Articles in Category: Precious Metals

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This morning in metals news, China hit record steel and aluminum production numbers in June as the world awaits the Trump administration’s Section 232 investigation results, the copper deficit could deepen amid further strikes and things are looking good for gold on Monday.

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China Posts Record Steel, Aluminum Outputs in June

Ever since the Trump administration announced its opening of Section 232 investigations into steel and aluminum imports in April, the world has waited to see whether new tariffs or import quotas could be on their way.

The major focus of the investigations has been Chinese excess capacity in the global market, which the administration might strike at via protectionist measures.

The Chinese steel and aluminum industries, meanwhile, showed no signs of slowing down in June.

According to Reuters, China produced record amounts of the metals last month: 73.23 million tons of steel and 2.93 million tons of aluminum.

Copper Deficit Deepens

According to Reuters, the copper deficit is likely to deepen this year as further strikes are expected in South America; however, those strikes have already been priced in, according to the report.

Even so, the strikes are not likely to produce a rise in the copper price, according to a Reuters poll of 26 analysts.

According to the report, LME copper is up 8% on the year.

Gold Looking Up

Gold might be in for some good news during the remainder of 2017.

Free Sample Report: Our Annual Metal Buying Outlook

According to Reuters, gold broke its 200-day moving average and could be in for further gains as a result of a slumping dollar.

Here’s What Happened

    • MetalMiner’s Global Precious MMI took a bit of a dip this month, coming down 1.1% to 83.
    • The sub-index’s value held at 84 in June and May, but on balance, the price drops within the overall basket of metals couldn’t hold the ship steady into this post-Independence Day summer lull.
    • While our U.S. platinum bar price got very close to its 2017 start-of-the-month low (which it hit in January; more on platinum below), U.S. palladium rose 3.8% month-on-month to record its highest price in 34 months — nearly a 3-year high.

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What’s Going On in the Background?

  • Diesel goin’ down? Due to negative sentiment after Dieselgate, as MetalMiner’s Editor at Large Stuart Burns pointed out recently, sales of diesel vehicles in some parts of Europe have taken a dive in the past few months over concerns that “authorities will raise costs or otherwise make living with diesel engines a less attractive proposition for owners.” Overall, total car sales have dropped in some European markets, including the U.K. — but in the spots where they haven’t, gas-powered vehicles have been winning over diesel. In short, not awesome for platinum prices.
  • BEVs are not the panacea. Battery electric vehicles (BEVs) could be the ticket … except that the World Platinum Investment Council forecasts BEVs to make up no more than 5% of the market by 2025, so that wouldn’t work either.
  • Of course, investor demand, jewelry demand and other industrial sectors, such as chemical, all play into it. But “platinum’s fortunes will in part ride on the coattails of the auto industry’s ability to re-establish the diesel engine as an environmentally acceptable propulsion unit,” according to Burns.
  • Meanwhile, as my colleague Fouad Egbaria reported yesterday, gold is now trading on the LME.

What Metal Buyers Should Look Out For

  • The divergence between platinum and palladium prices of late certainly merits attention, and perhaps may drive industrial manufacturers to broader substitution efforts — but that could be a stretch. According to analysts cited by the Financial Times (paywall), “the divergence reflects a number of factors, including speculative demand and several years of production deficits that have eroded stockpiles and reduced available supplies.” The article goes on to say that longer term, “with the increasing popularity of electric vehicles, analysts say this year’s turbocharged run for palladium could be a last hurrah for the material, which has few industrial uses outside of the car industry.”
  • Last month, we wrote that “while we’re unsure of when prices will swing back up, mainly because output cuts in South Africa and elsewhere have seemingly not helped, it may be hard to discount current windows for smaller spot buys.” Fortunately for platinum spot-buyers, this still holds true.

Key Price Movers and Shakers

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Indians’ love of gold is a story with which many around the globe are familiar.

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Just how deep is this love? A recent research report by one of India’s well-known equities firms said India had consumed — hold your breath — around $300 billion worth of gold in just the last decade.

The analysis by Kotak Institutional Equities said gold prices had gone up by 300% between FY 2008 and FY 2017. But the love story has not been the same in the last five financial years (FY 2013-17), when only half the gold consumption of the past decade was recorded, not to mention virtually flat gold prices.

It’s no wonder that under the new Goods and Services Tax (GST) implemented as of July 1, gold, according to some, has been given special treatment. The tax has been kept at 3%, nowhere near the 18% suggested by some experts.

GST is a uniform tax across India, doing away with almost all other forms of taxes for businesses. So high is this precious metal on an average Indian’s shopping list that even the 3% tax, up from the current 1.2%, has raised the hackles of buyers. Some have even suggested that the “high” GST (in reality, just 1.8% more) would once again lead to the smuggling of gold into the country.

