Articles in Category: Non-ferrous Metals

An interesting report by Reuters explores the vagaries of supply from Indonesia and the Philippines, the world’s two largest nickel producers — and, unfortunately for the nickel price, it would seem two of the least reliable suppliers.

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Source: Reuters

By far and away the most volatile supplier has been the Philippines.

Former Secretary of Environment and Natural Resources Regina Lopez’s mining crusade and resulting export ban last year had a cataclysmic effect on output from which the country has not recovered, despite her replacement in May by Roy Cimatu, Reuters reports.

The latest assessment by the International Nickel Study Group (INSG) notes the country’s nickel production fell by 15% to 101,000 metric tons in the first five months of this year. Shipments of nickel ore to China have also been flowing at a reduced pace. Chinese imports from the Philippines slid by 6% over the first half of the year, according to Reuters.

Indonesia’s supply constraint, on the other hand, was driven by a policy to achieve greater value add in-country, started by a 2014 export ban on unprocessed ore which has only recently seen a partial rollback, as progress has been made in setting up nickel pig iron plants in the country. There are now multiple nickel “smelters” producing nickel pig iron or equivalent intermediate product in Indonesia, Reuters reports, quoting INSG estimates that mined production has surged 89% to 122,000 tons in the January-May period.

Meanwhile, the market has been responding to these political proclamations and about-turns with dramatic changes in short and long positions.

Reuters quotes LME Commitment of Traders figures to support price movements and investor position taking. The 18% nickel price rally over the last month to $10,445, a five-month high, followed investors flocking back to the market driving net long positions to 32,363 lots, compared with a net short of 887 lots on May 15. The return to the market seems to have been on the back of the nickel price’s fall to a year’s low of $8,680 and the widespread belief — supported by the closure of half of Indonesia’s processing plants — that refining becomes uneconomic below a nickel price of $9,000 per metric ton.

If $9,000 is the price floor based on current technology, what is the upside, stainless consumers will be asking?

In part, that depends on the potential for constraints to supply.

Demand remains solid. Reuters states Chinese imports of Indonesian “ferronickel” (nickel pig iron) broke through the 100,000-ton barrier in May and stayed there in June, while cumulative imports in those two months were 270,000 tons (bulk weight), exceeding total imports in 2015.

Demand, therefore, remains solid, but so too does supply. Netted between them, the two countries produced 223,000 tons of nickel in the first half of this year, up from 184,000 tons in the  same  period of 2016, according to the INSG. China’s imports of nickel raw materials, ore and concentrates, were also up in the first half of this year by 4% (not counting the separate flow of Indonesian ferronickel).

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Providing Cimatu continues with his conciliatory approach to miners, the market is likely to conclude exports are going to continue. The market has a floor at $9,000 per ton, but according to Reuters it could also be capped by rising supply as both countries ease restrictions and supply remains adequate.

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This morning in metals news, the U.S. aluminum industry expressed support for the U.S. Department of Commerce’s ruling that Chinese aluminum foil is benefiting from government subsidies, Indian steel company Tata Steel is expected to detach its U.K. pension scheme from its business and, in consumer products news, a recent report says copper cocktail mugs may be causing food poisoning.

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DOC Rules Chinese Aluminum Foil Benefits From Government Subsidies

The U.S. aluminum industry came out in support of a U.S. Department of Commerce ruling Tuesday, which said that Chinese aluminum foil was benefiting from government subsidies.

According to the preliminary determination of the countervailing duty investigation, Chinese exporters of aluminum foil received countervailing subsidies 16.56 to 80.97%, Secretary of Commerce Wilbur Ross announced Tuesday.

Per a DOC release, the Commerce Department “will instruct U.S. Customs and Border Protection to collect cash deposits from importers of aluminum foil from China based on these preliminary rates.”

“The United States is committed to free, fair and reciprocal trade, and will continue to validate the information provided to us that brought us to this decision,” Ross said. “The Trump Administration will not stand idly by as harmful trade practices from foreign nations attempt to take advantage of our essential industries, workers, and businesses.”

Per the release, imports of aluminum foil from China last year were valued at an estimated $389 million.

The Aluminum Association applauded the DOC determination.

“The association and its foil-producing members are very pleased with the Commerce Department’s finding and we greatly appreciate Secretary Ross’s leadership in enforcing U.S. trade laws to combat unfair practices,” said Heidi Brock, President and CEO of the Aluminum Association, in a prepared statement. “This is an important step to begin restoring a level playing field for U.S. aluminum foil production, an industry that supports more than 20,000 direct, indirect, and induced American jobs, and accounts for $6.8 billion in economic activity.

“U.S. aluminum foil producers are among the most competitive producers in the world, but they cannot compete against products that are subsidized by the Chinese government and sold at unfairly low prices.”

