Articles in Category: Sourcing Strategies

The monthly Raw Steels MMI® registered a value of 52 in September, a decrease of 5.4% from 55 in August.

Raw-Steels__September-2015In July, it seemed like steel prices were stabilizing for awhile, but prices fell again last month. The decline wasn’t as bad as it could have been, considering that last month China’s stock market sell-off continued and some industrial metals took serious hits.

The bearish commodity environment makes it hard to pick a bottom, proving once again that buying on weakness hasn’t been the best strategy for metal buyers during this market cycle.

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The Real Steel Story

Fundamentally, the steel story is similar to other base metals and can be summarized as: a glut of raw materials everywhere and weak demand unable to keep the market in balance, with China being the main driver on both sides of the equation.

With imports into the US still high, it’s no wonder that US steelmakers keep fighting against the flood of imports. In August, new anti-dumping petitions were filled for HRC and CRC products. The petitioners are the usual group of US producers that have long said that foreign steel imports are subsidized by overseas governments in complete violation of US anti-dumping law. When it comes to price direction, we don’t see these anti-dumping petitions having that much impact.

Demand Side Drivers… Of Cars

The demand picture is mixed and not encouraging:

The car industry seems strong in the US with August numbers showing that it is on track to record one of its best sales years since 2000. On the other hand, the latest Chinese automotive numbers turned out to be even weaker than expected. Chinese auto sales fell by 7.10% in July 2015 compared to July 2014, the largest fall since February 2013.

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While construction activity is strong in the US and Europe, emerging markets and China continue to drag down prices and overproduction of materials for export is actually exacerbating oversupply.

Crude oil fell again in August, with prices sliding as low as $38/barrel. Low energy prices will continue to hurt the energy industry, therefore lowering demand for steel.

What This Means For Metal Buyers

Prices remain weak and it seems clear that there is little going on in the market that could push steel prices up this year. Placing long-term purchases while markets keep falling is not a good strategy. With prices declining at a fast pace, it’s very important for steel buyers to keep an eye on the market and be ready when market sentiment shifts.

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Monthly Metal Buying Outlook for Sept 2015The MetalMiner™ Monthly Buying Outlook report for September has arrived! Get your metal price forecast for aluminum, copper, nickel, lead, zinc, tin and multiple forms of steel, complete with drivers, market commentary, easy-to-read charts and more!

Free Download: Latest Metal Price Trends in the MMI Report

Before you cast, form or machine it you need to do one very important step: source it. When you buy can play a significant factor in the final cost of production. These markets are volatile and you’ll need the technical and fundamental research we offer for industrial sourcing strategies and specific price targets that have been tailored specifically for the North American manufacturer.

This month, you’ll learn:

  • What the China stock market crash tells us about global commodity markets
  • Why we think China devalued its currency
  • Whether or not we think recent US stock market declines portends a recession

Plus a short- and medium-term industrial buying strategy for the base metals that you source!

Individuals, small- and mid-sized manufacturers are encouraged to subscribe to our annual buying outlook reports. You can sign up at any time and receive the next 12 monthly reports emailed directly to you. Learn more and subscribe today!

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Get your short- and medium-term buying strategy for industrial metals.

This is your last chance to register for Thursday’s webinar, PREVIEW: MetalMiner Price Forecasts for September at 10 a.m. CDT, featuring Lisa Reisman, executive editor, MetalMiner™ and John Conolly, managing director, Azul Partners.

Can’t make it live? Register anyway and we’ll send a copy of the slides and recording of the webinar for you to review at your convenience.

Whether you cast, form, or machine aluminum, copper, nickel, lead, zinc, tin or the many forms of steel, you need to source it. And when you source can play a significant factor in your bottom line. This webinar will provide a behind-the-scenes look at how we formulate our short- and medium-term price forecasts for these base metals. This is a must-attend for those interested in a September metal price forecast.

Register now!

The US Court of Appeals for the District of Columbia Circuit in April 2014 upheld the bulk of the Security and Exchange Commission’s then-new Conflict Minerals Rule, but ruled a key disclosure requirement violated the First Amendment because it forced a company to “confess blood on its hands.”

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The same federal appeals court ruled against the disclosure requirement a second time Tuesday, saying an investigation requirement is fine, but disclosing that material remains untracked does not require an admission tantamount to guilt, when it comes to receiving raw materials from war-torn areas.

Disclosure of Unknown Origin

The Dodd-Frank Wall Street Reform and Consumer Protection Act required companies to disclose whether any tin, tantalum, tungsten or gold (commonly known as 3TG), in their supply chains is connected to violent militia groups in Africa.

An SEC spokesman said the commission is reviewing Tuesday’s decision.

The three-judge appeals panel split 2-1, effectively siding with business groups in ruling that forcing companies to designate which products “could not be found to be ‘DRC conflict free’” is tantamount to requiring firms to criticize their own products.

Two judges appointed by Republican presidents voted in the majority and a recent appointee of President Barack Obama dissented.

Conflict Minerals Rule Still Intact

The court’s rulings did not overturn the entire Conflict Minerals Rule, it actually upheld requirements such as having companies investigate whether their products include the minerals and a requirement to file public reports on their investigations, a process that began last year.