A report by news agency Reuters, for example, quoted named and unnamed gold traders and buyers as saying smaller gold shops could be more inclined to sell without receipts, potentially hitting sales.

Indians have been familiar with the “black” gold economy.

Except for certain periods, gold smuggling has always been a part and parcel of India. In 2013, for example, when the government raised import duties on the metal to 10%, smuggling went up. The World Gold Council (WGC) estimated that smuggling networks had imported up to 120 tons of gold into India last year.

The Kotak Institutional Equities report opined that it was “unhappy” with the special treatment given to gold vis-à-vis GST. India’s policy on inflation management achieved remarkable success, which should reduce gold’s function as a “store of value,” the report said.

Gold Demand on the Rise?

A WGC report in June highlighted the potential impact of the GST on India’s gold demand. It said the new tax could have a negative impact in the short term as the industry went through a period of adjustment, but the net impact in the long term was likely to be positive. The WGC expected India’s demand for gold to be 650–750 tons in 2017 and predicted it will rise to 850–950 tons by 2020.

According to another article in the Mint newspaper, analysis of household survey data seemed to suggest that one reason why regional governments in India may have lobbied for a low tax rate on gold was because gold purchases were not exclusive to the rich.

Even though the rich tend to buy more of it, possession of gold was a universal phenomenon across income classes, according to the Household Survey on India’s Citizen Environment & Consumer Economy (ICE 360° survey) conducted by the independent not-for-profit organization, People Research on India’s Consumer Economy, which was partly financed by the WGC.

The report found that one in every two households in India had purchased gold in the last five years. The survey also revealed of 61,000 households polled in 2016, 87% of households owned some amount of gold in the country.

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Reports of platinum’s demise have been much exaggerated — or so this month’s report from the World Platinum Investment Council (WPIC) would argue.

Sales of diesel vehicles in some parts of Europe have taken a beating in recent months over concerns that authorities will raise costs or otherwise make living with diesel engines a less attractive proposition for owners, due to negative sentiment post-Dieselgate. Total car sales have dropped in some European markets, including the U.K.. However, where sales have held up there’s been a definite swing to gasoline vehicles rather than diesel.

The markets have read this trend as meaning platinum demand will fall — but maybe not surprisingly, the WPIC is taking a more optimistic view.

Regardless of buyers’ short-term preferences, the WPIC says the auto industry has an overarching challenge in the years ahead that will support platinum demand. Automakers will face fines if they do not meet new EU CO2 targets by 2020, but the report lists the industry’s rather limited options.

First, the industry could boost sales of battery electric vehicles (BEV). However, with a consensus expectation of BEVs taking no more than 5% of the market by 2025 due to lack of charging infrastructure, it seems unlikely BEVs are the short-term solution.

Source: World Platinum Investment Council

Second, the industry could sell a higher percentage of hybrids. Recent trends, however, suggest demand for hybrids, despite Volkswagen’s Dieselgate, is still growing too slowly. Demand is certainly not growing fast enough to reach those emissions targets, which are just 2 ½ years away.

So, the third option — and to be fair to the WPIC, probably the most likely option — is for automakers to clean up diesel. The technology already exists to meet the most stringent nitrogen oxide (NOx) targets set for 2022, but the industry needs to do more than it has done in the past to prove to the buying public the performance figures they publish can be achieved in the real world.

The WPIC points to French automaker PSA, which has undertaken to publish independently certified, real-world CO2 test results for its vehicles. PSA also recently announced it will do the same for NOx results.

It is only by automakers voluntarily — or maybe by legislation — being forced to accept third-party verification of their emission figures that they will be able to rebuild consumer trust and deflect harsher government legislation on diesel engines in the future.

Not surprisingly, the attraction of the WPIC is significantly cleaner diesel engines will require increased platinum-group metal (PGM) loadings, even as the industry shifts from the current lean NOFX trap (LNT) system to the more effective selective catalytic reduction (SCR) technology. According to ExtremeTech, when announcing Ford’s switch to SCR, it reported that SCR is more costly, but it’s also generally considered more effective than LNT.

Of course, the platinum price has more drivers than just the demand for the catalysts in the automotive market. Investor demand in the form of ETFs, physical demands in the form of jewelry, and chemical and catalyst demand from the chemicals industry are all significant drivers on the demand side.

But much of recent negative sentiment toward platinum has been due to controversy over the diesel engine’s ability to meet emission targets.

And in that sense, platinum’s fortunes will in part ride on the coattails of the auto industry’s ability to re-establish the diesel engine as an environmentally acceptable propulsion unit.

