Market Analysis

President Donald Trump may not have said much, if anything, about China’s steel exports during his recent tour. Both European and U.S. legislators, however, are carrying out investigations into not just simple dumping but more complex and illegal activities, such as shipping via third parties to hide the origin and avoid pre-existing dumping tariffs.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

A Reuters article this week explains how the European Union’s anti-fraud office (OLAF) said it has found Chinese steel was shipped through Vietnam to evade the bloc’s tariffs.

In part, the current case may be a matter of timing.

Read more

The CRB index has once again breached a ceiling, signaling a strong rally.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The CRB index now stands just 1.5 points below its 2017 peak, which occurred at the beginning of the year.

Source: MetalMiner analysis of TradingEconomics

Oil prices have led the latest commodities rally.

Energy accounts for up to 39% of the entire commodities basket, and oil serves as one of the largest energy components of the index.

Actual output cuts from Saudi Arabia, as well as political turmoil, have led the oil price surge. Oil prices have traded sideways for a long time, and at some point in time would have changed direction.

Source: MetalMiner analysis of TradingEconomics

Industrial Metals

Contrary to commodities, industrial metals have fallen slightly this month.

The base metals bull rally has slowed down, creating price pullbacks. Price pullbacks often occur in bullish markets, especially those metals with high volatility. Furthermore, price pullbacks create buying opportunities.

Source: MetalMiner analysis of StockCharts

In rising markets, buying organizations will want to follow how commodities, industrial metals and each particular metal behaves before committing to purchases.

Free Download: The November 2017 MMI Report

To learn more about how to reduce risks when committing to long-term purchases and when to just buy as needed, check out our free Monthly Outlook trial.

Yes, the aluminum price has fallen back this month.

Yes, it is looking decidedly weak compared to its high point of $2,215 per metric ton earlier this month.

Yes, inventory on the Shanghai Futures Exchange (SHFE) is building rapidly, hitting a record high this week of 666,581 tons, according to Reuters.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

That’s not where we expected aluminum to be back in the summer when the market was talking all about smelter closures in China this winter and supply constraints.

Does that mean the market thinks the constraints are not going to happen? Is this another case of Beijing talking up their policies but failing to enforce them?

Read more

Another month has come and gone — now it’s time to take a look back at what’s happened in the world of metals. 

In August, all 10 of our MMIs saw upward movement. That changed the following month, when eight of 10 MMIs fell (albeit several of them fell by small amounts).

For our November MMI (tracking October’s activity), four of the MMIs moved up, five moved down and one held flat (the Automotive MMI).

Hitting some of the high points:

  • It was a big month for stainless steel. The Stainless MMI surged by seven points, hitting 70, up from the October reading of 63.
  • Aluminum also had another strong month, continuing what has been a very strong 2017 for the metal. The Aluminum MMI hit its highest reading, 99, in the history of the MMI series.
  • The doctor was in the house this past month (Dr. Copper, that is). The Copper MMI jumped four points.

You can read about all of the aforementioned — and much more — by downloading the November MMI report below.

The GOES M3 spot price index fell by 4% in October while no action has been taken on the Section 232 steel import investigation.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

China has gone on the offensive, specifically calling foul on the U.S.’s decision not to grant China MES (market economy status). This and the Section 232 investigations have real implications for GOES markets and specifically the sole domestic producer AK Steel.

AK Steel missed its most recent earnings estimates, blaming lower automotive demand and shipments, lower average sales prices during Q3 and rising GOES imports, according to Market Realist.

But AK also cited higher LIFO charges and rising raw material costs.

According to AK Steel CEO Roger Newport in the company’s most recent earnings call Oct. 30, “Yet as the only steel manufacturer Grain Oriented Electrical Steel in United States, we’re battling some of the highest import levels in years. Imports of Grain Oriented Electrical Steel or GOES have increased by more than 260% year-over-year and these imports are coming primarily from South Korea, China and Japan.” He added imports had flooded the market in anticipation of the Section 232 process.

Source: U.S. International Trade Administration

In reality, as reported by MetalMiner previously, the import surge has come largely from Japan which supplies the U.S. with grades of GOES not currently produced by AK Steel. Moreover, for the past two years, it’s hard to see an import surge from either Korea or China.