One situation where a respondent could not confirm that all of its raw materials were DRC conflict free, was party supply retailer Party City, a company that filled out a conflict minerals compliance form and asked their suppliers where, exactly, all of the materials for their mylar balloons and other party supplies came from. Party City reported it received little response from its supply chain.

That was one of many cases that highlighted the difficulty of actually vetting and confirming supply chain compliance for the wide range of businesses that the Conflict Minerals Rule covers.

What Does This Mean For Conflict Minerals Compliance?

In a statement after the initial ruling against the SEC last April, the regulator indicated that companies are not required to identify products as “DRC conflict free,” having “not been found to be ‘DRC conflict free’” or “DRC conflict undeterminable.” The SEC also indicated that, pending further action, an independent private sector audit (“IPSA”) will not be required unless a company voluntarily elects to describe its own product as “DRC conflict free” in its Conflict Minerals Report. That statement is likely to remain in effect pending the outcome of further litigation. It also looks unlikely that the private sector audits will be required this year and, barring a legal settlement, likely most of next year.

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

The SEC can petition the entire DC Circuit Appeals Court to hear the case en banc, a request that the court can decide whether or not to grant. The SEC can also appeal to the US Supreme Court no matter what the outcome is at the circuit court level. The business groups that challenged the Conflict Minerals Rule can ask the court to stay the entire law, as they did after the April decision, but it’s not likely that the court would grant such a request as a stay was not allowed after the initial decision.

Most larger companies — in a variety of industries — intend to continue implementing their 3TG traceability and responsible sourcing initiatives no matter what the outcome of the case concerning the DRC measure.


Get your short- and medium-term buying strategy for lead with our monthly outlook report!

Turmoil continues to paint an uneasy picture for commodities in August as yesterday, the selloff in emerging-market assets and commodities worsened, creating further currency declines and sending developing-nation stocks to their lowest position in nearly four years.

Lead is a commodity that joined nickel and zinc in retreating, with copper dropping to its lowest point since 2009 and aluminum hitting a six-year low.

Want to know how this will affect future lead prices? Get your 30-day forecasts for copper and 9 other metal forms in our new Monthly Metal Buying Outlook report.

China continues to be a huge factor in the direction lead is trending. We identified the nation’s manufacturing sentiment and its prices for the metal as two of the main drivers this month.

It’s been one week since China devalued the yuan to its lowest point in more than 20 years, worrying global investors as the world’s second-largest economy continues to struggle.

“Since China devalued the currency last week, investors have become more concerned about the growth outlook for emerging markets,” Michael Wang, London-based strategist at Amiya Capital LLP, told Bloomberg Business. “We need to get the first Fed rate hike out of the way. We also need more evidence that the near-term outlook for China’s economy is stabilizing.”

Lead Proves Resilient, So Far

We reported that after hitting a 5-year low in March, lead rebounded with an 18% rise in April, shocking many and also proving just how resilient the metal has been. We also warned that such a sharp increase is commonplace after a sharp decline, as evidenced by copper prices following a similar pattern.

You can find a more in-depth lead price forecast in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:


Get your short- and medium-term buying strategy for nickel

On August 12, for the second straight day, China devalued its currency, sending nickel and other base metals in a free-fall. Then, the central bank pushed the value of the currency lower a third time yesterday.

China’s economy is at a standstill and investors are concerned that it could fall further as commodity prices, including nickel, are now in reverse and traders view the devaluation of the yuan as a sign a currency war could follow, further putting the global economy in turmoil.

However, the central bank stated that financial markets should not be affected in the long-term as it doesn’t anticipate a consistent depreciation of the yuan.

Want to know how this will affect future nickel prices? Get your 30-day forecasts for copper and 9 other metal forms in our new Monthly Metal Buying Outlook report.

“Looking at the international and domestic economic situation, currently there is no basis for a sustained depreciation trend for the yuan,” the central bank stated.

Not everyone is so optimistic, however, as Rajeev De Mello, head of Asian fixed income at Schroders in Singapore, told The Guardian: “While it is too early to say whether this is the beginning of a sustained devaluation of the yuan, other central banks may be forced to follow suit and that may trigger a fresh round of currency weakening around the emerging world.”

Nickel Prices Primed for a Turnaround?

Our own Stuart Burns wrote just the other day that rising nickel inventories in London Metal Exchange warehouses could signal a bearish turn for the future of refined nickel prices.

This is contrary to the established viewpoint that the Indonesian export ban will lead to a shortage of nickel ore for Chinese production and, in turn, lead to rising prices. Burns concluded that as it is, there does not appear to be a case for nickel prices to rise in the near future.

So What Should My Industrial Buying Strategy Be?

You can find a more in-depth nickel price forecast in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

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Get your short- and medium-term buying strategy for industrial metals.

We are pulling aside the curtain and showing you what’s behind it. Learn how we formulate our Monthly Metal Buying Outlook reports with a special look at the coming month, in the upcoming webinar, PREVIEW: MetalMiner Price Forecasts for September.

