Articles in Category: Precious Metals

Another month has come and gone — now it’s time to take a look back at what’s happened in the world of metals. 

In August, all 10 of our MMIs saw upward movement. That changed the following month, when eight of 10 MMIs fell (albeit several of them fell by small amounts).

For our November MMI (tracking October’s activity), four of the MMIs moved up, five moved down and one held flat (the Automotive MMI).

Hitting some of the high points:

  • It was a big month for stainless steel. The Stainless MMI surged by seven points, hitting 70, up from the October reading of 63.
  • Aluminum also had another strong month, continuing what has been a very strong 2017 for the metal. The Aluminum MMI hit its highest reading, 99, in the history of the MMI series.
  • The doctor was in the house this past month (Dr. Copper, that is). The Copper MMI jumped four points.

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

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Before we head into the weekend, let’s take a look back at the week that was.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Free Sample Report: Our Annual Metal Buying Outlook

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Here’s What Happened

  • MetalMiner’s Global Precious MMI, tracking a basket of precious metals from across the globe, ticked back up a point to 87 for the November reading, a 1.2% increase. After a sizable dropoff last month, it looks as though this sub-index is crawling back toward the 2017 high of 89 reached this past September.
  • Palladium forged ahead, hitting a new high this year and landing a bit shy of the $1,000 per ounce mark. The platinum group metal’s U.S. bar price has jumped a whopping 44% since the beginning of the year.
  • Platinum rose marginally over the last month, staying just above the $900 per ounce level. It has receded from its most recent high of March 2017, when it landed above $1,000 per ounce. Notably, this is the second straight month in which palladium is priced at a premium to platinum.
  • After breaking and holding above the $1,300 per ounce threshold at the beginning of September for the first time since October 2016, the U.S. gold price is in its third straight month of retracement, ending up $9 per ounce lower than last month.

What’s Going On in the Background?

  • Why has palladium been trading at a premium to platinum? First, a bit of history.
  • “Palladium has traded at a discount to platinum because of platinum’s greater cost of extraction and its wider scope of applications,” MetalMiner’s editor at large Stuart Burns recently wrote. “But one application in which palladium does excel is catalytic converters for petrol engines. The diesel engine’s relative loss of favor over the last 12 to 18 months to the petrol engine has boosted demand for palladium, driving up the price to the point that it exceeded that of platinum for the first time in 16 years.”
  • Burns quotes analysts from UBS and SP Angel as saying they anticipate both palladium and platinum production to fall.

What Metal Buyers Should Look Out For

  • In the short term, keep an eye out on car sales. “With car sales growth featuring more in petrol-engine-dominated American and Chinese markets, and less in diesel markets like Europe, the demand bias has been for palladium, rather than platinum,” Burns writes. “But even within Europe there is gradual shift from diesel to petrol.” In fact, according to industry research group LMC, sales of diesel cars in western Europe fell from 45.1% of the market to 42.7% this year.
  • In the long term, the Rise of the Machines — electric vehicles, specifically — could really dent platinum and palladium demand.

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Key Price Movers and Shakers

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The Rare Earths MMI dropped for the second consecutive month, losing a point to hit 21. The November reading of 21 marks the lowest reading since June, when it also hit 21.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

This basket of metals, dominated by China, featured heavier hitters like yttrium and dysprosium oxide posting price increases.

However, europium oxide, terbium oxide and terbium metal all dropped for the month. The biggest drop of the bunch came from neodymium oxide, which fell 14.1%.

Rising Demand

Rare-earth metals are used in a number of high-tech capacities: smartphone, laptops and electric vehicle (EV) batteries, among other things.

Cobalt, which is drawing increasing demand in the EVs sector, is one of those metals. As our Stuart Burns reported earlier today, the metal is heating up.

“Plug-in vehicle sales grew 20 times faster than the overall market, justifiably causing concern that cobalt supply could be strained by this one market application,” Burns wrote. “Worryingly for cobalt, the fastest-growing market is also the largest.

“Driven by government subsidies, the Chinese market, at some 351,000 units last year, also grew at 84% over 2015. The switch to EV and PHEV cars is part of Beijing’s drive against pollution, so incentives are not likely to be relaxed anytime soon. Growth of this magnitude dwarfs the 13% and 36% growth rates in Europe and the U.S., respectively.”

