Articles in Category: Sourcing Strategies

Nickel prices edged up higher to end the year in the futures market following speculators widening their positions.

According to a report from the Economic Times, the spot nickel market is seeing a trend of increased demand from alloy makers and other industries that consume the metal. This has covered up short positions from speculators ahead of monthly figures, influencing nickel futures.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

A report from Economic Calendar last week found nickel prices hovering near year-long highs. Closing this year on a positive note can be attributed to a tightening supply chain for the metal.

Writes Donald Levit for the news source: “While the supply side adjustments was the major price driver, an improvement in demand also contributed to the rally. While nickel has soared, continued potential for further supply cutbacks have continued to push the metal higher, and last week news of a potential, major shutdown added even more upside impetus to nickel’s rally.”

Nickel Mine Suspensions Also in Play

The Economic Calendar report also announced the closure of the second-largest nickel miner in the Philippines, pending an appeal. This suspension (as it stands) would have a significant impact on the supply and demand balance for today’s nickel market.

How will nickel and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

Dr. Nicholas Garrett is a Director of RCS Global and an internationally recognized expert in the company’s six core work areas: supply chain due diligence and conflict minerals compliance, transparency, artisanal and small-scale mining, responsible supply chains, human rights and public policy and institutional reform. He has worked on more than 50 projects for over 10 years and regularly advises a range of clients, including AngloGold Ashanti, AVX, the EITI, Nokia, the Organization for Economic Cooperation and Development, Trafigura, the World Bank, and the World Gold Council, the British, German, Japanese and U.S. governments, the World Wide Fund for Nature (WWF) and World Vision. MetalMiner welcomes his perspective on conflict minerals compliance.

A lack of clarity on how and when key provisions of Dodd-Frank Wall Street Reform and Consumer Protection Act will be fully implemented is leaving downstream businesses in limbo — many of whom are looking to enhance their minerals sourcing compliance.

Conflict Minerals Flowchart

RCS Global’s simple IPSA flowchart. Source: RCS Global.

When passed, the implications of Dodd-Frank 1502 looked game-changing, significantly increasing the obligations on downstream companies using “conflict minerals,” but following an upheld appeal, the requirement to undertake an audit under Dodd-Frank 1502 is in stasis, leaving many companies either unsure as to how to validate their compliance obligations linked to the bill, or whether they should even attempt to validate at all.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Nevertheless, at some point in the not too distant future, more than 6,000 Securities and Exchange Commission issuers producing products containing tantalum, tin, tungsten and gold — better known as the 3TG — will be forced to make significant efforts to improve transparency, monitoring and oversight of their supply chains, and ultimately determine the source of the materials in a vast range of everyday products. Read more

Black lead zinc ore closeup rocky textureThe International Lead and Zinc Study Group recently released preliminary data for zinc in 2016, which revealed the global market for the refined metal in deficit from January to October  of this year.

Total reported inventories also fell over the same period.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

Global zinc mine production dropped by 1.8% compared to the same 10 months in 2015 with the overall reduction attributed to drop-offs in Australia, Ireland, Peru and India. Of note were Bolivia, China and the Russian Federation which posted increases this year.

China and the Republic of Korea (South Korea) posted increases in refined zinc metal output, but the global output declined slightly due to activity in Mexico, India, Australia and the United States.

The report stated: “A rise in global usage of refined zinc metal of 3.7% was primarily influenced by an increase in Chinese apparent demand of 9.3% that more than offset a 14% reduction in the United States. Usage in Europe rose by 0.9%.”

ILZSG concluded that Chinese imports of zinc fell by nearly half, 44.5% to be exact, but the country’s net imports of the metal grew 26%.

Buying Zinc at the Right Time

Our own Raul de Frutos wrote of the ILZSG report, and added some insightful analysis on what buyers of the metal should consider this time of year:

“During this year’s rally, zinc buyers had several opportunities to buy forward. Buyers now need to pay close attention to the recent price pull back. If you see a rebound in prices near that support level, that would be a good time to buy some volume.”

