Articles in Category: Supply & Demand

After rising strongly for the last month or more, copper prices now appear to be buffeted by every scrap of news that comes out.

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“Copper prices fell this week as investors cashed in gains after the previous session’s rally,” news.com in Australia reported yesterday. The gist of the argument seems to be the 23% rise in the copper price last month was a step too far. The site quoted Caroline Bain of Capital Economics saying “You only have to look at the levels of investor buying to see that quite a lot of these rallies have been based on euphoria rather than grounded in fundamentals. We think we will see some profit-taking inevitably as we end the year”

Reuters, on the other hand, took a somewhat contrary view, reporting copper prices climbing mid-week, buoyed by a pickup in U.S. manufacturing. The newspaper reported new orders for U.S. factory goods recorded their biggest increase in nearly 1-and-a-half years in October, evidence that the manufacturing sector is gradually recovering after a prolonged downturn and as demand signals from China also improve. Read more

The copper market will go into deficit by 2020, just when Rio Tinto‘s, extension to the Oyu Tolgoi mine in Mongolia comes online, the company said on Tuesday.

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The Anglo-Australian mining major gave approval in June for a $5.3 billion expansion of Oyu Tolgoi, one of the world’s largest copper mines and a project central to the major’s efforts to become less dependent on iron ore.

Traders Still Skeptical of OPEC Output Cut

The Organization of Petroleum Exporting Countries‘ output set another record high in November, rising to 34.19 million barrels per day from 33.82 million bpd in October, according to a Reuters survey.

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Oil prices pared losses slightly after inventory data released late Tuesday from the American Petroleum Institute showed U.S. crude stocks dropped more than expected last week despite a hefty build of 4 million barrels in Cushing, Oklahoma.

Renewed economic confidence followed the election of republican nominee Donald Trump and Americans snapped up new vehicles at a rapid pace in November, giving the U.S. auto industry a chance of breaking its all-time record for full-year sales.

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The Automotive MMI was up, too, jumping 8%.

In November, U.S. auto sales rose 3.7% compared with a year ago, according to Autodata Corp. On an annualized basis, that equaled a rate of 17.87 million units. November sales growth projections had ranged from 2.7% at Edmunds.com to 4.2% at Kelley Blue Book. Total sales for November were 1.38 million, that shattered a record for the month that was set in November 2001.

Automotive_Chart_December-2016_FNL

The month’s annual sales rate, adjusted for two extra selling days this November, was 17.9 million vehicles, more than the 17.7 million average estimate.

A contributing factor to the solid month was the Thanksgiving weekend and Black Friday sales, which are having an increasing effect on the month’s output. With one month to go, the auto industry has a decent chance to match or exceed its 2015 full-year record of 17.47 million vehicles sold.

Automotive sales and metals prices are both benefiting from bullish sentiment among buyers and investors. Steel companies stock prices have increased after Trump’s election just as aluminum and copper prices in the bullish metals markets.

Another factor in new car sales is the enduring low prices for both oil and gasoline, which might change soon now that the Organization of Petroleum Exporting Countries and other producers such as Russia have finally agreed to a production freeze.

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Rising oil prices, however, might not be the detriment to auto sales that they have in the past. Hybrid vehicles and simply more efficient fuel consumption have blunted the impact of gasoline prices on new car sales. One of the reasons that the gas tax has become such a poor funding mechanism for the federal Highway Trust Fund is that motorists simply have to buy less gas for today’s efficient, newer vehicles.

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A massive stockpile of 500,000 metric tons of aluminum has been trucked out of the Mexican city of San José Iturbide and shipped to a remote port in Vietnam.

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The Wall Street Journal reports that the stockpile is believed to be related to the product of Chinese aluminum producer China Zhongwang.

Zhongwang is a state-supported enterprise that has received large benefits and financing from the government of China. The company also has a long history of circumventing and evading duties in trade cases. Read more

Yesterday, the Organization of Petroleum Exporting Countries finalized a deal to cut production by 1.2 million barrels a day starting in January, its first reduction since 2008.

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The production deal will last six months with a committee composed of three OPEC country members monitoring and reviewing the decision at their next meeting in May to determine if the cuts will extend for another six months.

Trading volume (at the bottom) surged as crude moved up on Wednesday

Trading volume (at the bottom) surged as crude moved up on Wednesday. Source: @StockCharts.com.

On Wednesday, U.S. crude jumped 9.3% to settle at $49.44 a barrel. The number of contracts traded on Wednesday rose sharply as prices made a one-month high. Rising volumes confirm that new money is supporting the price move, increasing the likelihood that the trend will continue. Read more

The world is not short of tin yet tin prices are still rising. Not short in the total-percent-present-in-the-earth’s crust kind of way, anyway.

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It 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.

