Articles in Category: Sourcing Strategies

10% publicly-traded companies in the U.S. who filed form SDs with the federal government have proven it is possible to not only comply with Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, but to also perform supply chain due diligence in line with industry best practices, according to an analysis of public filings by Dr. Chris Bayer, PhD, of Tulane University.

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Yet, more than three years after U.S. companies began filing reports about their efforts to find conflict minerals linked to armed militias in Africa in their supply chains, 65% say they still can’t make a determination.

U.S.-listed companies are required to investigate their supply chain for the presence tin, tantalum, tungsten and gold (commonly known as 3TG in metals circles), under a rule stemming from the 2010 Dodd-Frank Act. The law is meant to choke off mining revenue to militia groups in the Democratic Republic of the Congo and adjacent countries.

As well-meaning as it is, even last year many companies were not able to fully vet their supply chains and have previously said so in their filings.

This year, 10% of Form SD and CMR (conflict minerals) filers were found to be 100% SEC Rule compliant 67% were at or above the 75% compliance threshold. In all, SD & CMR filers averaged a compliance score of 79%, a generally high degree of compliance.

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More than 100 companies said or implied they had conflict-free products, Bayer found. His study was advised by Assent Compliance, among others. But only 19 companies, including Intel, Qualcomm, Cree, Hasbro and Texas Instruments, actually underwent an audit for those claims on one or more of their products.

Stacked of Steel Angled Bar. Metal material for industry construction.

Stacked of Steel Angled Bar. Metal material for industry construction.

Several of the biggest steelmakers in India are pushing to continue the minimum import price put in place by the government in February in hopes of reducing cheap imports while firming up steel prices in the domestic market.

According to a report from The Economic Times, the government-implemented measure from February is due to expire in early August, but major producers like JSW, Tata Steel and Steel Authority of India Ltd. (SAIL) wish it will continue, as it has helped them improve their bottom lines as the result of reducing steel imports in recent months.

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“MIP has benefited the domestic steel industry,” PK Singh, chairman of SAIL, told the Economic Times.

Not everyone in the steel industry has been in favor of so-called “MIP” as it has hindered end-user segments in the steel industry, mainly processing firms and equipment makers as it makes steel more expensive for these enterprises, the Economic Times reported.

“Without an uptick in infrastructure and construction activity, steel demand would remain sluggish, leading to weakening of steel prices,” one steel industry executive told the news source.

Steel Prices in 2017

While steel has had a strong 2016 in terms of prices, China’s slowdown in construction activity in the second half of the year could also lead to a reduction in steel prices. However, prices could uptick again in 2017, according to analysis from BMI Research, a Fitch Group:

“Over the first half of 2016, steel prices rallied due to a combination of high demand from Chinese steel users restocking the metal, government stimulus measures implemented in the housing market and positive investor sentiment. Although we forecast the January-June 2016 steel price rally to fade over the latter half, prices will gradually edge higher from 2017 onwards as the market shifts into a deficit.”

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.

Nickel price investment trading arrow going up rising strong indDespite nickel prices going on a hot streak — having climbed 40% since bottoming out at the beginning of the year — many nickel miners are seeing diminishing returns on their production.

According to a recent report from the Financial Post, Sherritt International Corp., a Canadian nickel miner, announced recently that more than half of global output is losing money with the percentage of underwater production even higher when capital spending and other costs are factored in.

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“This rally in the last few weeks is perhaps more robust than some false starts we’ve had over the last year,” David Pathe, chief executive at Sherritt, told the Financial Post. “But it’s got a ways to go before we think we’re at a long-term nickel price that’s sustainable.”

Prior to the recent surge, nickel prices had been a victim to lagging demand, rising inventories and supply from the Philippines in recent years. The recent increase in nickel prices has been partially attributed to speculation that new environmental regulations from the Philippine government will spur mine closures yet only a few small mines have actually been shut down so far, the Financial Post stated.

Nickel Imports Rise

According to a recent piece from our own Raul de Frutos, nickel, along with zinc, have benefited from higher demand coming from China.

de Frutos stated: “In the case of nickel, the supply shortage comes as the new mining minister in the Philippines, Regina Lopez, said that there would be a ban on fresh mining exploration in the country for a month while all existing mines are being reviewed. At present, the Philippines is the top supplier of nickel ore to China and these new developments have sparked concerns about ore supply to China.”

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

Zinc prices, along with nickel, rallied to hit multi-month highs last week as investors hedged on continued supply disruptions.

According to a report from the Financial Times, the zinc price climbed to its highest point in 14 months to $2,275.5 per metric ton on the London Metal Exchange. Investor sentiment surrounding commodities has improved due in part to a weaker dollar and growing oil prices, in addition to government stimulus in China. That stimulus has enhanced the Far East nation’s transportation and infrastructure sectors.

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Meanwhile, nickel could reach as high as $12,000 per metric ton.

