Nickel wasn’t alone in its LME downward trend as most industrial metals retreated on the heels of commentary from the Federal Reserve, which fueled speculation that U.S. borrowing costs will rise in the coming year. Read more
Construction has been one of the few pockets of strength in the U.S. economy – until recently. Construction payrolls have declined since March and spending in May rose less than 3% from a year earlier, the lowest rate since 2011.
Coming after strong growth of 10% last year, the question now is whether the sputtering is just a blip or something more lasting that portends a significant drag on the economy.
The Associated Builders & Contractors, American Institute of Architects and National Association of Home Builders‘ chief economists recently gathered in Washington, D.C., for a mid-year market forecast, outlining stable to strong residential and commercial project activity through 2017.
Each economist discussed present and future indicators for sector performance, including ABC’s Construction Backlog Indicator (8.6, 1Q2016); AIA’s Architecture Billings Index (52.6 in June) and the Construction Consensus Forecast (5.6% growth in 2017); and, the NAHB/Wells Fargo Housing Market Index (60, August 2016).
While all of the economists predicted growth in 2017, they had varying degrees of optimism.
Anirban Basu, ABC Chief Economist: “Nonresidential construction spending growth will continue into the next year with an estimated increase in the range of 3 to 4%. Growth will continue to be led by privately financed projects, with commercial construction continuing to lead the way. Energy-related construction will become less of a drag in 2017, while public spending will continue to be lackluster.”
Robert Dietz, NAHB Chief Economist: “Our forecast shows single-family production expanding by more than 10% in 2016, and the robust multifamily sector leveling off. Historically low mortgage interest rates and favorable demographics should keep the housing market moving forward at a gradual pace, but residential construction growth will be constrained by shortages of labor and lots and rising regulatory costs.”
Kermit Baker, AIA Chief Economist: “Revenue at architecture firms continues to grow, so prospects for the construction industry remain solid over the next 12 to 18 months. Given current demographic trends, the single-family residential and the institutional building sectors have the greatest potential for further expansion at present.”
Preliminary data from the International Lead and Zing Study Group reveals the global market for refined zinc metal was in deficit from January to May this year with reported total inventories also declining over that same time frame.
Decreases in output from India, Australia, Peru, Ireland and the U.S. led to the significant 7.7% reduction in global zinc mine production in the first half of 2016, compared to the same time period in 2015.
“World output of refined zinc metal declined by 3.6% with reductions in India, Japan and the U.S. being partially balanced by increases in the Republic of Korea and Namibia,” the ILZSG report stated.
The report also stated that world demand for refined zinc metal grew 0.6% due to the rise in Chinese apparent usage, to the tune of 8.2%, that offset declines in Japan, Taiwan, the Republic of Korea and the U.S.
Lastly, Chinese imports of zinc contained in zinc concentrates fell substantially, by 26% with the country’s net imports of refined zinc metal growing by 112%.
Metal Prices Bullish on Global Stock Markets
Investors are becoming more positive on the health of the global economy, which could translate to industrial metals demand growth. The reason? Global stock markets continue to rise, and have already made up for their losses following Brexit.
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.
“A decrease in global lead mine production of 5% compared to the same period in 2015 was mainly a consequence of reduced output in Australia and the United States,” the ILZSG report stated.
Refined lead metal production decreased by 1.9% despite increases in Kazakhstan and the Republic of Korea. The reason? Lower output from China, whose imports of lead contained in lead concentrates fell 19.9% compared to the same time frame in 2015.
Also in China, demand decreased by 12.4%, which contributed to the global usage decline of 3.3% overall. In Europe, usage climbed by 9.8% but in the U.S. and the Korea, usage fell by 1.2% and 7.5%, respectively.
Metal Prices Bullish?
Our own Raul de Frutos wrote this week that global stock markets continue to rise, indicating a positive outlook for the global economy and, in turn, industrial metals demand growth.
de Frutos wrote: “This is especially true when China’s stock markets rally. China’s stock market is possibly the best benchmark for China’s economy or at least investors’ sentiment about the Chinese economy. The slowdown in the Chinese economy (weak demand with too much capacity) explains why industrial metals peaked in 2011.”
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.
The South Crofty tin mine story has a new chapter as Canadian mining company Strongbow Exploration, Inc. announced plans for the historic site in Cornwall, U.K.
It’s been a long and winding road, but just last month the West Briton reported that Strongbow finally completed the acquisition of the mine, which has seen its fair share of potential suitors dating back to 2001.
According to the West Briton, several companies attempted to acquire the mine from 2001 to 2013 but poor market conditions led to the mine going into administration in 2013. Enter Strongbow, which completed its acquisition with 100% interest in the South Crofty Tin Project and associated mineral rights just last month.
The mine has an active permit valid through 2071.
The reason for optimism in August 2016? Rising tin prices and a weakened pound could supplement each other to grow the mine’s value, which at one point employed thousands of locals before closing, according to the West Briton.
China to Increase Tin Imports?
A recent report from Reuters stated that China could increase imports of refined tin in the near future. The reason? Upcoming environmental inspections at smelters, which could derail local output.
“It should have a huge impact on the whole (tin) industry,” a trader at one Chinese tin smelter told the news source. “It’s … part of long-term supply side reform not just for the private sector or special smelters.”
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.
A who’s who of manufacturing companies, fabricators, service centers, wholesalers, trading companies, steel mills, toll processors and companies that provide products and services to the steel industry will be present at Steel Market Update‘s annual conference later this month, including our own Lisa Reisman.
Lisa will be providing a steel price forecast to those in attendance at the Georgia International Convention Center in Atlanta, August 29-31. She will be joined by representatives from the Institute for Trends Research, Cliffs Natural Resources, AK Steel and the Federal Reserve Bank of Atlanta, who will be delivering the keynotes during the 3-day event.
