China, many of which include allegations of transshipping.