Consumption of natural gas by U.S. energy providers/utilities has steadily increased for the last decade.
After a year of ups and downs, lead prices are finally finding their way up.
Three-month London Metal Exchange lead hit a one-year high last week as prices tested $1,900 per metric ton level.
The latest data reported by the International Lead and Zinc Supply Group (ILZSG) indicate the world refined lead metal supply exceeded demand by 23,000 metric tons during the first four months of 2016. Reductions in Australia, China, India and the U.S. led the fall in global lead mine production of 5% compared with the first four months of 2015.
World refined lead metal output decreased by 1.8%. excluding Chinese usage of refined lead metal rose by 4.2%, mainly because of an 8.8% increase in European demand. Chinese apparent usage, however, fell by 12.1%, and overall global demand decreased by 2.5%. Chinese imports of lead contained in lead concentrates declined by 18.9% compared with the same period in 2015. Read more
Rare earths are hitting new price lows as major manufacturers continue to invest in new technologies to substitute them out due to price volatility. Iron ore is still oversupplied, but stockpiles are falling faster than expected.
Substitution is Hindering Rare Earths Demand
Reuters’ Andy Home recently wrote about how large manufacturers are finding substitutions for heavy rare earths in a gambit to avoid the boom and bust price cycles of the magnet and battery metals that previously disrupted their supply chains.
Japanese automotive giant Honda and its technology partner Daido Steel recently announced a materials breakthrough in the electric motors used in hybrid vehicles. Starting with the next generation of “FREED” minivan due to go on sale later this year, Honda will be using a motor that doesn’t need heavy rare earth metals.
Specifically, it will be the world’s first hybrid engine, a gasoline and electric motor, to dispense with terbium and dysprosium.
“Major deposits of heavy rare earth elements are unevenly (distributed) around the world (…) thus, the use of heavy rare earth carries risks from the perspectives of stable procurement and material costs,” Honda said in a statement.
A fairly innocuous sounding statement but one that cuts to the heart of the roller coaster history of the rare earths market.
Iron Ore Stockpiles Falling Fast
Iron ore’s wild price gyrations this year may be masking a small, but significant, shift in the underlying fundamentals for the steel-making ingredient. While seaborne iron ore remains a well-supplied market, it appears the level of over-supply has been diminishing faster than many expected, leading to an improvement in the supply-demand balance, Reuters’ Clyde Russell writes.
The U.K.’s decision to leave the E.U. hasn’t really scared investors away from industrial metals. The metal complex continues to rally. As we explained in a webinar yesterday, Brexit had little to no impact on the supply and demand dynamics of industrial metals.
On the demand side of the equation, it is — not the U.K or even Europe — that is the world’s biggest consumer of industrial metals. Supply cuts amid low prices and this year’s boost in Chinese demand for industrial metals, thanks to stimulus measures, continue to be the key factors to watch. In this post we’ll look at the recent bullish price moves of individual base metals that appear to confirm that the bull market that we identified earlier this year is for real. In addition, we’ll look at the recent improvement in investors’ sentiments about China, which favors rising metal prices.
Aluminum Hits a One-Year High
Aluminum overcapacity is still an issue. In June, China and the U.S. failed to reach an agreement on how to address excess global aluminum capacity. But that hasn’t stopped prices from rising. On Tuesday, aluminum prices hit a one-year intraday high. Read more
China, this year, is becoming more than just the world’s largest metals consumer, it’s also taking a larger role in setting metals prices. While oil prices have crept up this summer, another selloff could be caused when refined products in storage finally come to market.
China is Taking a Bigger Role in Setting Metals Prices
The prices of metals from aluminum to zinc have long swayed to the beat of the world’s largest manufacturing nation, Reuters’ Andy Home writes.
But this is the year that China has emerged from the limelight to take center-stage in the trading of those metals. On one day alone, March 10, trading volumes on the Dalian Exchange iron ore contract exceeded one billion metric, more than the combined annual output of the world’s biggest three producers, Rio Tinto Group, BHP Billiton and Vale SA.
Another Oil Glut is Likely Due to Products in Storage
In its July Oil Market Report, the International Energy Agency warned about shockingly high levels of refined oil products sitting in storage. Gasoline, diesel and heating oil are built up to such high levels in so many parts of the world, that a sharp rise in crude oil prices is unlikely in the short run, oilprice.com reported.