To learn more and register for the conference, click here.
Dr. Christopher Bayer, Ph.D., of the Payson Center for International Development of Tulane University Law School, recently responded to an e-mail interview with MetalMiner Editor Jeff Yoders about the recent Conflict Mineral Benchmarking Study he led of Dodd-Frank Conflict Minerals compliance.
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 about what minerals are in those chains. Bayer explained more in this MetalMiner Q&A.
Chris Bayer. Image: Tulane University.
Jeff Yoders: Analysis of the reports shows that conflict-minerals reports are boosting supply-chain transparency for many of these companies. Is that an added benefit to reporting?
Chris Bayer, PhD: Yes, a company can use Dodd-Frank Section 1502 to gain insight into its own supply chain, to a degree that would probably not have been previously possible. Whether and how companies may leverage that to their advantage is up to them, but without question, information is power. Quite a number of companies are weeding out non-performing suppliers in their supply chain according to their defined parameters on conflict minerals.
JY: 10% Of all filers said, or implied, they had conflict-free products. What did you and your team’s research tell you about these claims?
CB: First off, it is in fact an extraordinary claim for a company to make. A whole lot of work would go into ruling out the possibility that the company is indeed not — through its procurement practices — fueling conflict in the Democratic Republic of the Congo. Your due diligence inquiry is, by definition, very involved, given the sheer amount of tiers and suppliers to traverse on average. But as per the Securities and Exchange Commission, a company should take care not to designate is products as DRC conflict-free unless it can also provide independent assurance that would lend credibility to such a claim.
JY: Incomplete reports were still an issue. How long do you think it will be until companies can, at least, fill out complete reports?
CB: Since many companies are already able to achieve full compliance — including reporting smelter Or Refiner (SOR) and Country of Origin (COO) data — the we-need-more time argument becomes less plausible.
JY: More companies underwent product audits this year. Are outside product audits necessary for full compliance?
Copper continues to struggle as demand for the metal wanes, most notably in its top consumer market, China.
BMI Research analysts noted that copper inventories indicate a significant lack of demand in general, but a lack of demand coming from China makes it especially troubling considering the Far East Nation is the world’s largest importer of the metal.
“While the corresponding decline in Shanghai inventories largely offset the jump in (London Metal Exchange prices), the shift suggests that China’s strong H1 2016 economic data does not in fact reflect improving demand growth,” BMI Research stated, according to a report from Business Insider.
The note added: “We expect China’s refined copper imports to decelerate over the remainder of the year, and will remain wary of any other rapid movements in inventories.”
Copper MMI gains just a single point
Our own Raul de Frutos noted that copper on the LME continues to trade up and down with the metal struggling near $5,000 for the ninth straight month. Citing the International Copper Study Group, de Frutos stated that refined copper balance for Q1 2016 reveals a production deficit of around 119,000 metric tons (seasonally adjusted to 129,000 mt.) compared to a production surplus of around 13,000 mt. (seasonally adjusted to 12,000 mt.) for the same time frame in 2015.
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.
MetalMiner’s index of global precious metals prices notched the second-largest move for August in our Monthly MMI series, behind only the Stainless MMI.
The Global Precious MMI rose 7.2%, from 83 to 89, between July and August. Gold prices again drove the move, with U.S. bullion logging its second straight month above the $1,300 per ounce threshold; however, the U.S. palladium price experienced a significant jump, rising 18.4% over the month.
Palladium on a Bullish Rebound
After hitting multiyear lows at the beginning of 2016, palladium has begun a slow down but its long-term ascent is still acting rather bullish.
The PGM has been making higher highs and lower lows since January, and hit above $700 per ounce at the beginning of August.
Looks like investors have been giving palladium and its cousin platinum some more love.
Analysts at INTL FC Stone and Citi Research have said recently that they think investors have taken some of the money they’ve been putting behind gold and spreading it to the PGMs, according to the WSJ.
Back to Gold
While U.S. gold prices have hovered recently, they are still far ahead of their pre-Brexit levels. The Federal Reserve‘s dovishness has not given investors any reason to abandon their investments in gold, or silver for that matter.
Core Consultants Group opined recently that gold broke through a psychologically important barrier of when it crossed $1,300/ounce and is still finding overall bidding interest despite the slight declines in the price during the last few weeks.
We, too, can’t see gold’s recent increases being pushed back, or even tempered, by anything other than significant interest rate increases by the Fed. The type of radical action that the central bank has shown no stomach for, lately, despite recent comments that it won’t rule out increasing rates this year.
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Aluminum futures closed a bit lower this week, declining 0.6% due in part to pressure on the base metals complex from a rise in the value of the U.S. dollar.
According to a recent report from the Economic Calendar, the dollar climbed in comparison to rival currencies with Automatic Data Processing releasing positive private payroll data. Donald Levit, a strategist for the Economic Calendar, wrote: “A higher U.S. dollar is negative for dollar denominated commodities because it decreases demand for the commodities from holders of international currencies.”
Economic Calendar speculated that aluminum upside could be on the horizon with buyers in China locking in prices for October shipments. That is a popular month for the Far East nation to stock up on the metal in time for winter when inclement weather can hinder shipments.
Domestic Construction Spending Hits One-Year Low
With China close to stocking up on aluminum for its upcoming construction projects, the U.S. Commerce Department recently announced domestic construction spending declined 0.6% to its lowest point since June 2015, reports our own Jeff Yoders.
Yoders wrote: “Economists polled by Reuters had forecast construction spending increasing 0.5% in June after a previously reported 0.8% drop in May. Their June estimates were largely based on the government’s assumptions for private residential and nonresidential construction spending in the advance GDP report.”
You can find a more in-depth aluminum 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.