The ruling stems from the March 9 filing of antidumping and countervailing duty petitions by The Aluminum Association’s Trade Enforcement Working Group. The petition marked the first time the Aluminum Association has filed unfair trade cases on behalf of its members in its nearly 85-year history, according to the Aluminum Association release.

Tata Steel Inches Closer to Potential Merger

According to a BBC report, an announcement from Tata Steel regarding the separation of its British pension scheme from its businesses could be coming within days.

The pension scheme has been a “significant barrier” in merger talks between Tata and German steel producer ThyssenKrupp, according to the report.

According to the BBC, Tata “has been in negotiations with pension regulators and trustees” of the £15 billion British Steel Pension Scheme.

Health Officials Say Copper Cocktail Mugs Could Cause Food Poisoning

A recent report might give drinkers of Moscow Mules pause.

CBS News reported health officials in Iowa made the declaration that copper cocktail mugs — often used to drink the popular Moscow Mule cocktail — might cause food poisoning “after examining the poisonous nature of copper and copper alloys mixing with food.”

Per an advisory bulletin from Iowa’s Alcoholic Beverages Division, the federal Food and Drug Administration’s Model Food Code prohibits copper from coming into direct contact with foods that have a pH below 6.0 — for example, vinegar, fruit juice or wine.

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The Moscow Mule, an increasingly popular cocktail, includes lime juice.

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For three months, MetalMiner has claimed a sideways trend for aluminum. This sideways trend could both signal a market top or a price consolidation, and a continuation pattern of the bullish market that started last year.

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The price increase in aluminum has coincided  with heavy trading volume, signaling a breakout of a price consolidation. Thus, we could see a bullish uptrend for aluminum, which means increasing aluminum prices.

Source: MetalMiner analysis of FastMarkets

As previously explained by MetalMiner, buying in a bullish market means buying organizations will want to identify opportunities to buy forward (hedge).

This new price increase, together with other strength in LME base metals (such as copper), may be the start of a new uptrend for aluminum.

The U.S. dollar has also continued to show weaknesses this year, providing a lift to base-metal prices. The CRB index is still in a long-term downtrend, but has shown a slight recovery in the short-term trend. The DBB index is currently in an uptrend, both for the long- and short-term.

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Buying organizations may want to buy forward given aluminum price dynamics, together with trading volume.

For more insight into forward buys and hedging, subscribe to our Monthly Metal Buying Outlooks.

The Aluminum MMI inched two points higher in July, returning to 2015 levels.

The Aluminum MMI increase was driven by a  5% increase in Chinese primary aluminum. The LME price inched up by 1%, contrary to other base metals that have experienced higher price increases this month.

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Analysis of supply and demand might suggest quite a bullish outlook for aluminum. According to a recent Hydro aluminum quarterly report, global primary aluminum production through Q2 of this year saw a .492 million metric ton deficit. However this deficit needs to be weighed against increased Chinese aluminum smelting capacity of up to 2.39 million metric tons this year, according to a recent article in Hellenic Shipping News.

Thus, we could see an oversupply situation.

However, going back to an earlier article on aluminum price direction, as expected prices have stayed between the two limits of what is called a wedge formation. Aluminum prices have traded  in a sideways trend since April. As stated above, aluminum prices, contrary to other base metals, have not jumped in July.

Aluminum prices tried to climb but instead, retraced back again with heavy selling volume, which commonly signals price weakness.

Source: MetalMiner analysis of FastMarkets

We would expect to see aluminum prices climb and remain in a bullish market.

The Gasoline-Aluminum Correlation

Buying organizations have told MetalMiner gasoline prices are correlated with aluminum prices.

Source: MetalMiner analysis of Fastmarkets and Trading Economics

Analysis of the two charts together suggest indeed the general trends move in tandem. Aluminum prices rose at the end of 2016, as did gasoline prices. It should not come as a surprise to MetalMiner readers that the two prices are correlated.

MetalMiner carefully considers overall commodity price trends for individual metal market analyses, of which oil is an important element for commodity analysis. When oil — and, therefore, gasoline — prices go down, aluminum prices tend to follow the same trend.

The longer-term analysis of gasoline prices reveals a sideways trend, which began during the spring of 2016.  What did the trend for aluminum look like compared to gasoline for the same time period? It looks the same!

The conclusion: Gasoline prices and aluminum prices are correlated.

However, when looking at shorter time periods, the degree of the price movements may be dissimilar. One can see that in the chart below. Gasoline looks like a good barometer for longer term correlation with aluminum but less so for short-term fluctuations:

What This Means for Industrial Buyers

Though it’s tempting to assume that the two-point MMI increase suggests a bullish outlook, we would like to see aluminum ingot prices break out of a sideways trend with increased trading volumes before claiming a bullish market.