The IEA said that “the fact that crude oil has in the past two months moved within a range in the high $40s/bbl should be a relief for some producers.” But it went on to caution that “the existence of very high oil stocks is a threat to the recent stability of oil prices.”
U.S. flat-rolled steel prices appear to abhor a vacuum — they seem to either go up or down.
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
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
Before anyone with shares in nickel mines goes out and orders their new Maserati, a word or two of caution is in order.
Yes, by some accounts nickel swung into deficit this year after five years of surpluses as global demand rose by some 4% and supply has been constrained by a lack of new investment, Indonesia’s export ban on nickel ore exports and, more recently, a fall in exports from challenger Chinese supplier, the Philippines where low prices have reduced output.
Investors Are Cashing In
The euphoria among investors is not simply due to a change in outlook. Nickel prices have surged this year by some 13% according to the Financial Times with the latest boost coming from the Philippines’ new environmentalist mining minister Gina Lopez, who has announced plans to audit domestic mines for compliance with environmental standards, the expectation is up to 70% could fail resulting in them potentially having their licenses revoked. Two have already lost their licenses. Read more
The international mining and metals sectors didn’t take a break for Independence Day. Rio Tinto Group has made its first moves under its new CEO and India is reconsidering its steel tariffs.
Jacques Shelves Rio Iron Ore Project
Rio Tinto Group has shelved its $20 billion Simandou iron ore project in Guinea because of a sustained slump in prices, the company’s new CEO Jean-Sebastien Jacques said in an interview with The Times newspaper.
The world’s second biggest miner by market capitalization had been seeking financing for Simandou, even after a $1.1 billion writedown on the project in February. Last month the Anglo-Australian company submitted a feasibility study to the Guinean government.
But global oversupply of iron ore made the project inviable at this time, Jacques told The Times.
India is Reconsidering Steel Minimum Import Prices
India may alter the list of steel items that attract a minimum import price if the country decides to continue with the measure beyond August, steel secretary Aruna Sundararajan said.
India imposed the minimum import price on 173 steel products in February, helping cut inbound shipments last month to their lowest level in at least 14 months.
Alcoa, Inc. revealed a new name, Arconic, for its value-added business unit in a recent regulatory filing and Iranian oil exports are decreasing but still adding more supply to global markets.
Alcoa Reveals Spinoff Details, Names Value-Added Business ‘Arconic’
Alcoa, Inc. said on Wednesday it will spin off its traditional aluminum smelting business as part of its planned company split and the renamed company will serve the aerospace and transportation industries.
The company to be spun off will be named Alcoa, Corp. The value-added business unit will take on the name Arconic, Inc., according to a recent regulatory filing. It will make engineered products for growth markets such as automotive and aerospace. Alcoa revealed its plans in a regulatory filing.
Iranian Oil Exports Fall From June High, Still Adding Supply to Markets
Iran’s oil exports in July will fall June levels as the country battles Saudi Arabia and Iraq for market share, but the Islamic Republic’s output is still about 70% higher than a year ago, a source with knowledge of the country’s crude oil lifting plans told Reuters Africa.
Exports will be about 2.14 million barrels per day in July, down from about 2.31 million bpd in June, but still the highest since January 2012, the source said.
Led by an active multifamily housing market and sustained by solid levels of demand for new commercial and retail properties, the Architecture Billings Index reached its highest score in nearly a year in May.
The American Institute of Architects (AIA) reported the May ABI score was 53.1, up sharply from the mark of 50.6 in the previous month. Any score above 50 indicates an increase in billings.
“Business conditions at design firms have hovered around the breakeven rate for the better part of this year,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “Demand levels are solid across the board for all project types at the moment. Of particular note, the recent surge in design activity for institutional projects could be a harbinger of a new round of growth in the broader construction industry in the months ahead.”
Commercial construction spending fell 3.7% to $72.0 billion in April, but remains 6.8% above April of 2015. Educational construction spending was down 2.4% to $88.4 billion, still 5.4% greater than April a year ago.
If design services are, indeed, in healthy demand then spending should pick up accordingly in the roughly one year between design services and actual construction breaks ground.