“You could easily be forgiven for thinking the market has now become the London Nickel Exchange as … that is where most of the volume is trading and suggests that for the moment it has become the favoured metal of the speculators,” Malcolm Freeman, director at Kingdom Futures, told the news source.

Back to zinc, which has seen its price more than 40% higher in 2016 following a number of mine shutdowns. Citing data from the International Lead and Zinc Study Group, the global zinc market deficit hit 68,700 metric tons in the first five months of 2016, compared to the supply surplus of 177,000 metric tons over the same time in 2015.

Global stocks rally, metals see gains

In his week-in-review, our own Jeff Yoders wrote that global stocks rallied, and metals along with them last week, with precious metals helped by Brexit and sustained despite neutral fundamentals.

“Yet skulking under this prosperity lies a specter that threatens to erode prices and even affect the positive performance of those stock markets: Chinese overproduction,” Yoders wrote.

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-L1To begin July, lead prices moved up nearly a quarter of 1% in futures trades as participants increased their positions due, in part, to a pick-up in spot market demand and a boost in base metals overseas.

Meanwhile, according to a report from the Business Standard, lead for August delivery at the Multi-Commodity Exchange also grew by nearly .25%.

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Our own Raul de Frutos reported just this week that lead prices have hit a one-year high despite neutral fundamentals. It’s been a year of fluctuation for lead, but three-month London Metal Exchange data has prices at $1,900 per metric ton.

Stated de Frutos: “The latest data reported by the International Lead and Zinc Supply Group (ILZSG) indicate the world refined lead metal supply exceeded demand by 23,000 metric tons during the first four months of 2016. Reductions in Australia, China, India and the U.S. led the fall in global lead mine production of 5% compared with the first four months of 2015.”

A Closer Look at the World’s Lead Usage

In addition, world refined lead metal output fell by 1.8%, excluding Chinese usage of refined metal which increased by 4.2% due in part to an 8.8% increase in European demand.

These figures are considered fairly neutral, but the market has not been convinced by this development until now. What’s changed?

“Lead prices are being driven by funds’ increasing appetite for industrial metals,” de Frutos wrote. “This means that even though lead fundamentals don’t look overly bullish, the wind is now blowing at lead’s back. Funds are either seeing a tightening in the fundamentals that we can’t see yet or they are simply buying metals as sentiment in the industrial metals complex has improved. It looks more like the latter.”

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.

 

 

Road signs EU and BREXITWe recently held a webinar on Brexit’s impact on metal prices and the geopolitical risk posed to North American Manufacturing (sponsored by Avetta). The turnout was incredible with more than 100 registrants, half of which were from the manufacturing industry.

We posed several poll questions throughout the webinar and the responses paint a clear picture of what this industry thinks of Brexit and its impact on various companies’ industrial sourcing strategies. Here’s a recap:

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Question 1: “Do you consider the Brexit vote to be a ‘black swan’ event?”
21% Yes; 48% No; 30% Don’t Know

Question 2: “Why are you concerned about Brexit?”
31% have exposure to UK and/or EU suppliers; 61% don’t have said exposure but are concerned about commodity volatility; 56% concerned about currency volatility; 31% worried about other countries leaving the EU

Question 3: “How much of an impact will Brexit have on your industry?”
3% a large impact and we’re concerned; 50% some impact and we’re assessing how much; 16% I have no clue which is why I’m here; 0% no impact

Question 4: “As a result of Brexit, do you think non-ferrous metal (e.g. aluminum, copper, nickel, etc.) prices will:”
20% rise; 14% fall; 66% stay the same

Question 5: “As a result of Brexit, do you think ferrous metal (e.g. steel) prices will:
26% rise; 16% fall; 58% stay the same

Question 6: “As a result of Brexit, do you think precious metal (e.g. gold, silver, platinum, etc.) will:”
41% rise; 7% fall; 52% stay the same

Question 7: “Does your company have operations in Europe or the UK?”
40% yes; 60% no

mining-L1The South Crofty tin mine acquisition has finally been completed after initially being announced in March.

Various news sources are reporting the Canadian company Strongbow Exploration has acquired 100% interest in Western United Mines Ltd. and Cornish Minerals Ltd. (Bermuda).

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“This represents a significant step towards our goal of creating a new strategic metals company with Osisko Gold Royalties as a cornerstone shareholder,” said Richard Williams, president and chief executive at Strongbow.

The South Crofty Tin Project, as it has been referred to, spans several tons and holds an active mining permit through 2071 and also includes 26 former production mines. Several companies have previously attempted to revive the mine, dating back to 2001.

“The Cornish people are justly proud of their mining expertise, and Cornwall led the world in the tonnage of its tin production,” Sally Norcross Webb, mining lawyer at Stephens Scown, told Insider Media. “Completing this deal gives South Crofty a chance to progress towards a production decision, which could mean significant investment and generate valuable jobs for Cornwall.”