Growth of the U.S. Market

While it is indeed true that China overwhelmingly dominates the global rare-earths market, the U.S. is working to increase its presence in the global market vis-a-vis rare earths.

According to a Wards Auto report, research at Purdue University could boost U.S. extraction of rare-earth elements (REEs) while also recycling the U.S.’s 1.5 billion tons of accumulated coal ash.

“REEs have many important applications in things such as permanent magnets in power generation and electric cars, batteries, petroleum refining catalysts, phosphors in color televisions, and many electronics including cellphones,” said Linda Wang, inventor of the technology and Purdue’s Maxine Spencer Nichols Professor of Chemical Engineering, in a Purdue University release. “The demand for REEs is predicted to grow dramatically over the next several decades. REEs used in the U.S. are primarily imported from China, which controls over 90 percent of the supply, with wide implications on the U.S. economy and national security.”

Wang underscored the importance of developing the domestic market as a means of weathering the volatile rare-earths market.

“For example, after China reduced the export quotas in 2010, the costs of rare earth magnets for one wind turbine increased from $80,000 to $500,000,” she added. “After China relaxed the export restrictions 18 months later, the prices returned to lower levels than in 2010. It’s highly desirable to develop the capacity to produce REEs in the U.S. and to become independent of foreign suppliers.”

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Actual Metal Prices and Trends

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Before we head into the weekend, let’s take a look back at the week that was.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

  • Holidays in India mean an uptick in gold buying — our Sohrab Darabshaw covered India’s holiday gold surge.
  • The fourth round of renegotiation talks focused on the North American Free Trade Agreement (NAFTA) concluded earlier this week. We covered the latest round of talks, which by all accounts have the three negotiating teams at an impasse.
  • As the fallout continues from Kobe Steel’s quality data falsification scandal, our Stuart Burns wrote about what exactly might have gone wrong at Japan’s third-largest steelmaker.
  • The World Steel Association’s Short Range Outlook came out this week, predicting solid, albeit moderated growth for the global steel market.
  • Precious and base metals have been behaving similarly, our Irene Martinez Canorea wrote this week.
  • The U.S. International Trade Commission launched a new Section 337 probe related to automation systems.
  • The value of the U.S. dollar has a significant impact on the fortunes of a number of metals, our Stuart Burns explained.
  • And how about palladium? Burns also touched on the rise of the platinum group metal and its leapfrogging of platinum (for the time being).
  • It’s third-quarter earnings report time. Alcoa and Nucor were among the latest companies to announce their earnings for the latest quarter.

Free Download: The October 2017 MMI Report

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This morning in metals news, Japanese carmakers tested the safety of Kobe Steel products, palladium outshines gold and the global nickel deficit widened in August.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Kobe Steel Materials Pass Safety Checks

Toyota, Honda and Mazda gave Kobe Steel, Japan’s embattled third-largest steelmaker, a touch of good news Thursday by saying its products are safe, despite the recent data falsification scandal.

According to a report in The New York Times, the products fell short of advertised standards, but met with regulators’ standards (as well as those of the carmakers).

Palladium Continues Charmed Run

The palladium price recently eclipsed that of platinum for the first time since 2001 — and the metal’s rise has people taking notice.

The upward trend for palladium has even caught the eye of the gold industry, according to the Financial Times.

Our Stuart Burns covered palladium’s rise in his post earlier this morning.

Nickel Market Showed 6,700-Ton Deficit in August

The nickel market deficit deficit rose to 6,700 tons in August, according to data released by the International Nickel Study Institute.

Free Download: The October 2017 MMI Report

Global production was 176,800 tons, with demand at 183,500 tons.

The price of several metals has traditionally been looked at paired with that of another metal. For example, gold and silver prices are looked at in isolation and relative to each other, in part because both metals make up a major part of the jewelry trade.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

So, too, are zinc and lead prices, where the correlation is not from market applications but from the fact lead and zinc are often co-mined from the same resource.

Like precious metals gold and silver, less prominent platinum and palladium can be both mined and used in very similar applications. The Platinum Group Metals, or PGMs, are often magmatic in origin and rare in economic concentrations. The majority of the world’s platinum and palladium comes from South Africa, Zimbabwe and Russia, where early low-cost surface mines have long since given way to deep, expensive and complex operations.