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This morning in metals news: copper on the London Metal Exchange (LME) is hanging steady, zinc pulled back after hitting a two-week high and General Electric (GE) announced plans to build the world’s largest laser-based powder bed metal 3-D printer.

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No Movement for Copper

A stronger U.S. dollar put a cap on gains for LME copper, as the metal’s price didn’t show much movement Tuesday, Reuters reported.

The U.S. dollar hit a three-week high against the yen after a Federal Reserve official said inflation should rise alongside wages — “reinforcing expectations for the Fed to keep raising interest rates,” according to Reuters.

Zinc Falls After Two-Week Peak

Zinc prices have been steadily climbing of late, with the metal hitting a two-week high yesterday. That has pulled back a bit, partly as a result of questions about Chinese demand, Reuters reported.

“You’ve got some news with a bullish tone, so that’s supporting the market, but I don’t know how sustainable this will all be,” Gianclaudio Torlizzi, partner at the T-Commodity consultancy, told Reuters.

LME zinc fell by 0.4%, according to the report.

GE Makes 3-D Printer Announcement

Say hello to ATLAS.

That’s the name of the new metal 3-D printer GE announced it is building, a printer that will be the world’s largest laser-based power bed metal 3-D printer.

GE made the announcement at the Paris Air Show, according to 3D Printing Industry.

Free Download: The June 2017 MMI Report

Per 3D Printing Industry, the printer has a build volume of 1 meter cubed.

Our June MMI Report is in the books, and there’s a lot to unpack.

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

Out of 10 MMI sub-indexes, four posted no movement from our May MMIs. That wasn’t true for all, though, as the report shows promising signs for construction (compared with last year). Like the Construction MMI, growth in the automotive sector slowed a bit, but still performed better than at the same time last year.

In terms of policy, several things happening around the world will have macroscopic effects on these industries.

Domestically, the Trump administration’s ongoing Section 232 investigation into steel imports will have ripple effects at home and abroad (namely in the Chinese steel market).

In the U.K., the recent shocker of a parliamentary election leaves question marks regarding the way forward — is it going to be a “hard” or “soft” Brexit? Does Theresa May have the political capital to make a hard Brexit happen? It seems unlikely now, but that situation continues to develop. In terms of business and metal markets, whichever iteration of Brexit takes hold will have effects on the ways in which British companies do business with Europe.

In China, many analysts expect growth to slow in the second half of 2017 as the government aims to put the squeeze on credit growth. (Moody’s recently downgraded China’s credit rating for the first time since 1989.)

While several MMI sub-indexes did not go up or down this past month, there was still quite a bit going on in each sector. You can fill yourself in by downloading our June MMI Report, which offers all of the storylines and trends for our 10 MMI sub-indexes, presented in one convenient place.

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It was a busy week in the world. On Thursday alone there were elections in the U.K. (which resulted in a hung parliament) and former FBI Director James Comey testified before the Senate Intelligence Committee.

Before we head into the weekend, let’s look back at the top storylines in metals news on MetalMiner this week:

Climate of Corruption Tempers Comeback Optimism in Brazil

Speaking of politics, our Stuart Burns wrote about Brazil and its efforts to push its way out of the doldrums of a recession, while also struggling with the specter of corruption.

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

One year after former President Dilma Rousseff was impeached, her successor, Michel Temer, is facing questions about corruption. The BBC reported Thursday Brazilian judges have chosen to delay voting on a case that could in fact send Temer packing (an outcome which would continue a period of presidential instability in Brazil).

Read more

Here’s What Happened

  • All quiet on the precious-metals front this month, as our Global Precious Metals MMI held pat from May to June at a reading of 84.
  • Since we tend to keep a closer eye on the platinum group metals (PGMs) due to their automotive applications, the U.S. platinum price tracked by the MetalMiner IndX posted only a negligible gain, while the U.S. palladium price suffered only a negligible loss…reflected directly in the wash that was the sub-index’s June performance.
  • Interestingly, gold has been getting hot as of late. More on that below.

What’s Going On in the Background?

  • Although the Global Precious Metals MMI did not reflect it in the May-to-June time period, the U.S. gold price increase after June 1 has gotten some heads turning. As my colleague and new MetalMiner Editor Fouad Egbaria reported earlier this week, “gold neared its year-to-date high on Tuesday,” according to Reuters. “The rise comes in a climate of political uncertainty, with an election in the United Kingdom, former FBI Director James Comey’s testimony before the Senate Intelligence Committee on Thursday and a European Central Bank meeting this week,” Egbaria noted.
  • Back to platinum. As a reflection of the metal’s dawdling short-term pricing, South African producer Lonmin has been struggling, so much so that Reuters reported earlier this week that the company is “pulling every lever to try to restore confidence in its ailing business, including reopening a major shaft and expanding its biggest operation,” according to Lonmin’s CEO. Low prices and skyrocketing costs have reportedly conspired to present the company with a cash problem over the past near-decade.

