Articles in Category: Supply & Demand

After more than four years of languishing, some hope’s been rekindled in India’s iron ore mining sector.

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

Ore production jumped 22% between April and October, according to figures released by the government. Iron ore production stood at 100 million metric tons during the resurgence, against 81 mmt during the same April to October period a year ago. What’s brought even more cheer is the news that exports, too, jumped 9 times their previous level, to 9 mmt from last April to September, as compared to 1 mmt, the same period last year.

Export Taxes

With a steep price hike in global markets aided by protectionist measures for the domestic steel industry, will India see a resurgence in iron ore exports? Not so fast.

India has plentiful iron ore stockpiled but taxes are holding up exports. Source: Adobe Stock/nikitos77.

The protectionist measures imposed by India’s government previously included an export duty tax of 30% on high-grade iron ore. Many within the mining sector are of the opinion that the export tax must go, or at the very least be reduced, to boost exports. Read more

By anyone’s reckoning, iron ore and coking coal had a stellar year in 2016. Driven by infrastructure investment and a robust construction market, Chinese imports of our iron ore could top 1 billion metric tons for the first time in 2016. Prices more than doubled in the space of 12 months and the supply-demand situation seemed to be largely in balance for much of the year.

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

After topping $80 per mt in early December, prices eased back a little toward the end of the year prompting many to ask “have we seen the peak in iron ore prices?” Mills typically cut output during the quieter winter months when construction demand slows. Many steel mills have already curbed output due to chronic smog alerts across northern China.

Chinese Demand

Seasonally, it would not be unusual if iron ore prices remained subdued up to the Chinese New Year and then picked up in preparation for the peak production months of late spring and summer. But, while Chinese demand defied many expectations of a slowdown in 2016, the recent softening of both iron ore and coking coal raw material prices, and the price of some finished steel products over the last week or 10 days, has lent support to some analysts’ predictions that we could be seeing markedly lower Iron ore prices throughout this year and next. Read more

What will 2017 bring for the steel industry?

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

At the beginning of the year, it’s always fun to look forward and pick out some of the themes for the year. 2016 was certainly volatile as hot-rolled coil pricing went from $360 a ton to $600/ton, then back to the low $400s/ton before recovering to $600/ton. Phew! Read more

Our Raw Steels MMI fell by two points, dragged down by a sharp drop in coking coal prices. Chinese coking coal prices have been quite volatile over the past few months. But despite the recent decline, prices are still well above last year’s levels.

On the bullish side, we saw a big increase in steel flat product prices, both domestically and internationally.

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

Hot-rolled coil and cold-rolled coil prices in the U.S. have risen 13% and 17% respectively since they hit bottom in mid-November.

Additionally, steel prices in China continued to climb in December. We already noted, that one of the reasons to expect higher steel prices in the U.S. was rising Chinese prices. Prices in China set the floor for international prices and the spread between U.S. and international steel prices has narrowed so much in some steel product categories, like HRC, that there isn’t much incentive for domestic steel buyers to look for import offers.

While prices in China have risen, Chinese steel exports have fallen, suggesting that the country is absorbing more steel. In November, Chinese steel exports fell 16% compared to last year. For the first eleven months, exports are down 1% compared to the corresponding period in 2015.

The real estate sector is among the world’s largest steel consumers. Total investment in real estate in China during the first eleven months of 2016 rose 6.5% compared to the same period of last year. China’s passenger car sales rose 17.2% compared to the same month last year and it’s the seventh consecutive month were car sales rise in the double digits.

China’s Steel Supply to Fall In 2017

While China’s better-than-expected demand was a key driver to higher steel prices in 2016, we believe that China’s supply might be the key to higher steel prices in 2017.

For years, Chinese cities have been choking on the smog spewing from China’s industrial production sector, but things have gotten much worse lately. In December, authorities asked 23 cities in northern China to issue red alerts as inspection teams scoured the country. The scale of the red alert measures shows that the Chinese government is taking air pollution seriously this time.

China’s energy consumption is mostly driven by its industry sector, the majority of which comes from coal consumption. Coal burning is the biggest contributor to air pollution in China. One of the principal users of coal, and therefore most polluting, is its steel industry.

Two-Month Trial: Metal Buying Outlook

China has previously applied stricter anti-pollution rules and supply-side reforms designed to cut capacity in the coal and steel sectors, which helped push prices up. Now that the situation is getting unbearable for citizens, China has no choice but to get tough in its self-declared “war on pollution.” The result is that we could see significant supply disruptions in China’s metal production sector, particularly in steel.

What This Means For Metal Buyers

The expected boost in infrastructure spending in US will help support steel prices. However, the main driver to steel prices continues to be China. In 2017, steels buyers need to monitor if China is able to spur demand growth rates and whether its steel supply falls amid pollution issues.

For full access to this MetalMiner membership content:
Log In |

We’ll remember 2016 as the year in which steel prices bottomed out thanks to higher-than-expected demand in China.

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

China, once again, increased infrastructure and property construction spending. As a result, steel prices rose.