As the name suggests, platinum as long been the investor’s favorite PGM and enjoys the widest number of applications.

Recently, however, its quiet PGM peer palladium has caught investors’ interest.

Palladium has traded at a discount to platinum because of platinum’s greater cost of extraction and its wider scope of applications. But one application in which palladium does excel is catalytic converters for petrol engines. The diesel engine’s relative loss of favor over the last 12 to 18 months to the petrol engine has boosted demand for palladium, driving up the price to the point that it exceeded that of platinum this month for the first time in 16 years.

On Monday, palladium exceeded $1,000 per ounce on the London market compared to its platinum’s $950 per ounce.

The reasons are not hard to find.

The platinum market is in surplus, but that of palladium is estimated by Joni Teves, an analyst at UBS quoted in The Telegraph, as experiencing a shortfall in production, which could push the market into a deficit of 830,000 ounces this year, as miners have cut back production.

In fact, John Meyer, analyst at SP Angel, is quoted as saying, “Marginal mine shafts have been closing at a rate of knots. We could see production in both palladium and platinum continue to fall as a result of ongoing rising costs. I don’t think the current rally (in prices) is enough to reverse that.”

Meanwhile, market demand is shifting.

Platinum that is used more in diesel engines has seen falling demand. With car sales growth featuring more in petrol-engine-dominated American and Chinese markets, and less in diesel markets like Europe, the demand bias has been for palladium, rather than platinum.

But even within Europe there is gradual shift from diesel to petrol.

Sales of diesel cars in western Europe fell from 45.1% of the market to 42.7% this year, according to industry research group LMC, with a forecast it will continue to decline to 39% by 2022 as petrol gains favor and hybrid or electric vehicle sales grow.

Some, though, are voicing caution.

Much of the enthusiasm for palladium has been investor-led — it is a small and relatively illiquid market, meaning not a large volume of positon taking is required to dramatically boost prices. Given time — and it would take time — catalysts could be altered to accommodate more platinum to the detriment of palladium demand, if the palladium price stayed at a premium to platinum over time.

In the longer term, electric vehicles are expected to sound the death knell for both metals (at least, with respect to automotive demand). Counter to this is the upcoming move by predominantly petrol engine China to increase its emission standards to the much tighter China 6a standards by 2020. Johnson Matthey says many manufacturers could leapfrog even this standard and aim to future-proof themselves to the yet more stringent China 6b standard expected in the middle of the next decade.

The enhanced PGM loadings such a move would require will maintain palladium demand — certainly well into the next decade — and could be the basis of investors’ longer-term enthusiasm for the metal.

Free Download: The October 2017 MMI Report

Either way, for the time being palladium has come out of the shadows and is having its day in the spotlight. For how long, we will have to see.

Precious metals dynamics have looked similar to base metals during these last couple of months.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The four precious metals (gold, silver, palladium and platinum) rallied since July, and peaked in September. In September, precious metals saw a price pullback, as did the base metals.

Gold spot prices (see graph below) reflect this movement perfectly.

After the price retracement in September, gold spot prices increased again. The gold rally that started at the beginning of 2017 appears set to continue. More movements to the upside could occur for the rest of the year.

Source: MetalMiner analysis of FastMarkets

Silver prices, however, have traded sideways, showing less of a bullish sentiment than gold. However, silver has shown the same price movements (in different price ranges) from July to October (see chart below).

Does this set the foundation for a new long-term uptrend?

Source: MetalMiner analysis of FastMarkets

As Fouad Egbaria noted: “As of Oct. 1, palladium closed higher than platinum. The last time that happened? Sixteen years ago.” Palladium prices rallied, as did gold prices, while platinum prices traded sideways, similar to silver.

Palladium prices. Source: MetalMiner analysis of FastMarkets

Platinum prices. Source: MetalMiner analysis of FastMarkets

However, both palladium and platinum showed the same price pattern since July. Those price movements may point toward an ongoing bullish market.

As reported by Reuters, the commodities outlook for Q4 looks bullish. MetalMiner also remains bullish on both commodities and base metals, and expects more movements to the upside while the U.S. dollar remains weak.

Free Download: The October 2017 MMI Report

A complete analysis of commodities and base metals for 2018 is published in our free Annual Outlook report. 

