Precious Metals

Screen Shot 2015-07-01 at 11.56.49 AMIt’s been a wild ride, but after three months of adding, subtracting, nip/tucking and perfecting, we are finally at the July metal buying outlook – the third and final complimentary MetalMiner™ Monthly Metal Buying Outlook – the only July metal price forecast and market commentary you will ever need.

Lisa Reisman, CEO, Azul Partners and executive editor, MetalMiner, is back with her tool kit and expert insight into the industrial metals aluminum, copper, nickel, lead, zinc, tin and steel (HRC, CRC, HDG, Plate) so you can formulate your short- and long-term buying strategy.

While this is the last complimentary Monthly Metal Buying Outlook, we are excited to announce the launch of the commercial product on Aug. 1.

Beginning in August, we will offer the Monthly Metal Buying Outlook for $899/year. That’s less than $75/month for 12 reports, or an annual subscription.

Check out the complimentary July report!

More About Lisa

A third-generation metals enthusiast, Lisa Reisman founded MetalMiner in 2007 – 13 years after she began trading semi-finished aluminum metals and 3 years after she was tasked by the CEO of a Tier 1 automotive company to save his company some money on their direct material spend. Lisa is an ex-big 5 consultant who built MetalMiner into the largest online publication for metal-buying organizations, and has the experience and depth of insight to produce this one-of-a-kind invaluable monthly report to impact your industrial metals purchasing strategy.

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A recent study by SNL Metals & Mining reported that delays in the US mine permitting process diminish the value of minerals and mining projects – underscoring a need for a streamlined permitting process.

This September: SMU Steel Summit 2015

The study, “Permitting, Economic Value and Mining in the United States,” commissioned by the National Mining Association, found that duplicative permitting processes can delay mining projects a decade or longer and those processes, both federal and state, are hindering US mining industry’s ability to meet a rising demand for minerals.

SNLstudyimage

It can take three to five times as long to receive a mining permit in the US than in Canada or Australia. Source: NMA/Minerals Make Life.

Some mining projects lost as much as half of their value while awaiting state or federal approval. Three domestic mines in Arizona, Alaska and Minnesota served as case studies for the research. In one example, SNL found that after eight years of delay the value of Arizona’s Rosemont mine dropped by $3 billion. Alaska’s Kensington mine suffered 20 years of mining delays, while the capital cost of building the mine increased by 49%.

Where Have Exploration Dollars Gone?

“Why aren’t we attracting the exploration dollars we should be? Back in the mid-’90s we attracted about 20% of the worldwide exploration budget for mining. Now, it’s only about 7% and I do think it’s this delay on the return on investment that makes a big difference,” said Katie Sweeney, senior vice president, legal affairs, and general counsel at the NMA. “Are you going to put your money in Australia where you can get a permit in a couple of years or here where it’s 7 to 10? The process is definitely broken.”

The study details a veritable alphabet soup of permitting processes in all three states as well as the federal process. It quantifies incremental, production and additional risk. There is a comparison with the processes in Australia and nearby Canada in the report as well, one that’s not favorable to the US as both clock in with an average permit time of two years compared to seven or more for US projects.

The timeline for the government to respond is more clearly outlined in those countries, the permitting agency leading the process is identified from the outset and responsibility for preparing a well-structured environmental review is given to the mining company, not the government. In the US not only is a primary permitting agency not defined, but several groups with competing interests could be lining up for review.

New Legislation

There are bills pending in both the US House and Senate to streamline federal processes.

“On the House side we should see the bill move through. It’s passed the lower chamber the last two congresses so I would anticipate it will get through this congress as well,” Caswell said. “On the Senate side we think there is more opportunity than in previous congresses. Senator Lisa Murkowski (R. Alaska) is a champion of this bill and with her in position as Chairman of the Energy and Resources Committee, she has more opportunity to promote moving this bill forward. When she held the last hearing on this bill there seemed to be wide support among the committee members present. We are hopeful of making progress in the Senate this time.”

Free Download: Latest Metal Price Trends in the June MMI Report

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We recently wrote about platinum prices sinking. Well, palladium seems to be following its sister metal.

In April we noticed that palladium was heading into trouble and it certainly was, only this month the metal dropped 15%, falling to its lowest level in two years.

Palladium spot price since 2012

Palladium spot price since 2012. Source: MetalMiner.

Unlike platinum, palladium finds more application in gasoline engines and is, therefore, more exposed to the Chinese and US markets than to European markets.

Automotive Demand Stalls

Slowing growth in Chinese auto sales may have scared investors away from this precious metal.

Free Webinar: Are You Speculating When You Buy Spot Metals?

Another bearish factor is that supply concerns eased amid signs of recovering mining output this year. Although, there are different opinions on this and some experts are still saying there will be a continuing deficit.

Palladium Follows Platinum

As with platinum, we believe that a main driver has been a stronger dollar which puts pressure on commodities and gives South Africa’s miners an incentive to keep producing as their currency depreciates against the dollar. Meanwhile, it is clear that investors are not pouring money into precious metals and this trend is hurting palladium as well.

Free Download: Latest Metal Price Trends in the June MMI Report

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Today, the Greek debt crisis touched all markets, including commodities, and a bipartisan group of US Senators unveiled the long-term highway bill that the construction industry has long clamored for.

Greek Debt Crisis Roils Markets

Commodities could not escape the market turmoil caused by Greece’s capital controls and a hefty drop in Chinese equities, with the stronger dollar and risk aversion hitting raw materials led by oil and metals.

Webinar TODAY! Are You Speculating When You Buy Spot Metals?

On the London Metal Exchange, amid a sea of red for industrial metals prices, nickel plumbed a six-year low. The metal, an ingredient for stainless steel, fell 4.6% to $11,855 a metric ton, while aluminum was off 1.5%, copper fell 0.5% and tin dropped 2.5%.

Senators Unveil Long-Term Highway Bill

A bipartisan coalition of senators on Tuesday introduced a six-year bill that would boost overall spending on US roads and bridges.

Working against a July 31 deadline, the senators acknowledged that it will be an uphill effort to corral their Senate colleagues and the House to pass a bill.

The six-year bill would increase highway spending by almost 13% over the current level, bumping it up by more than $2 billion each year. It includes a new program to spread more than $2 billion a year among states to invest in improvements for freight facilities that move goods and products.

It further streamlines project approval, cutting federal red tape that state officials say has slowed projects down. It holds flat at $819 million the money for pedestrian and cycling improvements and for roadway landscaping. Senator Barbara Boxer (D.-Calif.) joined Sen. James Inhofe (R-Okla.), the committee’s chairman, and Sens. David Vitter (R-La.) and Thomas R. Carper (D-Del.) in writing the bill. The cost of the bill is estimated to be about $350 billion and would require new funding if it is passed.

Free Download: Latest Metal Price Trends in the June MMI Report

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What are your spot buying habits?

Check out our 30-minute debate this morning at 11AM Central (12 PM Eastern) between the husband-wife team of Jason Busch, Executive Editor of Spend Matters and Lisa Reisman, Executive Editor of MetalMiner, who promise to cover the following topics:

– Why sourcing on the spot market is actually speculative behavior and therefore risky

– Why using indexes when sourcing commodities is often just plain bad strategy

– Whether or not sourcing optimization actually creates benefits – it seems like a software led “problem” to create demand for technology

What’s In it for You?

– An interesting argument against conventional wisdom – turn some unconventional practices into profit

– An alternative viewpoint on your direct material commodity spend

– How to wring out every possible bit of value from some well-accepted “best practices”

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Platinum prices fell to their lowest levels since 2009. Despite most analysts predicting a deficit, this precious metal has done nothing but falling during the past few years. As we pointed out previously, the technicals looked nothing but bearish.

Platinum spot price since 2012

LME platinum spot price since 2012.

A bearish factor could be that European car sales were rising at the slowest pace in six months in May due to buyers’ concerns about unemployment and the Greek debt crisis.

Free Download: Latest Metal Price Trends in the June MMI Report

On the other hand, European car registrations, a proxy for sales, rose 6.9% in April to 1.17 million units, the best April sales volume since 2009 and the US car market is the strongest since 2001. Therefore, it’s tricky to blame the car market for platinum’s continuous price decline.

Another factor putting the market under pressure is South African production of platinum, which accounts for more than 70% of the world’s supply and has returned to levels ahead of the five-month strike in 2014.

We believe that the real driver has been a stronger dollar which puts pressure on commodities and gives South Africa’s miners an incentive to keep producing due to the South African Rand’s sharp depreciation against the US dollar.

Moreover, it’s been awhile since investors started taking their money out of precious metals and this trend will not help prices recover.

Free Webinar: Are You Speculating When You Buy Spot Metals?

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PriceWaterhouseCoopers‘ Mine 2015 Report was good news for India, but cast a troubling picture of the overall global mining industry.

Free Download: Latest Metal Price Trends in the June MMI Report

Dry-fuel miner Coal India Ltd. (CIL) moved up from the 8th to the 6th slot on the list of the largest mining companies in the world in terms of market capital.

A second state-owned company, which was also the country’s top iron ore miner, National Mineral Development Corporation (NMDC), also improved its ranking by coming in 21st, up three spots over the previous year.

What is Mine 2015?

Mine 2015 analyzed the financial performance of the world’s top 40 mining companies by market capitalization. The report said market values continue to fall, overall, in spite of improvements reported in the financial results of all top 40 companies.

Depending on which way you read it, in 2014, a collective $156 billion was eroded (about 16%) of the top 40 companies’ combined market value, but then again, that was only half of the 2013 slide. The collective market capitalization came in at $791 billion in 2014, which was the range miners held a decade ago.

The report said the world’s largest miners had reduced spending but stepped up production. The industry was also helped by lower input costs and currency devaluation. PwC did note, however, that weak commodity prices due to low demand hammered down revenues.

The Iron Ore Drag

The report said the downturn was largely driven by iron ore miners, particularly diversified companies with large exposure to shifts in commodity prices.

Last year, iron ore was the hardest hit, with prices dropping by half because of a supply glut and a negative short-term demand outlook, the report said.

On the coal front, coal miners in the BRICS countries (Brazil, Russia, India, China, South Africa) saw their values increase 19% over the period, regaining almost half of the value they lost in 2013.

In Asia, more industry consolidation was expected between key resource players from India and China in order to stem production overcapacity, the report said.

Chinese Production Still Surging

The coal companies of China made significant gains in the ranking of the top 40 mining companies, with three appearing in the this year’s top twenty.

China Shenhua Energy Co. Ltd (Shenhua) topped the list, becoming the third most valuable mining company (based on market capitalization) after BHP Billiton and Rio Tinto Group. Shenhua moved up from fifth in 2013’s rankings.

Another company, China Coal Energy Co. climbed to 14th rank from 23rd in 2013, with a 30% increase in valuation, while Inner Mongolia Yitai Coal Co. jumped to 18th from 25th. Yanzhou Coal Mining Co. came in at 26th – up from 34th in 2013. Yanzhou also recorded a more than 30% increase in value over 2014.

US Miners Can’t Keep Pace

On the other hand, not many US coal-mining companies charted in Mine 2015. Consol Energy found itself at number 28. No other companies charted despite noted concern from US manufacturing execs about local resource supply.

Of the 40 companies, 15 miners saw their share values appreciate, while 25 witnessed a decline.

The average return on capital employed was largely below the minimum hurdle investment rate of 15 to 20% set by the companies themselves. Only 6 of the 40 passed the 15% benchmark: CIL (coal), OAO Norilsk Nickel (nickel), NMDC (iron ore), Randgold (gold), Shandong Gold (gold), and Newcrest (gold), according to the report.

Copper Still Stagnating

On the copper front, Mine 2015 noted that global copper production had gone up by only 2.8% last year, which was way below the 8.1% of 2013. PwC noted that the world’s largest copper producer, Chile, had faced problems increasing its production due to falling grades.

PwC’s general outlook for the global metals and mining market though remains dreary due to the continuance of a slower rate of economic growth, particularly in emerging markets, especially due to the cooling off of China’s growth rate.

In 2014, iron ore, coal and copper prices had fallen by 50%, 26% and 11%, respectively, according to the report.

Free Webinar: Are You Speculating When You Buy Spot Metals?

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The American Iron and Steel Institute said in a telephone press conference that the House of Representatives’ passage last Friday of a customs bill, which includes new trade remedy provisions for collecting tariffs on imports determined to have been illegally subsidized or “dumped” by their origin nations, was a major win for the US steel industry.

Free Download: Latest Metal Price Trends in the June MMI Report

The House voted in favor, Friday, of trade promotion authority (TPA), a major free trade power desired by President Obama, but the House also rejected Trade Adjustment Assistance (TAA) in a separate vote. In order for TPA to advance to the President for his signature, the House had to pass both TPA and TAA. So, TPA was pronounced not to have passed yet, either.

What Now For Trade Authority?

Speaker of the House John Boehner (R. Ohio) has already moved to reconsider the vote on TAA and the House rules committee will extend the time for a second vote to occur sometime between now and July 3oth. While it was certainly a setback for the President in getting fast approval of TPA, there was a separate vote on a customs bill that includes trade remedy provisions that passed.

“We specifically advocated for provisions to provide for more effective remedies against imports that are dumped or subsidized,” said Thomas Gibson, president and CEO of AISIS. “As regulars on this call know, steel imports have reached historic levels in the past few years due, in large part, to unfair trade practices.”

New Customs Enforcement Passes

Finished steel imports in 2014 increased 36% compared to 2013. Total steel imports over the same time frame were up 38%. Last year, imports captured 28% of the market surpassing the prior record of 26% and this year the finished import steel market share has continued to thrive and is already at 32% on the year-to-date. Not surprisingly, year-to-date raw steel production is down 7.3% and shipments through April were down 9.5%.

Approval of the House customs bill was NOT dependent on the passage of the TPA/TAA package in the House, either. So, both the senate and house have passed customs bills. The Senate passed its ENFORCE (Enforcing Orders and Reducing Customs Evasion) bill in April

The two bills now go to conference committee to resolve their differences. One difference between the House and Senate bills is the so-called “enforcement act” provisions which would create a new procedure for industries to petition for action to address trans-shipment and evasion of already-determined customs duties. The ENFORCE Act creates procedures for a federal agency or interested party to make good faith allegations of a company’s evasion of anti-dumping and countervailing duty orders to US Customs and Border Protection.

Senate ENFORCE Act Better for US Producers

“AISI has long-supported the senate version of the bill and will continue to push for adoption of its approach in the conference committee,” Gibson said, “but the bottom line is the steel industry is one major step closer to getting trade remedy provisions signed into law after last Friday and that’s a good thing.”

Gibson also said the infrastructure bill authorization runs out again at the end of July and the House ways and means committee and the senate finance committee are holding hearings this week to find a long-term solution for funding the Highway Trust Fund for upkeep of federal roads, bridges and other infrastructure.

No Reason to Tie Highway Funding to TAA

“It affects us in two ways: use of the infrastructure for a competitive economy and the public construction market is beholden to its infrastructure for transportation,” Gibson said. “AISI supports a user fee approach, something like a gas tax to provide a long-term funding solution. We think it can be solved this year.”

Gibson stopped short of supporting a solution that combines both a highway bill and TAA as House Minority Leader Nancy Pelosi (D. Calif.) advocated last week after speaking against the TAA bill on the House floor.

“We don’t believe it can get done at the same time at this point,” Gibson said. “We believe those comments were more of an explanation by former Speaker Pelosi of why she was against the bill (TAA) she had said she was for the week before.”

Anti-Dumping Enforcement

Gibson said as soon as the conference committee sends a final customs bill to the President and he signs it, the new language would apply and a petitioner to Customs and Border Protection could take advantage of the new trade law remedy provisions for enforcing existing anti-dumping countervailing duties.

The remedy provisions would not drastically change the standards by which injury is determined and how they are adjudicated. The ENFORCE ACT and the House’s customs deal mainly with the enforcement, addressing evasion, trans-shipments and other ways importers avoid duties at US customs.

“As opposed to bringing cases to the International Trade Commission and Dept. of Commerce, which is the trade remedy provisions, these deal with enforcement,” Gibson said. “That’s exactly why we think the senate version (ENFORCE) is superior to the version that passed the House because it has enforceable deadlines and, if an agency ignored its obligations, you’d be able to go to a court to tell the agency to obey its mandate.”

Trade adjustment assistance expires at the end of September if it’s not reauthorized before then. Gibson said that would be a big loss for proponents of free trade such as the President and congress’ republican majority who have both supported TAA in its current form. He also said the next “pressure point” was Congress’ July 4th recess which actually starts June 30th and AISI expected action on TAA before that.

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MM-IndX_TRENDS_Chart_June-2015_FNLRemember that bounce we saw in most of the metal prices we track last month? Annnnd it’s gone.

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The bearish environment our metals are up against resumed this month as the strong dollar erased nearly all of the gains from May. There were some positive outliers, though, with construction showing growth just as the summer building season begins in the US and the Global Precious Metals MMI was able to hold onto its May gains.

Check out the June MMI Report to get details on the fundamentals of all of the markets we track.















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There is a close linkage between emerging markets and commodity prices. This connection becomes stronger for net commodity exporters. The two most notable examples are Russia and Brazil, both of which are commodity and energy exporters. These two countries have been two of the hardest hit among emerging markets.

Russia market vectors (Black). Brazil iShares (Orange)

Russian market vectors (Black). Brazilian iShares (Orange) since 2012. MetalMiner analysis with data from Stockcharts.com.

These markets have historically moved with commodity prices. When commodities fall, exporters of commodities make less money which is bad for their economy. In many cases, the movement of these markets helps to give clues to future moves in commodities.

Free Download: MetalMiner’s Top Service Centers Guide

As we can see in the chart above, Russian (in black) and Brazilian (in orange) stock markets have been in bearish mode since 2011. Both, however, rallied this year but we can see that the rally is falling short of their previous peaks. The recent drop also coincided with falling commodity prices worldwide since April.

What This Mean For Metal Buyers

Weakness in emerging markets validates weakness in commodity prices. The dollar is still strong while commodities and emerging markets fall. It’s hard to become bullish on commodities until we start seeing some divergences.

FREE Download: Last Week for the May MMI® Report.

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