Articles in Category: Sourcing Strategies

The Construction MMI held steady at 66 in July, as spending remains stubbornly low during the traditionally strong East Coast construction season.

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Construction spending during May reached a seasonally adjusted annual rate of $1,143.3 billion, 0.8% below the revised April estimate of $1,152.4 billion, but 2.8% above the May 2015 estimate of $1,112.2 billion, according to data from the U.S. Census Bureau. Construction spending in the first five months of this year, construction totaled $438.5 billion, which is 8.2% higher than the $405.4 billion for the same period in 2015.

Construction_Chart_July_2016_FNL

It’s difficult to quantify the lack of spending increases in what outwardly looks like a robust U.S. construction sector.

Spending Struggles to Stand Pat

Residential construction was at a seasonally adjusted annual rate of $451.9 billion in May, virtually unchanged from the revised April estimate of $451.7 billion, while nonresidential construction was at a seasonally adjusted annual rate of $407.4 billion in May, a mere 0.7% dip from the revised April estimate of $410.1 billion.

Ken Simonson, chief economist at Associated General Contractors of America, a construction industry trade group, noted that the latest data affirms complaints that contractors are having an increasingly hard time finding skilled workers to hire.

“Mild winter weather in many regions early in 2016, followed by extreme rains in some locations in May, has probably distorted monthly spending patterns but shouldn’t mask the robust widespread growth in demand for construction so far this year,” Simonson said. “It appears there will be plenty of activity in the remainder of 2016 — if contractors can find the workers they need.”

We have, indeed, documented the lack of skilled labor in the U.S. market for more than two years now. Labor costs are increasing so much that they are outstripping the savings many general contractors had captured from low commodity prices for construction products. While it’s true that many are also cutting costs by using more efficient construction methods, the drop in spending is still highly concerning since most sectors look like they should be growing with strong demand and, supposedly, lots of design work on the boards.

Chinese Spending Grows

There is, however, good news from abroad. In China, the Caixin/Markit services purchasing managers’ index for June rose to 52.7 from 51.2 in May on a seasonally adjusted basis. Readings above 50 indicate an expansion on a monthly basis, while readings below signal contraction.

Free Download: Compare Prices With The June 2016 MMI Report

Beijing has fast-tracked planned infrastructure spending this year to boost growth, and a strong run-up in housing prices as buying restrictions were loosened helped turn around a slowdown in property development. Like many of our sub-indexes this month, it will be interesting to see what effect the U.K.’s vote to leave the European Union has on construction prices when markets have had a month to settle.

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Road signs EU and BREXITBrexit is not a stagnant event. It is dynamic and will continue to introduce ripples and waves to the global geopolitical climate for years to come.

North American Manufacturing will need to continue to monitor and keep its finger on the pulse of Great Britain’s decision to leave the European Union, because the ongoing effects will have a long-lasting impact on metal prices and direct materials sourcing.

Join U.K.-based Editor-at-Large Stuart Burns and U.S.-based Executive Editor Lisa Reisman on Wednesday, July 13 at 10 a.m. CDT for Brexit, North American Manufacturers & Metal Prices: What’s Next?

Covered will be:

  • The geopolitical risks involving Brexit and your direct materials sourcing
  • A Brexit timeline from the final vote to today and into the future
  • The impact Brexit has and will continue to have on metal prices

Sign up here!

Monthly Metal July_Final-220Read all about the implications of Brexit and other recent developments for metals markets in our July Monthly Metal Buying Outlook.

Our Monthly Metal Buying Outlook allows you to receive short- and long-term buying strategies with specific price thresholds. If you would like to trial our metal price forecast, click below to get two free months of reports.

Our coverage was dominated this week by the implications of the U.K.’s vote to leave, or Brexit, the European Union.

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So many questions still need answers, despite metals markets essentially calming down as the week went on. What will any future deal with the E.U. look like? What does this mean for metals markets? Can Tata Steel sell its U.K. assets without a pension bailout that was being discussed before the vote? Is China taking advantage of the situation by devaluing the yuan again while nobody’s looking? Will U.K. Independence Party leader Nigel Farage get through his gloating speech to the European Parliament without being booed and hissed out of Brussels?

We told you it could happen. Source: Adobe Stock/Stephen Finn.

We told you it could happen. Source: Adobe Stock/Stephen Finn.

Actually, we know the answer to that one, he got through it with some help from European Parliament President Martin Schulz asking for order, but not before he blamed his fellow ministers of parliament for “exporting poverty to the Mediterranean” and “bringing the Lisbon Treaty in through the back door.”