China’s primary growth engine — and, therefore, that of industrial metals demand — was fired up one more time. Some people might think that what drove steel prices this year was the imposition of higher trade barriers. While that did help prices, the real driver sustaining the rising trend in steel prices was the aforementioned higher-than-expected demand in China.

Chinese hot-rolled coil price. Source: MetalMiner IndX.

Many analysts expect the country’s demand growth rates to slow down this year. Some Chinese cities have tightened their home purchasing rules to prevent their property markets from overheating. Also, China’s car sales could lose momentum if China doesn’t extend the tax break for small cars in 2017. Read more

As we continue to look back at our highest-rated posts of 2016, it’s no surprise that another price predictions article was among the most-read. Contributor James May of Steel-Insight gave us his price outlook for the second half of 2016 and, yes, 2017. Enjoy this best of metalminer post with an eye toward next year. — Jeff Yoders, editor.

U.S. flat-rolled steel prices appear to abhor a vacuum — they seem to either go up or down.

Two-Month Trial: Metal Buying Outlook

JamesMayheadshot_150

James May

Moves this month, therefore, have to be perceived as efforts to hold pricing, even though they are pitched as price increases. For now, the moves appear to have worked; hot-rolled coil is steady at $620 a short ton out of minimills and $640/st from integrated mills with cold-rolled coil at $820-840/st.

Amid lower scrap prices, the minimills certainly have room to negotiate. Meanwhile, buying tends to slow over the summer. Import deals are also firming up given the spread. As such, it is our view that the bias is to the downside, but discounting — at least initially — will be limited. Hot-rolled coil lead times remain at around six weeks, although some minimills are closer to four to five weeks. Cold-rolled coil and hot-dipped galvanized remain in the eight to 10 week range — down from their peak, but not long enough to allow distributors much leeway in negotiation. Moreover, with some mills having downtime in August, there is no incentive to cut prices to fill schedules.

US Hot-Rolled Coil Prices ($/metric ton ex-works Midwest) Margins Widen

Steel_Insight_Coil_prices_550_071116

Source: Steel-Insight

Falling scrap prices and high steel prices are leading to rising spreads for minimills, a further reason to maximize output. Slab re-rollers are still seeing their spreads widening as well. At around $350/mt free-on-board Black Sea, the spread to U.S. domestic steel is around $300/mt over landed slab, an enormously profitable spread. It is, perhaps, no wonder that provisional semi imports in May were over 700,000 mt. We would expect them to move higher as buyers take advantage of the arbitrage. However, we caution that this could be another contributory reason for U.S. prices to drop later in the year as rising supply of coil hits the market. Read more

As we continue to spotlight and republish our top posts of 2016, we travel way back to New Year’s Day 2016 for another metal price story. This one by our Editor-at-Large and MetalMiner Co-Founder, Stuart Burns noting an aluminum price increase from almost exactly one year ago today. — Jeff Yoders, editor.

Aluminum has since taken off with the rest of the base metals and we’re in a full bull market. It’s quite a contrast from situation just one year ago.

The London Metal Exchange (LME) aluminum price has risen from the low $1,400s per metric ton in October to the mid $1,550s this week.

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

At the same time, the Japanese have started settling first quarter 2016 physical delivery premiums at $110 per mt, 22% higher than the previous quarter, the first time they have risen in a year.

rolled aluminum on table with worker

What is behind the increase in the aluminum prices? Adobe Stock/uwimages.

Meanwhile, probably not unconnected, Japanese port stocks have fallen at the country’s three major ports. Stockpiles fell in November by 7.5% to 401,000 mt according to Reuters. Over the in US, the Midwest transaction price, which includes the LME price and premium that buyers pay to take delivery of the metal, has risen steadily this month to $1,736 per metric ton by December 24, up from $1,599/mt on 28 October, which was its lowest point since May 2009. Read more

About a year ago I was interviewed by a columnist from a leading economic newspaper about the prospects for the lithium market.

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

The gist of the article was the question of will lithium demand from electric vehicles unsustainably drive up prices due to supply shortages? I said no. I expected the market to rise as demand increased, but that there was no shortage of lithium in the world and supply would rise in response to price increases and demand.

Well, the paper went on to report that supply shortages would constrain the market and the lithium price was set to boom. That’s okay. I don’t expect everyone to take my advice as gospel and, to some extent, you could say the author was right, the price has risen as this graph from CRU illustrates.

Source CRU Group

Source: CRU Group

But the same CRU article goes on to explain that to every price rise there is a response. The extent to which the market responds with new capacity or expansion to existing capacities varies with the commodity, the market during the time frame involved and any number of other issues. We will come back to CRU’s modelling of the lithium market a little later but, for now, how has the lithium industry responded to this rise in demand and what effect has the rising price had?