Meanwhile, from a demand perspective, ABB has shifted its manufacturing footprint by shuttering power-transforming production in St. Louis and investing instead in its South Boston and Crystal Springs locations.

Free Sample Report: Our Annual Metal Buying Outlook

Exact GOES Coil Price This Month

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

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Here’s What Happened

  • MetalMiner’s Global Precious MMI, tracking a basket of precious metals from across the globe, ticked back up a point to 87 for the November reading, a 1.2% increase. After a sizable dropoff last month, it looks as though this sub-index is crawling back toward the 2017 high of 89 reached this past September.
  • Palladium forged ahead, hitting a new high this year and landing a bit shy of the $1,000 per ounce mark. The platinum group metal’s U.S. bar price has jumped a whopping 44% since the beginning of the year.
  • Platinum rose marginally over the last month, staying just above the $900 per ounce level. It has receded from its most recent high of March 2017, when it landed above $1,000 per ounce. Notably, this is the second straight month in which palladium is priced at a premium to platinum.
  • After breaking and holding above the $1,300 per ounce threshold at the beginning of September for the first time since October 2016, the U.S. gold price is in its third straight month of retracement, ending up $9 per ounce lower than last month.

What’s Going On in the Background?

  • Why has palladium been trading at a premium to platinum? First, a bit of history.
  • “Palladium has traded at a discount to platinum because of platinum’s greater cost of extraction and its wider scope of applications,” MetalMiner’s editor at large Stuart Burns recently wrote. “But one application in which palladium does excel is catalytic converters for petrol engines. The diesel engine’s relative loss of favor over the last 12 to 18 months to the petrol engine has boosted demand for palladium, driving up the price to the point that it exceeded that of platinum for the first time in 16 years.”
  • Burns quotes analysts from UBS and SP Angel as saying they anticipate both palladium and platinum production to fall.

What Metal Buyers Should Look Out For

  • In the short term, keep an eye out on car sales. “With car sales growth featuring more in petrol-engine-dominated American and Chinese markets, and less in diesel markets like Europe, the demand bias has been for palladium, rather than platinum,” Burns writes. “But even within Europe there is gradual shift from diesel to petrol.” In fact, according to industry research group LMC, sales of diesel cars in western Europe fell from 45.1% of the market to 42.7% this year.
  • In the long term, the Rise of the Machines — electric vehicles, specifically — could really dent platinum and palladium demand.

Free Sample Report: Our Annual Metal Buying Outlook

Key Price Movers and Shakers

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

The Aluminum MMI increased two points this month, reaching 99 points.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Stronger LME and Chinese primary cash prices led to the jump. This month’s index reading brings the highest MMI reading of any index since January 2012, when MetalMiner launched the MMI series of indexes.

Source: MetalMiner analysis of FastMarkets

Upward price momentum may have slowed slightly, but the bullish run appears sustainable. We could expect additional upward movements.

The U.S. Department of Commerce imposed preliminary duties against aluminum foil imports from China. These duties range from 96.81-162.24% and apply to all aluminum foil products from China. The Chinese government requested consultation with the World Trade Organization (WTO) on  Nov. 3, claiming that the U.S. is using an expired 2001 clause.

China’s Ministry of Commerce said on Tuesday: “Regrettably, the United States has ignored the expiration of Article 15 … and still persists in its erroneous practice of continuing to use the ‘third country’ method in its anti-dumping investigations on imported products of China in violation of its obligation to WTO rules.”

Of course, China does not have market economy status, so the Department of Commerce will likely not agree with China’s Ministry of Commerce.

Oil, Gasoline Prices

Oil prices have already jumped in November, moving above levels that signal a bull market to MetalMiner. Oil prices hit a two-year high and currently trade over $55/barrel. The latest uptrend reveals strength in the latest oil rally.

Source: MetalMiner analysis of StockCharts

Since oil prices serve as one of the most important contributors to the CRB (commodities) index, we expect continuous upward movements for the index. Therefore, the case for a bullish commodity  — and industrial metals market, too — appears to have strengthened despite the latest short-uptrend of the U.S. dollar (dollars and commodities tend to move inversely).

Gasoline prices also increased with oil prices. MetalMiner previously analyzed the correlation between gasoline prices (and oil prices) and increasing base metal prices, specifically aluminum. When oil (and gasoline) prices increase, aluminum prices tend to follow. The degree of the increases does not always correlate, but aluminum prices tend to move together with the commodity.

Source: MetalMiner analysis of StockCharts

What This Means for Industrial Buyers

Aluminum showed resilience this month, maintaining its trend in the bullish market. Increasing oil prices also support the bullish case for aluminum. Therefore, adapting the right buying strategy becomes crucial for reducing risks.

MetalMiner released its longer-term annual outlook back in October. Readers can grab a free copy here.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Aluminum Prices and Trends

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

The Rare Earths MMI dropped for the second consecutive month, losing a point to hit 21. The November reading of 21 marks the lowest reading since June, when it also hit 21.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

This basket of metals, dominated by China, featured heavier hitters like yttrium and dysprosium oxide posting price increases.

However, europium oxide, terbium oxide and terbium metal all dropped for the month. The biggest drop of the bunch came from neodymium oxide, which fell 14.1%.

Rising Demand

Rare-earth metals are used in a number of high-tech capacities: smartphone, laptops and electric vehicle (EV) batteries, among other things.

Cobalt, which is drawing increasing demand in the EVs sector, is one of those metals. As our Stuart Burns reported earlier today, the metal is heating up.

“Plug-in vehicle sales grew 20 times faster than the overall market, justifiably causing concern that cobalt supply could be strained by this one market application,” Burns wrote. “Worryingly for cobalt, the fastest-growing market is also the largest.

“Driven by government subsidies, the Chinese market, at some 351,000 units last year, also grew at 84% over 2015. The switch to EV and PHEV cars is part of Beijing’s drive against pollution, so incentives are not likely to be relaxed anytime soon. Growth of this magnitude dwarfs the 13% and 36% growth rates in Europe and the U.S., respectively.”

Growth of the U.S. Market

While it is indeed true that China overwhelmingly dominates the global rare-earths market, the U.S. is working to increase its presence in the global market vis-a-vis rare earths.

According to a Wards Auto report, research at Purdue University could boost U.S. extraction of rare-earth elements (REEs) while also recycling the U.S.’s 1.5 billion tons of accumulated coal ash.

“REEs have many important applications in things such as permanent magnets in power generation and electric cars, batteries, petroleum refining catalysts, phosphors in color televisions, and many electronics including cellphones,” said Linda Wang, inventor of the technology and Purdue’s Maxine Spencer Nichols Professor of Chemical Engineering, in a Purdue University release. “The demand for REEs is predicted to grow dramatically over the next several decades. REEs used in the U.S. are primarily imported from China, which controls over 90 percent of the supply, with wide implications on the U.S. economy and national security.”

Wang underscored the importance of developing the domestic market as a means of weathering the volatile rare-earths market.

“For example, after China reduced the export quotas in 2010, the costs of rare earth magnets for one wind turbine increased from $80,000 to $500,000,” she added. “After China relaxed the export restrictions 18 months later, the prices returned to lower levels than in 2010. It’s highly desirable to develop the capacity to produce REEs in the U.S. and to become independent of foreign suppliers.”

Free Sample Report: Our Annual Metal Buying Outlook

Actual Metal Prices and Trends

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

Chris Titze Imaging/Adobe Stock

Industrial metals are in the grips of a bear market, various outlets report, and one of the main narratives sounds like a case of the market having its cake and eating it too.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The FT reports that the oil price, as referenced by the Brent crude quotation, has topped $60 a barrel for the first time in two years.

The article quotes various sources suggesting that while demand is strong, the rise in prices is driven more by supply constraints than by a sudden surge in demand (which caused the China-inspired super-cycle in the last decade). This time, a combination of reduced investment in new capacity (resulting from low prices in recent years) and the OPEC-led production constraints initiated in November 2016 are gradually tightening the market. Trader Trafigura is quoted as predicting demand will outstrip supply by as much as 4 million barrels a day by the end of the decade as supply becomes under better control and the U.S. shale industry fails to make up the delta between supply and gradually rising demand.

That’s where the have the cake and eat it too part comes in.