What Metal Buyers Should Look Out For

  • Platinum specifically has had a low-price problem this year — but that’s obviously less of a problem if you’re purchasing metal. While we’re unsure of when prices will swing back up, mainly because output cuts in South Africa and elsewhere have seemingly not helped, it may be hard to discount current windows for smaller spot buys.

Exact Prices of the Key Movers and Shakers

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Gold Prices Going UpThis afternoon in metal news, Chinese imports of scrap metals could be subject to further scrutiny by the government, gold reached a one-month high and GE Additive gives away metal 3-D printers valued at $8 million to more than 400 schools. GE Additive previously committed $10 million to its GE Additive Education Program, which aims to encourage the use of 3-D printing technology in education programs and developing future talent.

China Considers Bans on Scrap Imports

China, the world’s leading buyer of copper scrap, might be reconsidering its import strategy, as Materials Recycling World reported.  Speaking at a Bureau of International Recycling (BIR) convention in Hong Kong, Ma Hongchang, BIR’s adviser on Chinese policy and regulatory developments, said it was possible the government could ban imports of certain grades of mixed metal scrap.

Two-Month Trial: Metal Buying Outlook

While nothing has been set in stone from a regulatory perspective, China will continue to have a need for scrap metals, given the growth of infrastructure projects in the country. However, it will be interesting to note the sources of its import supply — that is, whether there is a shift in imports coming from Europe and the U.S. to other nearby Asian nations.

Amid Political Uncertainty, Investors Go for the Gold

Geopolitical tensions and instabilities have a way of roiling markets and, consequently, making investors uneasy. That hasn’t been the case for gold, which recently hit a one-month high, according to a Reuters report.

As the race for prime minister in the U.K. tightens, and nations like Italy and Germany prepare for elections of their own down the road, many investors have turned to the “safe-haven asset” of gold. Spot gold rose by 0.1 percent, according to the Reuters report, to $1,267.70 per ounce.

“The ongoing political uncertainty in the market is really driving safe-haven buying at the moment,” ANZ analyst Daniel Hynes told Reuters.

GE Additive’s $10M Education Program to Bring 3-D Printers to 400-plus schools

GE Additive recently announced it would be giving metal 3-D printers to more than 400 schools, as part of its education initiative to bring the technology to students, as reported in 3D Printing Industry.

The printers, valued at $8 million, are part of Additive’s effort to give students access to additive technologies and “help accelerate the adoption of advanced manufacturing worldwide,” according to GE Additive’s website.

According to 3D Printing Industry’s report, eight universities will receive a Concept Laser MLAB cusing 100R metal 3-D printer, valued at $250,000 apiece. Although the 2017 application deadline for 3-D printers through the program has passed, educational organizations can apply for 2018 at a later date on the GE Additive website.

Free Download: The May 2017 MMI Report

This morning in metals news, the strike at Freeport McRoRan’s Grasberg copper mine was extended for a second month, oil prices rose in expectation of supply cuts, and silver prices reached a three-week high.

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Freeport Indonesia Strike Extended

This past Saturday, the union representing thousands of workers at Freeport’s Grasberg copper mine in Papua, Indonesia announced that the ongoing strike will be extended beyond May 30, Reuters reported. As union industrial relations officer Tri Puspital told Reuters, “We will extend the strike for 30 more days.” Approximately 9,000 workers are participating in the strike.

Two-Month Trial: Metal Buying Outlook

The reason for the strike revolves around employment. Last month, Freeport laid off about 10% of its 32,000 workers to cut costs, which accrued to the tune of millions thanks to an ongoing dispute with the Indonesian government over rights to the Grasberg mine. “With this problematic combination of protests from workers and tensions with the Indonesian government,” wrote MetalMiner analyst Raul de Frutos earlier this month, “it’s no wonder that investors are concerned about further supply disruptions this year.” It looks like supply disruptions will continue.

A Key Week for Oil

One hopes that this will be the only time when news source after news source mentions Saudi Arabia and glowing orbs in the same headline. In more important news, Bloomberg reported yesterday that Saudi Arabia has received Iraq’s support to extend oil output cuts for nine months, after Saudi Minister of Energy Khalid Al-Falih flew to Baghdad to talk to Jabar al-Luaibi, his Iraqi counterpart. Read more