Yet, ore grades are falling and much of what is left will require a progressively higher price to be economically extractable. Falling London Metal Exchange and Shanghai Futures Exchange inventories are signalling that real or apparent demand remains strong and the rise by tin to become the second-most actively traded metal on the LME this year as the price has surged underlies strong investor interest.

After falling to the lowest level since 2009 to $13,085 a metric ton in January, tin is now trading at $21,400 per mt. Investor appetite has been insatiable, particularly in China, driven in part by a perception that demand is outstripping supply. BMI Research is forecasting the global tin market will see a supply shortfall deepen to 9,400 mt in 2020.

“This is mainly due to higher average tin consumption than production, as a result of depleting ore reserves,” the research group is quoted by the FT as saying.

But before we all get too carried away, the industry is getting twitchy about the price and that should ring alarm bells. Although the FT says “visible” stocks held in LME or SHFE warehouses are at their lowest level since at least 2000, there is a “high level of under-reported stocks in China.”

Yunnan Tin, suppliers of over one-quarter of global refined tin output, called for a “sustainable recovery” in the market, “rather than volatility caused by hot money or speculation in futures markets.”

While ITRI warned that “…money flows from the investment funds, could be the determining factor in metals price.”

A warning from both that supply-demand is not currently driving prices and therein lies an inherent risk.

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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.

Global automotive giant Volvo is currently taking part in a European Union research project which involves replacing the various cables in trucks with wireless sensors.

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The result is expected to be a dramatic reduction in the amount of copper and plastic used. Every year the Volvo Group should be able to dispense with around 3,000 miles (5,000 kilometers) of cabling, which is the equivalent of 18 metric tons of copper and 33 metric tons of plastic.

Volvo is saying goodbye to miles of cabling in its truck division. Can IoT sensors replace all that expensive copper and plastic? Source: Volvo.

Volvo is saying goodbye to miles of cabling in its truck division. Can IoT sensors replace all that expensive copper and plastic? Source: Volvo.

“The savings could amount to a large number of hours, sometimes even days. In the factory, the cables are awkward to handle and time-consuming to fit in the right place,” said Jonas Hagerskans, a development engineer at the Volvo Group. “The wireless sensors are much simpler to install. The cables are also sensitive to dirt and rust and prone to faults. By replacing the cables with wireless sensors, it is possible to prevent all the potential cabling faults. When trucks come into the workshop for repairs, identifying faults in long cables that are difficult to access is very time-consuming. In the future, our customers could get their trucks back from the workshop more quickly.” Read more

Lead prices rose sharply last week, adding to the year’s gains. From its January lows, lead is up 52% on the year to date. Not bad for a metal whose fundamentals looked neutral at best.

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The International Lead and Zinc Study Group recently convened in Portugal to deliver its forecast for the coming year. The group anticipates that, through the end of the month and year, supply will exceed demand in the global refined lead metal market by 42,000 metric tons. In 2017, the group predicts a closer balance, but still a surplus of 23,000 mt.

3M LME lead price hits a three year high. Source: MetalMiner analysis of fastmarkets.com data

The 3-Month LME lead price hits a three-year high. Source: MetalMiner analysis of Fastmarkets.com data.

Perhaps if you narrowed your view to lead’s supply/demand fundamentals you missed this rally. However, if you payed attention to the ongoing monster bull market in the metal complex, you shouldn’t have. Read more

Don’t we all wish we could predict where the scrap markets are going?

Tracy Porter is no exception.

Porter, the executive vice president of operations for Commercial Metals Company (CMC) and board chairman for the Steel Manufacturers’ Association, sat down with us not too long ago to chat about a number of issues crucial to the steel industry, one of which is the volatility of scrap markets.

While certain short-to-medium outlooks, such as Platts’ recent view, may appear to be bullish for prices, the wild card is still China, as Porter mentions in the video interview above.

“There are a lot of unanswered questions with the new [US presidential] administration and China’s intervention in the coal futures,” a U.S. exporter told Platts. “At the end of the day, there is not enough scrap in the pipeline, here or abroad. It’s a good position to be in if you’re a scrap dealer.”

 

Could uranium demand and prices be set to take off over the next few years?

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Currently prices are languishing at 13-year lows due to excess raw material supply and the after effects of Japan’s Fukushima disaster which resulted in the mass idling of Japan’s nuclear reactors.

Nuclear may be thought of as yesterday's technology, but its emission-less power generation makes it attractive. Source: Adobe Stock/mandritoiou.

Nuclear may be thought of as yesterday’s technology, but its emission-less power generation makes it attractive. Source: Adobe Stock/mandritoiou.

According to a London Telegraph article, the resulting low prices have encouraged utilities to become “uncovered,” meaning with a low spot price they have resisted locking themselves into long-term contracts. Read more