At the same time, industrial metals are rising strongly. Copper passed $7,000 per ton last month and aluminum is knocking on the door of $2,200 per ton. The cobalt price has doubled in the last 18 months and nickel, long in the doldrums due to over-supply and poor demand from the stainless sector, has also been on the rise due to projected battery demand from electric vehicles and charging infrastructure.

On the face of it, this appears like investors are picking and choosing their good news. If electric vehicles are such a strong bet that metals demand is set to soar, then surely oil demand is set to collapse. That prospect should undermine the oil price, you may reasonably suggest.

If only it were that simple.

Even a doubling of battery production would suggest an extra 750,000 vehicles based on 2016 global electric vehicle and hybrid production of 773,600 units, according to EV-volumes.

There was modest, by global light vehicle sales, of 90 million units in 2016, just 0.86%. Yet for cobalt, it’s still significant when you consider the battery industry currently uses 42% of global cobalt production, so an ongoing rise of 42% increase in lithium ion battery demand (2016 over 2015) would be highly disruptive to cobalt demand.

Plug-in vehicle sales grew 20 times faster than the overall market, justifiably causing concern that cobalt supply could be strained by this one market application.

Worryingly for cobalt, the fastest-growing market is also the largest.

Driven by government subsidies, the Chinese market, at some 351,000 units last year, also grew at 84% over 2015. The switch to EV and PHEV cars is part of Beijing’s drive against pollution, so incentives are not likely to be relaxed anytime soon. Growth of this magnitude dwarfs the 13% and 36% growth rates in Europe and the U.S., respectively.

Free Sample Report: Our Annual Metal Buying Outlook

No wonder cobalt prices have doubled and yet oil prices have virtually ignored the message the rise in EV sales is telling us. One is major disruption to a small, constrained and geographically, supply market, while the other is a long-term trend to a still growing vast supply and demand market that will take years to impact consumption figures.

The Automotive MMI was stuck in park for the month, holding at 93 for the second consecutive month.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

It was an up-and-down month for the automotive basket of metals. Chinese primary lead dropped 12.1%, while LME copper shot up 4.6%.

Bucking historical trends, palladium continued to be hotter than its fellow platinum-group metal, platinum. Palladium rose 5.1% on the month, while platinum posted a modest 0.8% gain.

Ford Drives October Sales

Ford Motor Co. led the way this past month, according to sales data released by Autodata Corp.

Ford’s October sales rose 6.4% year-over-year, although year-to-date sales through the month are down 1.9% compared to the same time frame last year.

General Motors, meanwhile, saw a 2.3% year-over-year dip in October with 252,614 units sold in the U.S. market. In the year to date, GM’s sales are down 1.0%.

Despite the drops in year-to-date sales, both GM and Ford are doing well in one particular market: trucks.

While there is increasing momentum behind electric vehicles (EVs) and greener energy, in general, light truck sales for both GM and Ford are up, 6.6% and 3.6%, respectively, through the first 10 months of the year. Across all automotive brands, light trucks sales were up 3.6% year-over-year in October, and are up 4.3% through the first 10 months of the year.

Even so, as our Stuart Burns wrote last week, the big brands are preparing for the future.

“The auto industry is certainly going through challenging times. In some quarters there is an expectation the established old order will be swept away by new challengers, such as Tesla,” he wrote. “The fact is, however, the incumbents have a huge depth of experience in supply chains, manufacturing, marketing and distribution.

“After an arguably slow start, they are moving swiftly to both develop new technologies in-house and to buy smaller firms in areas they recognize they lack the skills or expertise.”

Down the sales list, Fiat Chrysler saw a 13.2% year-over-year drop in October. Fiat sales are down 8.4% in the year to date.

Speaking of EVs, it wasn’t the best month for Tesla. Again, small sample sizes notwithstanding, Tesla’s October sales were down 15.9% year-over-year (although they’re up 18.5% for the year to date).

Meanwhile, Toyota (up 1.1%), Honda (up 0.9%), Nissan (up 8.4%) and Volkswagen (up 10.7%) all posted sales in October.

BMW Recalls 1 Million Vehicles

In general automotive news, BMW announced Friday it was recalling 1 million vehicles in North America, Reuters reported.

According to the report, the recalls — most of which are in the U.S. — are related to two separate vehicle fire risks. Per BMW spokesman Michael Rebstock, the vehicle recalls could expand to other countries.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Metal Prices and Trends

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