How will zinc and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

 

Six years its first proposal, Indian mining giant Adani seems as if it’s finally ready to start its $16.5 billion coal project in Queensland, Australia.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

The company recently secured the approval for a permanent rail line for what’s known as the Carmichael project. An official statement by the company said Queensland’s Coordinator-General had given “the latest, and final, secondary approval” for about 19-and-a-half miles of permanent track, as well as a 300-bed camp.”

The permission will add to the nearly 242 miles of heavy haul track connecting the mine to Abbot Point port. Chief Executive of Adani Australian, Jeyakumar Janakaraj, said in a press statement, “We are particularly focusing on the construction of our planned near-400-kilometer (248 miles) rail line to be constructed between the Carmichael mine and our bulk port facility at Abbott Point near Bowen.”

When fully operational, the mine will reportedly be the largest in Australia, involving the dredging 3.53 million cubic feet of soil near the Great Barrier Reef Marine Park. The project will ensure Adani a steady supply of coal to be used for electricity generation, benefiting a hundred million Indians.

The proposed project ran afoul with green groups in Australia, quickly taking on a “jobs versus ecology” dimension. As per some claims, the project is likely to create at least 11,000 jobs, and the company has promised to farm these out to locals, and not bring in labor from abroad.

After getting approval, Adani Group Chairman Gautam Adani met Australian Prime Minister Malcolm Turnbull, amid protests from groups in Melbourne. Adani has said the project will start in the new year.

Supporters of the project insist mines such as these will provide an economic stimulus to North Queensland.

Matt Canavan, Minister for Northern Australia, was quoted in a section of the media as saying this would be the first time a new minerals basin would be opened up in 40 years.

Adani also announced that it will set up regional centers for providing vital support services for the project and associated infrastructure and headquarters for its rail and port operations.

Townsville would become Adani mining’s regional headquarters, while the Mackay-Bowen area would become the regional headquarters for its rail and port operations. Adani said its shift to the regional Queensland centres would allow it to more directly harness local skills.

The project has faced a lengthy environmental approval process and a number of court challenges. Earlier, this year, it finally got Queensland government approval to mine. Some say, however, that while the Carmichael mine has the final government approvals, there are still a few hurdles it has to surmount.

Two-Month Trial: Metal Buying Outlook

An appeal has been lodged with Australia’s full Federal Court seeking to overturn the Commonwealth approval, and is due to be heard in March.

I get it, you are thinking of what you are going to get your family for Christmas. However, Santa is bringing you good opportunities to buy some metals. Don’t miss them.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Base metals entered a bull market earlier this year. The real driver of this bull market has been the stronger-than-expected Chinese demand. Markets underestimated Beijing’s determination not to disappoint on its growth numbers. Thanks to the country’s increase in infrastructure spending, industrial metal prices are getting a tailwind.

The metals rally particularly extended in November. However, prices don’t just move in a straight line. If they move up quickly, buyers are tempted to take their profits until markets digest those gains. This is normal price action and why we normally see prices moving in a zig-zag. In the second half of December, there’s already been some profit taking and as prices pull back, buyers can find good opportunities to time some purchases. Let’s take a few examples:

Copper

Copper prices could find support soon

Copper prices could find support soon. Source: MetalMiner analysis of Fastmartkets.com.

Almost no analyst was bullish on copper prior to this rally, but it seems that the market now sees the possibility of a market deficit next year as almost no supply is due to come on-stream while demand seems robust. Read more

Macro photo of a piece of lead ore

Macro photo of a piece of lead ore

The International Lead and Zinc Study Group released its latest findings recently, which have world refined lead metal supply exceeding demand from January to October with reported stock levels growing over that same period.

A 7.8% reduction in global lead mine production, compared to the first 10 months of 2015, was also of note and attributed mostly to lower output in China, India and Australia.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

The ILZSG report states: “A sharp fall in Chinese refined lead metal output was partially balanced by increases in Australia, Kazakhstan, the Republic of Korea and the United States resulting in an overall global reduction of 1.1%.”

Meanwhile, refined lead metal usage grew 9.8% in Europe due to Germany, Poland, Italy and the U.K. posting increases. However, in China, demand fell by that same number and in the US, demand stayed flat.