To try to answer all of these questions, as best we can, we’re holding a webinar on July 13th with MetalMiner Co-Founders Lisa Reisman and Stuart Burns. They’ll discuss all of the issues for metals, North American manufacturing and trade that Brexit presents.

Non-Brexit News

Alcoa LogoAlcoa, Inc. settled on Arconic, a truly Tronc-worthy new name for its value-added automotive and aerospace business.

Free Download: The June 2016 MMI Report

Alcoa, Inc. — whose spin-off will now be Alcoa, Corp. — revealed the new name in a securities filing and did not even have the decency to apologize and say “sorry guys, Google was already taken.”

Indonesia’s Dirty Coal Mines

Indonesia’s tropical coal mining sector is winding down production due to low global prices and poor production, but the island nation might be sitting on an environmental time bomb as few of the country’s mining companies have the resources to properly clean up the sites before they pull out. Almost none of the companies have paid their share of billions of dollars owed to repair the badly scarred landscape. Nothing to snark at here.

What Does Brexit Mean for Metal Prices?Brexit happened but its impact is far from over. Prepare your direct materials sourcing strategy and risk mitigation approach accordingly with the help of the MetalMiner research team. Join UK-based Editor-at-Large Stuart Burns and US-based Executive Editor Lisa Reisman on Wednesday, July 13 at 10 a.m. CDT for Brexit, North American Manufacturers & Metal Prices: What’s Next?

They will cover:

  • What the Brexit timeline looks like from a metal sourcing perspective
  • What to be aware of when sourcing metal from the U.K.
  • The potential ramifications of sourcing metal from Europe
  • The impact of Brexit on North American metal prices
  • The other geopolitical risks facing North American manufacturing

Sign up here!

This steel plant at Port Talbot in South Wales, U.K., could close if Tata Steel can't find a buyer. Even as steel prices increased last week. Source: Adobe Stock/Petert2

This steel plant at Port Talbot in South Wales, U.K., could close if Tata Steel can’t find a buyer. Even as steel prices increased last week. Source: Adobe Stock/Petert2

The recent vote that has Britain leaving the E.U. has a global audience on the edge of their seat: What impact will it have on metal prices? The labor market? The steel industry in the UK?

Most analysts agree that Brexit is casting doubts over Tata Steel‘s plans to sell its operations in the U.K. Tata is based in Mumbai but its Port Talbot, Wales, location is one of Europe’s largest steel making operations by production capacity.

Plans to sell were announced back in April, due in part to severe funding issues and the global glut of steel combined with rising manufacturing costs, The Wall Street Journal reported.

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Tata has already cut thousands of jobs due to falling demand and a rise in cheap steel imports from China. The Brexit vote has done nothing to uncomplicate matters as questions surround immigration, trade and other policy areas, according to the WSJ. Also worth noting is Tata Steel’s sale process.

“Trade negotiations with potential buyers will not be easy as business activity in the region will take a hit,” Goutam Chakraborty, an analyst at Emkay Global Financial Services in Mumbai, told the WSJ.

China Plans Cuts

Meanwhile, Stuart Burns (Editor-at-Large, MetalMiner, and a U.K. resident and citizen) wrote recently that China plans to cut 45 million metric tons of steel capacity this year alone. He added that lower coal output capacity is also expected to be cut by the Far East nation by 280 mmt.

Burns wrote: “The capacity cuts will involve relocating 700,000 workers in the coal sector, and 180,000 workers in the steel industry,” Xu Shaoshi, chairman of the National Development and Reform Commission, said at the World Economic Forum in the northern city of Tianjin. Xu said he was “very confident that China will achieve the 2016 targets.”

You can find a more in-depth steel price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.

stainless-nickel-L1Nickel ore shipments from the Philippines could be in trouble after a new president’s appointment of an anti-mining presence that could spell disaster for Chinese buyers.

According to a recent report from Bloomberg, President-elect Rodrigo Duterte is prioritizing the nation’s stance on mining by appointing a new head for its environment department. This maneuver has the potential to disrupt supplies to buyers in China.

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The London Metal Exchange echoed those concerns as nickel closed up nearly half a percent this week, indicating this new government will limit nickel ore exports.

“We might see an imminent crackdown on the Philippines’ small mines,” said Sam Xia, an analyst at China Merchants Futures Ltd. “This will reduce its nickel ore exports, including to China.”

The Philippines is now a key supplier of nickel ore to Asia’s leading economy after Indonesia stopped shipments in January 2014. Meanwhile, China’s nickel ore imports from the Philippines increased to 3 million metric tons this May, its highest point in seven months. That figure accounted for 97% of its total purchases.