Lithium Investing

Well, Reuters leads an article with “stampede to invest in lithium mines threatens price gains” and goes on, as the title suggests, to say a rush to invest in new and expanded mines for lithium means material will flood the market just as demand for lithium batteries is due to soar, curbing prices. Read more

Over the holidays, we are republishing and revisiting some of our most well-read posts of 2016. While this one technically doesn’t fall into the 2016 (it was initially published December 14, 2015) but we are still looking back at it anyway since it deals with predictions about metal prices for the year we’re about to leave behind. It also gathered the second-most traffic of any post we published in 2016 despite predating the year by a few weeks.

At the time, my colleague Raul de Frutos wrote “Currently, some key Chinese indicators we are tracking are giving us no reason to expect higher metal prices in 2016.”

Yet, we have seen higher metal prices in 2016 and we are now in a full metals bull market. The reason we are is because of everything Raul cited in his post. He was 100% right that “the longer it takes China to clean up its mess, the later metal prices will hit bottom.”

China cleaned up its mess, hit bottom early in 2016 and turned global commodities demand around remarkably fast, all things considered. This reminds us that markets can make a turn around quickly. The future is unpredictable and we need to take the market day by day. Just four months after this post, we went from bearish to completely bullish on industrial metals.  Enjoy the second of our Best of MetalMiner in 2016 series. -Jeff Yoders

As you well know, the main cause of the commodities meltdown has been China’s slowdown. Since China makes up half of the world’s demand for commodities, the economic slowdown means lower demand which has led to a situation where a glut of materials can’t find a home.

Free Sample Report: Our Annual Metal Buying Outlook

The role that China plays in commodity prices is so big that the future of metal prices is totally dependent on China. The longer it takes China to clean up its mess, the later metal prices will hit bottom. Currently, some key Chinese indicators we are tracking are giving us no reason to expect higher metal prices in 2016.

Trade Surplus

Imports to China dropped 8.7% to $143.14 billion in November from a year earlier, extending a slump in imports to a record 13 months, suggesting that government stimulus measures are failing to boost growth.

China Imports (millions $) Source: trading economics.com

China Imports (millions $) Source: TradingEconomics.com from Customs Administration Data.

Meanwhile, Chinese exports declined 6.8% to $197.24 billion in November from a year earlier, marking the fifth straight falling month. The fact that China is struggling to increase its exports demonstrates that global demand is weak and that China will have to find a more painful solution to balance its surplus. The trade surplus and the inability to find a home for the excess of materials flow will continue to keep a lid on China’s growth, depressing commodity prices.

China Exports (millions $). Source: tradingeconomics.com

China Exports (millions of dollars). Source: TradingEconomics.com

 Yuan Falls To Four-Year Low Against The Dollar

Chinese authorities want to see a smooth depreciation of the yuan/renminbi as China faces external pressure not to devalue its currency too quickly. A sharp depreciation would probably hurt the country’s credibility at the same time China wants to attract more foreign capital. In addition, it would raise criticisms that China is keeping its currency artificially low to encourage more exports.

Yuan versus dollar. Source: yahoo finance

Yuan versus dollar. Source: Yahoo Finance.

Recently, China’s central bank cut its reference rate to the lowest level since 2011. The yuan fell against the dollar to the lowest level since 2011. Although China has said that it has not allowed the yuan to slide to boost the economy or increase exports, it seems that the market is taking these developments as desperate actions from China’s government to help the economy, raising concerns among investors that the country’s slowdown might worsen.

China’s Equity Markets’ Slump Continues

We believe that equity markets are the best benchmark for the performance of China’s economy, or at least investors’ sentiment about China. We’ve analyzed before the link between China’s stock market and commodity prices. Currently, this link is even more noticeable.

China FXI ishares

China FXI shares continue to fall. Source: @StockCharts.com.

After the huge slump this summer, equity prices mildly recovered, but since October we see that equities are heading south again. The poor performance of Chinese stocks demonstrates that investors are still worried about the future of the country and not lured by its government actions.

New! Free Download: The December MMI Report

Contrary to what others are saying, we suspect that the slump in China’s stock market could continue, resulting in more fears and more sell-offs in commodities/metals markets.

The European Union has launched a new investigation into Chinese steel imports, this time to determine if corrosion-resistant steel grades merit further investigation and possible duties.

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

The E.U. currently has 40 anti-dumping and anti-subsidy measures in place, according to Reuters. 18 of these are products from China and a further 20 investigations on steel products are ongoing. The European Commission said it would start another anti-dumping investigation into cast-iron products from both China and India while reviewing whether existing duties on Chinese seamless steel pipes and tubes should continue for another five years. The E.U.’s action is being met by a rising level of concern in China which sees protectionist overtones in the E.U.’s moves.

Ascension Debate

The timing of the E.U.’s latest action is viewed with some suspicion in Beijing, coming just days before the 15th anniversary of China’s accession to the World Trade Organization. China says that from December 11 the E.U. should consider China’s prices as fair market value. Others say China must make minimum standards of market participation. Up until now, the E.U., like all WTO member nations, could compare Chinese prices with those of another country of their choosing, in this case Canadian prices. Not surprisingly, Chinese steel prices are consistently below Canadian prices, supporting legislation and anti-dumping penalties. Read more