Join us Thursday, August 27 at 10 a.m. CDT for this very special September metal price forecasts event. Can’t make it live? Register anyway and we’ll send you a copy of the slides and recording of the webinar for you to review at your convenience.

Speakers to include:

Lisa Reisman, CEO, Azul Partners and Executive Editor, MetalMiner™ has more than 20 years’ experience in management consulting and direct materials sourcing. She has worked at Andersen and Deloitte Consulting, in addition to owning and operating her very own aluminum trading company.

John Conolly, Managing Director, Azul Partners also has more than 20 years’ experience, but in listed derivatives, trading commodities and client advisement of hedging commercial risks. John previously worked as director of product marketing at CME Group, and has been featured on Bloomberg, CNBC and Fox Business News.

Register for the webinar today!

If our Monthly MMI® series was ever collectively looking to tell a big story, this is it: a whopping 9 out of the 10 individual monthly metal category sub-indexes that comprise the series hit an all-time low for the August 2015 reading.

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The outlier, our GOES MMI, was spared, but that index was down, as well, even though it didn’t hit a low like its base, minor and precious metal brethren.

MM-IndX_TRENDS_Chart_August-2015_FNLOf course, if you’ve followed regular MetalMiner coverage and our monthly outlook reports on ferrous and base metal markets, this should be much less of a surprise to you, as equity markets, commodity and exchange rate movements have roiled the status quo for virtually all industrial metal categories.

Computer generated 3D photo rendering.

This month there were plenty of multi-year lows to go around… even beyond metals.

This month we saw the Thomson/Reuters-Jefferies CRB Index hit a six-year low, itself, and China devaluing its own currency this week has sent commodities such as oil tumbling, as well.

Race to the Bottom

Since the beginning of 2015, plummeting prices have caused the Aluminum MMI to drop 10.1%, the Copper MMI to lose 15.2%, and the Stainless MMI to take a whopping 23.8% hit.

Three Best Practices for Buying Commodities

Since the MMI series began in January 2012, against the baseline value of 100, the Aluminum MMI has now dropped 20%, the Copper MMI has dropped 33%, and the Stainless MMI has dropped by more than a full third – 36%.

How to make your purchases in this volatile commodity environment? What indications, if any, are there of prices hitting rock bottom? Check out the full report to find out.


copper wire closeup

Here’s the latest on China’s currency value affecting copper, other commodity prices.

Copper prices have gone the way of aluminum and crude oil.

Chinese trade data confirmed the expectation that demand will “remain slack” in the Far East nation, according to a recent report from the Wall Street Journal. Citing data from China Customs, the news source reported that national exports dropped 8.3% in July, year-over-year.

This data also confirmed that imports fell for the ninth consecutive month, to 8.1% in July, year-over-year. This was a whole 2 percentage points higher than the year-over-year decline seen in June (6.1%).

Want to know how this will affect future copper prices? Get your 30-day forecasts for copper and 9 other metal forms in our new Monthly Metal Buying Outlook report.

“As long as China worries, eurozone woes and dollar strength dominate the headlines, sentiment across metals markets will be weak,” Casper Burgering, senior economist, manufacturing and industrial metals, at ABN Amro Bank, told the WSJ. Read more

Tin cans

Want a medium- and short-term buying strategy for tin? Check out our Monthly Metal Buying Outlook report!

Back in June, we reported that tin had been in a free-fall for most of the past year. In 2014, the metal declined 15% and as of June 2015, prices were down 24% year-over-year. Simply put, it did not look good for tin producers heading into July.

But then July happened. Tin outperformed all metals last month, and even nearly breached our short-term resistance level of $16,500/mt, with one day even trading as high as $16,600/mt.

Want to know what August has in store for tin?

Get your 30-day forecasts for aluminum, copper, nickel, lead, zinc, tin and steel (HRC, CRC, HDG, plate) from our new Monthly Metal Buying Outlook report.

Indonesia Export Quantities: The Story for Tin in August

The world’s top exporter of tin, Indonesia, ramped up its export activity in July, but local smelters are preparing for a sharp tail-off in August amid reports that a new export rule is about to go into effect.

“Many of the smelters don’t have the new license yet,” Jabin Sufianto, president of the Indonesian Association of Tin Exporters (AETI) told Reuters. “There have been delays in the new regulation from the government.”

These new export rules and licensing requirements are expected to underpin prices of the metal.

“If you can’t export the tin ingot, your cash flow will be affected,” Sufianto added. “So I believe the production will be lower, and as an impact, the price will increase. But I don’t think it’s going to be a huge problem because the government will help us getting our licenses.”

The reason for these new regulations stem from the Indonesian government expressing concern over illegal activity related to tin mining and smuggling, and the subsequent negative effect on the environment it can have.

The London Metal Exchange responded in June, with tin prices up nearly 10%. However, according to Reuters, stagnant demand from the electronics sector and neighboring country Myanmar picking up the slack, should offset any significant price gain for tin.

So What Should My Industrial Buying Strategy Be?

You can find a more in-depth tin price outlook and forecast in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds: