Articles in Category: Sourcing Strategies

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As the dust settles from President-Elect Donald Trump’s historic win last week, we’re starting to see what it might mean for infrastructure.

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

The Wall Street Journal said last week that his $1 trillion building proposal relies entirely on private financing, which industry experts say is likely to fall far short of adequately funding improvements to America’s crumbling roads, bridges and airports.

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Is it a brand new day for privately funded public infrastructure projects? Or can only direct federal spending fix our roads, rail stations, bridges and airports? Source: Jeff Yoders.

Trump wants private investors to put money into projects in exchange for tax credits totaling 82% of the equity amount. His plan anticipates that lost tax revenue would be recouped through new income-tax revenue from construction workers and business-tax revenue from contractors, making the proposal essentially cost-free to the government.

The Trump/Navarro PPP Plan

Peter Navarro — a public-policy professor at the University of California, Irvine, and an adviser to Trump — wrote on his personal website that, “For infrastructure construction to be financeable privately, it needs a revenue stream from which to pay operating costs, the interest and principal on the debt, and the dividends on the equity… The size of the required equity cushion will, of course, vary with the riskiness of the project. However, we are assuming that, on average, prudent leverage will be about five times equity. Therefore, financing a trillion dollars of infrastructure would necessitate an equity investment of $167 billion, obviously a daunting sum.” Read more

China has come in ahead of schedule on its target of cutting 45 million metric tons of steel capacity in 2016, reaching the goal before the end of October, the country’s state economic planner said on Friday.

Two-Month Trial: Metal Buying Outlook

China also hoped to achieve its 2016 goal of cutting 250 mmt of coal capacity before the year-end, Li Pumin, general secretary of the National Development and Reform Commission (NDRC), told a news briefing.

Oil Surplus Poised to Continue in 2017

The oil market surplus may run into a third year in 2017 without an output cut from the Organization of Oil Exporting Countries, while escalating production from exporters around the globe could lead to relentless supply growth, the International Energy Agency said on Thursday.

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

In its monthly oil market report, the group said global supply rose by 800,000 barrels per day in October to 97.8 million bpd, led by record OPEC output and rising production from non-OPEC members such as Russia, Brazil, Canada and Kazakhstan.

Set of copper pipes of different diameter lying in one heap

Set of copper pipes of different diameter lying in one heap

Just last week, copper prices rallied for 10 straight days, their longest streak in at least 28 years, according to The Wall Street Journal, and that could be a good sign for global economic health.

Pointing to manufacturing and inflation in China and the U.S., the WSJ stated that previously sluggish global economic growth may have turned into a sprint, which in turn has helped propel copper prices.

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!

Tai Wong, head of base- and precious-metals trading at BMO Capital Markets, told the newspaper that copper build up from the London Metal Exchange indicates a 10% decline since Oct. 25, which points to a positive sign for demand.

“Whenever you have draws like that, that will help (the price of copper),” Wong told the newspaper.

Not all analysts are bullish on copper until more evidence comes to the forefront.

“One would like to see trending economic growth, rather than a few isolated data points,” Michael Turek, head of base metals at BGC Partners, told the newspaper.

Bull Market on the Horizon?

Our own Raul de Frutos wrote last week that while copper’s movements may not initially imply a bullish run, but looking closer at its fundamentals tells a different story:

“Copper prices have lagged the rest of the industrial metals this year and we’ve been pretty bearish on copper since 2011. But, although still early to make a call, there might be a bull lurking in the shadows. Copper prices might be setting up for a big run,” de Frutos wrote.

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:

Aluminum lines on a conveyor belt in a factory.

Aluminum lines on a conveyor belt in a factory.

Aluminum prices are on the rise in a major way with a stockpile in the Chinese market leading the charge along with concern over an available supply shortage.

According to a recent report from The Wall Street Journal, aluminum futures hit a two-year high to close out October on the Shanghai Futures Exchange. The specific cause? Some analysts claim it’s the stricter Chinese road regulations with new weight limitations on trucks, which are delaying aluminum deliveries.

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!

Producers who rely mostly on trucks for aluminum delivery could see their costs rise as much as 30% for the time being.

“The longer this situation is unresolved, the more impact it’s going to have,” Michael Turek, head of base metals at BGC Partners in New York, told the WSJ. “Less aluminum is getting to where it needs to go.”

Smelters using trains as their primary method of moving aluminum are also facing issues, according to the WSJ.

“Loads of ingots are waiting at rail stations across the region, waiting for spare rail capacity to take them to markets in the south east and elsewhere,” aluminum consultancy AZ China wrote in a report Tuesday.

Aluminum Prices Hit 15-month High to Begin November

Our own Raul de Frutos wrote this week that aluminum prices hit even newer highs, rising above $1,700 per metric ton on the London Metals Exchange.

“Aluminum supply has increased this year as rising aluminum prices triggered release of new capacity and restarts of idled capacity. However, as we recently pointed out, there are other factors pushing aluminum prices up,” he wrote.

Those factors include rising energy costs and strong demand.

How will aluminum 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:

 

 

rectangular welded steel pipes on painting workSouth Korea’s largest steelmaker just posted its most significant quarterly profit in nearly three years, which coincided with steel prices rebounding.