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Actual Aluminum Prices and Trends

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This morning in metals news, President Donald Trump might be close to a decision on how to deal with what are considered unfair Chinese trade policies, environmentally friendly aluminum produced by hydro-powered smelters is coming at a hefty price tag and aluminum got a positive boost Wednesday that might prove short-lived.

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Trump Could be Close to Decision on China Trade

According to a Reuters report, a Trump administration official said President Trump is close to a decision on how to respond to Chinese trade practices he considers unfair.

While the results of the Section 232 investigations into steel and aluminum imports have yet to be announced, Reuters reports Trump might ask U.S. Trade Representative Robert Lighthizer to initiate a Section 301 investigation of Chinese trade practices. A Section 301 investigation offers the “authority to enforce trade agreements, resolve trade disputes, and open foreign markets to U.S. goods and services.”

Section 301 was most recently used this past December by the Obama administration in the long-running dispute over the EU’s ban on U.S. beef, which dates back to 1989.

‘Green’ Aluminum to Cost a Lot of Green

Hydro-powered aluminum smelters producing so-called “green” aluminum are charging quite a bit for their product, according to a Reuters report.

Why? It’s partly because industrial consumers are under pressure to reduce their carbon footprints, so demand is high.

Big names like Norway’s Norsk Hydro, U.S.-based Alcoa, Russia’s Rusal and London-listed Rio Tinto all view this green wave as good news, Reuters reports.

Will more and more companies get on board with aluminum produced by more environmentally friendly processes? It’s safe to say that demand will likely only continue to grow in this sector (and for greener products and processes, generally).

Aluminum Gets a Boost, But It Might Not Last

Continuing with the aluminum thread, the metal got a boost Wednesday on news of expected capacity cuts, Reuters reported.

According to Reuters, the aluminum price moved up because of expectations of Chinese capacity cuts. However, as has been mentioned here before, the aluminum momentum might not last, as the capacity cuts might just end up being wiped out by new capacity.

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For example, Hongqiao Group plans to shut more than 2 million tons a year of outdated smelter capacity, Reuters reported — but after new investments, capacity will likely remain around current levels.

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This afternoon in metals news, a recent survey of automakers indicates aluminum’s use in vehicles will grow in a big way over the next decade, U.S. steel production for the week is down slightly from the previous week and copper keeps on soaring.

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The Rise of Aluminum

According to a recent survey of automakers released by The Aluminum Association and conducted by Ducker Worldwide, automakers expect usage of the light, durable metal to increase significantly in the manufacturing of automobiles.

Total aluminum content for North American lightweight vehicles will increase to nearly 9 billion pounds, reaching 565 pounds per vehicle (PPV) and representing 16% of total vehicle weight by 2028, according to the survey results.

“As our automotive customers embrace a multi-material approach to new car and truck design, that directly translates to increased amounts of aluminum,” said Heidi Brock, president and CEO of the Aluminum Association, in the release. “On top of 40 years of uninterrupted growth, the aluminum industry is experiencing a level of sustained growth not seen before in any market or product sector. However, the true winners of this change are American consumers who can choose next-generation cars and trucks that are high performing, efficient, safe, sustainable and more fun to drive.”

According to the release, the expected rise in aluminum use is “consistent with the emerging trend of automakers transitioning to a multi-material vehicle (MMV) design approach, choosing aluminum for doors, hoods and trunk lids, body-in-white, bumpers and crash boxes.”

Steel Production Has Small Week-Over-Week Dip

U.S. steel production dipped 0.2 percent from the week ending July 22 to the week ending July 29, according to data from the American Iron and Steel Institute (AISI).

Approximately 1.67 millions tons were produced last week, compared with 1.77 million tons during the week ending July 22.

However, the July 29 total is a significant step up from total production for the same week in 2016. Production last week was up 6.1% from the same week in 2016.

Copper Continues Surge

Copper continues to have a great 2017, recently hitting its two-year peak. According to CNBC, the metal jumped 7% in July alone.

A global supply deficit and a flagging dollar have supported copper prices this year.

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While some think copper could keep its momentum in the short term, many analysts predict a slowdown as the year progresses.

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This morning in metals news, copper hits a two-year high, economic signals in July for China were a bit of a mixed bag and the London Metal Exchange continues a balancing act between tradition and change.

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Copper Reaches Highest Point in 2 Years

It’s been a big year for copper.

Copper reached a two-year peak on Monday, partially a result of solid manufacturing data in China, Reuters reported.

LME copper reached $6,431 per ton, its highest since May 2015.

Construction Up in China

Speaking of China, July saw a dip in factory growth but a surge in construction, Reuters reported.

China’s Purchasing Managers’ Index (PMI) remained above 50, however, as the Chinese government spent money on construction, fueling demand for building materials.

The Chinese steel industry, for example, had its strongest month of growth since April 2016.