Tin Continues to Surge

Our own Raul de Frutos wrote last week that tin, along with zinc, have been the biggest gainers among base metals so far this year. July has been a particularly strong month in growth for tin as it rose above $18,000 per metric ton for the first time since March 2015.

You can find a more in-depth tin 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.

Rare earths are hitting new price lows as major manufacturers continue to invest in new technologies to substitute them out due to price volatility. Iron ore is still oversupplied, but stockpiles are falling faster than expected.

Substitution is Hindering Rare Earths Demand

Reuters’ Andy Home recently wrote about how large manufacturers are finding substitutions for heavy rare earths in a gambit to avoid the boom and bust price cycles of the magnet and battery metals that previously disrupted their supply chains.

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Japanese automotive giant Honda and its technology partner Daido Steel recently announced a materials breakthrough in the electric motors used in hybrid vehicles. Starting with the next generation of “FREED” minivan due to go on sale later this year, Honda will be using a motor that doesn’t need heavy rare earth metals.

Specifically, it will be the world’s first hybrid engine, a gasoline and electric motor, to dispense with terbium and dysprosium.

“Major deposits of heavy rare earth elements are unevenly (distributed) around the world (…) thus, the use of heavy rare earth carries risks from the perspectives of stable procurement and material costs,” Honda said in a statement.

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A fairly innocuous sounding statement but one that cuts to the heart of the roller coaster history of the rare earths market.

Iron Ore Stockpiles Falling Fast

Iron ore’s wild price gyrations this year may be masking a small, but significant, shift in the underlying fundamentals for the steel-making ingredient. While seaborne iron ore remains a well-supplied market, it appears the level of over-supply has been diminishing faster than many expected, leading to an improvement in the supply-demand balance, Reuters’ Clyde Russell writes.

Source: Adobe Stock/ epitavi

Source: Adobe Stock/ epitavi

What’s copper demand like in China, the world’s largest consumer? If the volume flooding warehouses in Asia is any indication, then copper prices could be weighed down as a result of that apparent demand.

According to a report from the Financial Times, copper currently residing in warehouses licensed by the London Metal Exchange (LME) has climbed by 18% over the past week, the highest level since February.

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This tidal wave of copper could weigh on prices, which recently closed in on a two-month high of nearly $5,000 per metric ton due in part to expectations of further economic stimulus from central banks.

“It’s certainly a sign the market is struggling to absorb all of the supply coming to it,” Matthew Wonnacott, analyst at consultancy CRU in Hong Kong, told Financial Times. “Partly because supply is good but demand is not that great either.”

Chinese copper exports

Our own Raul de Frutos wrote recently that Chinese copper exports spiked as much as 256% in May this year when compared to the prior year. This causes some concern about domestic demand with production also rising significantly, up 7% year-over-year in May.

de Frutos added: “Along with the LME copper inventory, bonded copper stocks held in free trade zones in China have climbed this year. Higher inventory levels are, perhaps, limiting the upside potential of copper prices. Although copper rose in June, the outlook remains neutral and, due to all of this uncertainty, we could continue to see choppy price action in the coming months.”

You can find a more in-depth copper 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.

 

The GOES M3 spot index reading fell for the fourth month in a row to 181 from 191. Contract buyers may have already begun to see a $200-per-metric-ton increase in prices from a year ago, according to a recent TEX report due to domestic mill closures.

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The recent Brexit decision has also created complications for grain-oriented electrical steel markets both from the demand as well as the supply side. First, the supply side: Tata Steel’s precarious Port Talbot, South Wales operation in the U.K. that was destined for sale and then for a bailout remains in limbo. As previously reported by MetalMiner, the British government insists that its equity and pension support remain on the table. The Port Talbot operation produces grain-oriented electrical sheet at the Orb works in Newport, South Wales.

GOES_Chart_July_2016_FNL

An acquisition now, with Port Talbot lacking free and open access to the European single market, may have dimmed the operation’s prospects. My colleague Stuart Burns speculated that merely the prospect of higher export tariffs for the U.K .producer would make any potential bidder skittish.

Meanwhile, Baosteel and Wuhan Iron & Steel unveiled a potential mega-merger creating the largest steel producer in Mainland China. Baosteel is a leader in GOES production within China for standard grades. This merger would likely not impact GOES production in any meaningful way.

On the demand side, Siemens announced it would hold off from making any investment in wind power in the U.K. until the E.U.-U.K. trading relationship becomes clearer. That move will contribute to the U.K. failing to meet the E.U.’s 2020 15% requirement that energy consumption come from renewable sources.

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The crux of Brexit, from an energy perspective, comes down to investments. Will projects move elsewhere? Will businesses such as Siemens stall decision-making, impacting demand until the U.K. devises a clear Brexit strategy?

From a metal price perspective, it doesn’t appear as though Brexit will have much if any impact on GOES pricing. Certainly July’s price performance follows a similar price trajectory.

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