According to a report from Bloomberg Markets, POSCO‘s earnings jump can be attributed to China’s property and infrastructure boom, as well as an earnings increase in additional Asian mills. The net result is that Moody’s Investors Service revised the former Pohang Iron & Steel Corporation’s ratings outlook from negative to stable.

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!

Writes Heesu Lee for Bloomberg: “Net income, excluding minority interests, was 539.3 billion won ($476 million) in the three months through September, after a 550 billion won loss a year earlier, the Pohang-based company said in a statement Wednesday. Analysts expected profit of 587.4 billion, based on estimates compiled by Bloomberg. Operating income beat expectations and was the highest since 2012.”

Bloomberg stated that steel prices have grown more than 40% so far this year, an impressive rally following five years of losses.

Price Arbitrage Settles

Our own Raul de Frutos wrote this week the price spread between U.S. and Chinese steel prices is now at normal levels with the U.S. price corrected and Chinese prices holding. This comes after the summer months when the price arbitrage between the two nations was significant.

de Frutos wrote: “(The price arbitrage was) Well above historical levels. Two months ago we predicted that this unprecedented price arbitrage wouldn’t last, since enough holes existed in the anti-dumping duties to allow material to reach U.S. shores.”

How will steel 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:

 

stainless-nickel-L1Nickel prices remained steady this week, trading in the range of their support and resistance levels, but the future could be an interesting one for the metal.

According to a recent report from the Economic Calendar, a tightening supply chain and increased demand could lend its support to future upside for nickel.

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!

“There are signs that this year could be finally the turning point for nickel with many expecting the market to be in deficit and so starting the much needed rebalancing process,” Eduard Haegel, asset president of BHP’s Nickel West unit, said at a conference in Perth. “The welcome return to balance over the next few years should see further recovery in nickel prices.”

So far this year, nickel prices have climbed following the Philippines banning several miners due to questionable environmental practices. On the heels of Indonesia’s ban on nickel ore exports, there were concerns this shift in supply would be temporary but both nations have confirmed they will continue their efforts.

Nickel in Line for a Rally?

Our own Raul de Frutos wrote just this week that nickel’s fundamentals favor a move higher, as do their recent consolidation.

“At least both the price action and fundamentals seem to agree with (nickel’s move higher). Buyers should have a good plan in order to protect margins in case of a price increase,” de Frutos wrote.

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:

Adobe Stock/ Björn Wylezich

Adobe Stock/ Björn Wylezich

Just last week, zinc prices experienced a tough couple of days as the London Metal Exchange (LME) three-month price fell by $100 per metric ton.

According to a report from Reuters, this has been an interesting month for zinc as the metal previously hit a five-year high earlier in October. Its slide can be attributed to news of producers planning to increase output of 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!

North American zinc mining continues to play a significant factor with Canada’s Teck MIning providing a three-year production forecast from its report in Q4 last year.

“Zinc production is expected to increase significantly as the mine enters a phase with high zinc grades and a higher proportion of copper-zinc ore processed, with our share of zinc production during 2017 to 2019 expected to average more than 80,000 tons per year,” the report stated.

Nothing to Worry About With Zinc’s Decline?

Our own Raul de Frutos recently covered zinc’s decline and warned that it’s nothing to worry about.

“Don’t expect zinc to turn bearish or anything. Meanwhile, in China, manufacturing provinces have found a way to curtail power costs, no matter what the price,” de Frutos stated.

Actually, most industrial metals saw their prices increase as energy and transportation costs went up, as well. Also of note we oil prices, which flirted with $55/barrel this week and U.S. shale drillers increasing production.

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:

Allegheny Technologies, Inc. shares tumbled 15% Tuesday after the Pittsburgh-based specialty metals producer reported a larger than expected third quarter loss and missed analyst revenue estimates as well.

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

The company lost $530.8 million, or $4.95 per share, vs. a loss of $144.6 million, or $1.35 per share, in the year-ago quarter. Sales fell 7% to $770.5 million. Analysts had expected the company to report an adjusted loss of 10 cents per share and revenue of $822 million.

ATI also announced the permanent closing of the idled Midland stainless steel melt shop and finishing operation in Beaver County, Pa.

It also permanently closed its Bagdad plant in Gilpin, Pa., whichemployed about 225 people. It produced grain-oriented electrical steel prior to the start of the six-month lockout of union workers in August 2015. Midland employed around 250 workers.

“The decision helps provide clarity to some of the people who had hoped that there would be a restart,” ATI spokesman Dan Greenfield said.

In December, the company announced it was mothballing both facilities with the possibility that they would reopen if market conditions for those products improved.

Free Download: The October 2016 MMI Report

Richard Harshman, ATI’s chief executive officer, said that has not happened. He announced the move as part of the company’s third-quarter earnings statement.

lead-prices-L1Lead prices climbed to their highest point in 16 months earlier this month, due in part to steadier copper prices and concern over mine supply.

According to a recent report from Reuters, three-month lead on the London Metal Exchange surged more than 3% to begin October, its strongest showing since May 2015, stacking on gains from the last session when rising oil prices were also a contributing factor.

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!

“Lead, which has underperformed the other base metals for much of this year, has been catching up in the past couple of months … with contraction in lead mine supply and refined lead, Caroline Bain, senior commodities economist at Capital Economics, told the news source.

According to the Reuters report, mine shutdowns on a global scale over the past year, as well as lead producers’ activity in curbing output due to low prices, have tightened global supplies of lead, which is used to make batteries.