Changing Times at the LME

Matthew Chamberlain became the boss of the world-famous London Metal Exchange at age 34.

A lot has changed for the LME, which was founded in 1877.

The exchange was sold to HKEX in 2012, and is currently engaging in efforts to bring back volumes, The Guardian reports.

The so-called “ring” where LME traders do their work is governed by a set of long-standing rules, like the prohibition on chewing gum. According to the report, Chamberlain says those rules aren’t likely to change.

However, he also acknowledges that the LME needs to be prepared to deal with changing demands — for instance, for cobalt and lithium to be used in electric car batteries.

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Copper prices jumped to a five-month high on Tuesday. Chinese positive data (like the PMI and economic growth) and supply concerns have driven copper market sentiment, increasing the number of copper buyers and, therefore, the metal’s price.           

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Source: FastMarkets/MetalMiner analysis

Trading volumes,  for the first time this year, support the uptrend. Even if it is soon to be bullish on copper, copper could experience some additional price increases following this new uptrend. Investors  seems to be willing to buy copper. In particular, Chinese buyers have bought copper  based on lower stocks due to supply concerns, which also supports copper prices. 

MetalMiner indicated a ceiling price for copper at $6,000. Since the beginning of the year, copper prices have traded below this level. However, copper prices broke this psychological ceiling twice in July, encouraging traders — who actually move copper prices— to buy more copper.

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Based on historical analysis, when copper prices breakout over $6,444/metric ton and are supported by high trading volumes, that could signal a new long-term uptrend. Buying organizations should watch the U.S. dollar and industrial metals, very closely.  

A deeper analysis is discussed in detail in our Monthly Metal Buying Outlooks

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This morning in metals news, a team of researchers has developed a magnesium alloy that is billed to be at least 1.5 times stronger than aluminum sheet metal, copper is up and one analyst writes that China should not be the primary focus of the U.S. steel industry.

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A New Metal

Aluminum is renowned for its many qualities, including its strength, light weight and durability.

Now, scientists have developed a new magnesium alloy that appears to be even stronger than aluminum sheet metal.

According to a phys.org report, a team at NIMS and Nagaoka University of Technology has developed a high-strength magnesium sheet metal that “has excellent formability comparable to that of the aluminum sheet metal currently used in body panels of some automobiles.”

According to the report, the new magnesium alloy is lighter than aluminum and composed of common metals, making it a low-cost material.

Copper Gets a Boost

Copper rose Monday on news of supply disruptions and a weak dollar, according to Reuters.

The metal crossed the $6,000 dollar mark while the U.S. dollar approached 13-month lows.

Elsewhere, halting of mine operations also pushed prices up. In Chile, talks last week fizzled between union workers and management at the Zaldivar copper mine.

According to the report, the government-mediated talks will continue into this week.

China’s Not the Problem?

Ever since the Trump administration announced Section 232 investigations into steel and aluminum imports, China has been the primary focus. Chinese excess capacity, the administration and many in the U.S. aluminum and steel industries argue, has driven prices down worldwide and negatively impacted U.S. primary producers.

Clyde Russell, however, writing for Reuters, argues that China isn’t the U.S.’s biggest obstacle when it comes to strengthening its domestic steel industry.

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Russell points to statistics showing China’s relatively small U.S. market share, which even lags behind fellow Asian countries Japan, South Korea and India. In May, China was the 10th-largest supplier of steel products to the U.S., Russell writes.

Russell argues that rather than looking at China, the U.S. should focus on fellow North American Free Trade Agreement (NAFTA) partners Canada and Mexico, which exported significantly more steel in May to the U.S. than did China.

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Before we dive into the weekend, let’s take a look back at the week in metals news:

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  • Our Stuart Burns started out the week with a piece on confirmation bias and how those in the media and metal-buying communities can sometimes let bias affect their interpretation of data.
  • What’s the diagnosis for the ailing U.K. steel industry? According to Burns, it’s a product of a lack of government support and global oversupply. A recent report showed that the U.K. steel industry has declined in monetary output value by 30% from 1990 to 2013.
  • In case you missed it, our July MMI report has long been in the books. You can download it here.
  • What did the recent G20 summit in Germany mean for India? Our Sohrab Darabshaw touched on the subject this week.
  • What’s up with oil prices? Unsurprisingly, as with the metal markets, prices are so low because there is just so much of the stuff out there. Burns dug deeper into oil price trends in a piece earlier this week.
  • What’s a Section 332? In short, it’s a fact-finding investigation by the United States International Trade Commission, which recently conducted a large-scale look into the competitive factors affecting the U.S. aluminum industry.
  • Another big story, the ongoing debate regarding a potential renegotiation of NAFTA, got an update this week when it was announced that the U.S., Canada and Mexico will come together for talks beginning Aug. 16.

Free Download: The July 2017 MMI Report