The report stated that Chinese lead imports contained in lead concentrates fell 22.4% compared to the first 10 months of 2015.

Industrial Metals on a Bull Run

Although the latest report on lead has supply exceeding demand, the story for industrial metals in 2016 has been one dominated by the bull. Our own Raul de Frutos recently wrote of this market and suggested buying tips for those sourcing metal in this market:

“In a bull market, sometimes prices rally and it’s risky to buy at those levels because prices could pull back simply due to profit taking. A good opportunity to time your purchase is when prices correct or pull back and then momentum picks up again. That signals that buyers are again back in control and prices are likely to move higher.”

How will lead and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

 

Tin cans. Cans are used for packing all sorts of goods - conserved food, chemical products such as paint, etc

Tin cans. Cans are used for packing all sorts of goods – conserved food, chemical products such as paint, etc

Tin prices, along with nickel, weakened last week on the non-ferrous metals market due in part to reduced demand from alloy industries.

According to a report from the Business Standard, owners of metal stocks sold en masse from this lower demand, affecting both tin and nickel with copper prices also softening from a lack of demand.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

To begin December, our own Stuart Burns wrote of tin’s continued bull run even with an abundant supply.

Burns wrote: “(Tin) is also relatively well distributed: the five largest producing countries are China 35%, Russia 12%, Australia 8%, Indonesia 7% and Brazil 6%, according to Platts. These mines are not in unstable or war-torn regimes. Some mines in places such as Myanmar and the Democratic Republic of the Congo are less savory, sure, but as a percentage of the whole they are not mission critical to global ore supply.”

Risk with Tin

There is some inherent risk with tin since both supply and demand are not presently driving prices.

Burns concluded: “That doesn’t mean to say the price hasn’t got further to go. There is no shortage of liquidity in the Chinese investment market and speculators this year have pushed not just tin but copper and other metals to annual highs. Tin’s fundamentals aren’t bad by any means but the FT reports that nearly 30% of Chinese smelter capacity sits idle today, a warning sign that high prices may not be matched by downstream demand.”

How will tin and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

Scenario: Within the next two months you need to go to your supplier and buy metal. Let’s say you are thinking about placing an order that will meet your metal needs for the next six months. Let’s say you correctly identify that you are in a bull market (you read us).

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Therefore, as you expect prices to keep moving up, you quickly grab the phone and call your supplier to place the order ASAP.

Is that the right way to do it? Nope. Read more

Set of copper pipes of different diameter lying in one heap

Set of copper pipes of different diameter lying in one heap

Copper prices experienced an increase to close out the week due in part to hope for stronger Chinese demand and a rally in crude oil.

According to a recent report from Dow Jones Business News, China consumes roughly 45% of global copper supplies and economic trends in the Far East suggest a significant effect on prices for the industrial metal.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

“Right now the markets look rosy and there seems to be a reluctance to stand in the way of the move higher,” Matt France of brokerage Marex Spectron told Dow Jones. Also of note, growing crude prices have provided a boost to commodities with copper prices rising alongside oil.

The reason? According to the news source, the majority of investors buy and sell broad bundles of commodities and oil is typically involved, which leads to an effect on other commodities, in this case, copper.

Even Stronger Copper Prices on the Horizon?

This week’s developments for copper is nothing new as the metal has been rising strongly for the past month or more. Writes our own Stuart Burns:

“Copper consumers, of course, would like to know what they can expect for copper prices next year. Will they fall back or continue to be supported? So a letter yesterday to the Financial Times from Simon Hunt, one of the most experienced and respected analysts in the market, is of interest.”

How will copper and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

Join sister site Spend Matters this Tuesday at 10 a.m. Central as Jason Busch (founder and head of strategy at Spend Matters) and Marco H. de Vries (senior director, product marketing at OpenText Business Network) discuss what the oncoming Trump administration means for global trade, the environment and economic policy. How will the supply chain and risk and visibility be impacted? You’ll have to register today to find out!

Webinar: Trade, Environment, and Economic Policies in 2017: Is Procurement Ready?

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