Nickel Hits Six-Week High This Week

Our own Raul de Frutos recently highlighted that nickel prices hit a six-week high following a notable recovery from May’s price sell-off.

de Frutos wrote: “The metal benefited from a positive swing in investor sentiment toward commodities in June, stemming from a weaker dollar and the ongoing recovery in oil prices. Nickel has climbed steadily after hitting multiyear lows in February, but the move isn’t big enough to impress the market yet.”

You can find a more in-depth nickel price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.

 

 

 

Adobe Stock/ Björn Wylezich

Adobe Stock/ Björn Wylezich

The International Lead and Zinc Study Group has released preliminary data on the global market for refined zinc, and found a notable surplus from January to April 2016 with total reported inventories increasing during that time.

The ILZSG also found that an 8.1% reduction in global zinc mine production was mostly due to decreases in India, Australia, Ireland, Peru and the U.S.

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Meanwhile, refined zinc metal production increases in Namibia and the Republic of Korea were offset by reductions in Japan, India and, once again, the U.S., leading to an overall global reduction of 3.4%.

The ILZSG states: “Global refined metal usage over the first four months of 2016 was at the same level as the corresponding period in 2015 with rises in China and Europe being offset by decreases in Japan, Taiwan (China) and the United States.”

The group concluded that Chinese zinc imports contained in zinc concentrates fell by 20% while refined metal net imports grew by 163%.

Zinc Storage Under Fire

Recently, our own Jeff Yoders covered the lawsuit over zinc storage in his Week-in-Review. Yoders wrote: “Glencore‘s Pacorini warehouse operations business will have to defend the suit as they seemingly falsified documents at the center of the gripes from customers.”

The lawsuit by U.S.-based investors deals with falsified orders and are specifically designed to conceal when and where metal entered Pacorini’s New Orleans warehouse complex.

You can find a more in-depth zinc price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.

lead-prices-L1The International Lead and Zinc Study Group released its latest findings for June, and revealed that lead metal supply surpassed demand during the first quarter of 2016.

Also, over that same time frame, total reported stock levels declined by a small amount.

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On a geographic basis, drop-offs in China, Australia, India and the U.S. were the main contributors to a global lead mine production decrease of 5% for Q1 2016 (compared to Q1 2015).

On a global scale, refined lead metal output decreased 1.8% during the first four months of 2016, compared to 2015, due primarily to lower reported output in China. This offset the gains made by Canada and the Republic of Korea.

“Ex-China usage of refined lead metal rose by 4.2% mainly due to an increase in European demand of 8.8%,” the ILZSG stated. “However, Chinese apparent usage fell by 12.1% and overall global demand decreased by 2.5%.”

The Fed and Metal Prices

Our own Raul de Frutos recently wrote about the Federal Reserve leaving interest rates unchanged while lowering the outlook for rate increases in the future. What impact does this have on metal prices?

“Higher rates mean higher borrowing costs, which usually make a currency more attractive to investors seeking higher yields than in other currencies,” de Frutos wrote. “So, basically, higher rates domestically (or expectations of a rate increase) normally translate into a stronger dollar which leads to lower metal prices. This happened in May, when the U.S. dollar strengthened amid new expectations that the Fed would raise rates in June or July. Consequently, base metals fell.”

You can find a more in-depth lead price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.

 

While Saudi Arabia’s grip on oil prices has waned and shale drillers have survived its attempt to undercut them with crude prices nearing $50/barrel, China might just be the new Saudi Arabia of metals markets.

Resilient Shale Drillers Investing Again

Two years into the worst oil price rout in a generation, large and mid-sized U.S. independent producers are surviving and eyeing growth again as oil nears $50 a barrel, confounding the Organization of Petroleum Exporting Countries and, particularly, OPEC heavyweight Saudi Arabia with their resiliency.

Free Download: The June 2016 MMI Report

That shale giants Hess Corp., Apache Corp. and more than 25 other companies have beaten back OPEC’s attempt to sideline them would have been unthinkable just months ago, when oil plumbed $26 a barrel and collapses were feared.

Is China Metals’ Saudi Arabia?

Speaking of countries that dominate the market for important commodities, is China doing for metals markets what Saudi Arabia used to do for crude oil?

Free Download: The June 2016 MMI Report

The world’s largest producer and consumer of industrial metals may be acting as a de facto, if unwitting, type of OPEC for metals, adjusting supply in response to price signals and balancing the market.