If you were in India right now, someone is bound to tell you that it’s that time of the year.

He or she would be referring to the almost-three months of festivals and wedding season, which India sees starting from sometime late August and continues until early September. More specifically, just under a week remains before that “mother of all Indian festivals” — Diwali, the fest of lights.

All this also means an uptick in shopping, but, more specifically, gold shopping.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Indians love their gold, and any excuse is enough to buy some more of the yellow metal. But Dusshera (a major Hindu festival preceding Diwali) and Diwali are special occasions, reserved for buying as much gold as possible. All of this makes India the second-largest gold-consuming market in the world.

This year, there was a slight damper on Indians’ demand for gold.

As part of the new tax reforms, the government included jewelers in the Prevention of Money-Laundering Act (PMLA) in August. This meant a compliance requirement on part of the buyer for any purchase above US $760 (Rs 50,000), including providing their income tax identity.

Incidentally, gold and real estate are the two investment opportunities that were often misused by hoarders of cash or those dealing in the black economy.

For some time, then, there were no “high value” deals as jewelers across the country, their associations and potential customers protested.

So, while September import figures of gold (in the month of Dusshera) were robust, they could have been even higher if the PMLA was not in effect, some associations claimed.

According to a report put out by news agency Reuters, India imported 48 metric tons, equivalent to $2 billion at today’s prices, in September. But since Dusshera fell in September instead of October this year (it follows the lunar calendar), the import figures compared to September 2016 were up, though on a month-on-month basis, it was lower, because of the uptake being down due to the PMLA.

But a decision by the government a few days back has brought back the cheer in the lives of gold consumers in India.

The PMLA has been put on hold for now, which means people can go ahead and buy gold without providing any of the previously required documents. Jewelers are hopeful the gold-buying spree, normally seen during these festive months, will at least revive in October, especially around Diwali. Imports are expected to go up to about 70 metric tons per month.

Just to give readers an idea of Indians’ love of gold, Indian households have the largest private gold holdings in the world, standing at an estimated 24,000 metric tons. That figure reportedly surpasses the combined official gold reserves of the United States, Germany, Italy, France, China and Russia.

This year, even the Indian government wants to take advantage of the festive gold bonanza.

Showing impeccable timing, it has announced the launch of new sovereign gold bond schemes. Never before has such a scheme been announced around festival time.

Free Download: The October 2017 MMI Report

The bonds issue opened Oct. 9 and remain so until Dec. 27, covering the festivals of Diwali and Christmas.

The government has also made important changes to attract high-value investors, raising the annual investment limit per person from 500 grams to 4 kilograms. For trusts and similar entities, the limit was raised to 20 kilograms. This higher limit will make the scheme attractive for high-net-worth individuals who had not participated in earlier schemes, as they found the 500-gram limit to be too low.

Before we head into the weekend, let’s take a look back at the week that was. 

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

  • In case you missed it, our October MMI report is out. Make sure to check out the free PDF download for the rundown on the last month for our 10 MMI sub-indexes: Automotive, Construction, Aluminum, Copper, Renewables, Rare Earths, Raw Steels, Stainless Steels, GOES and Global Precious.
  • Also, our Annual Outlook is out, too. Check it out for a comprehensive look ahead to 2018.
  • Coal India Ltd. is looking to diversify beyond coal, Sohrab Darabshaw wrote earlier this week.
  • Aluminum officials are in “wait-and-see mode” when it comes to the ongoing Section 232 probe vis-a-vis aluminum imports. The investigations into the national security impact of aluminum and steel imports were launched in April and have a January statutory deadline; at that point, Secretary of Commerce Wilbur Ross must present President Donald Trump with a report and recommendations.
  • Glencore bet big on zinc — and won, our Stuart Burns writes.
  • Although oil prices are well below 2014 numbers, supply cuts in some cases have seen the price start to climb. Are more cuts on the way, further constraining global supply and driving up prices? Burns wrote about the subject and what OPEC Secretary General Mohammad Barkindo called a “rebalancing process.”
  • In big news, Kobe Steel is in hot water for a data falsification scandal, one which threatens the firm’s credibility among consumers and manufacturers. The scandal has already had major financial ramifications, as the company’s share price has been in free fall since the news hit.

Free Sample Report: Our Annual Metal Buying Outlook