CommentaryMarket Analysis

It won’t have escaped your notice that the shine has gone off the metals market.

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

Prices have been softening across not just metals but other commodities, like oil, too.

Consumers, of course, will not be complaining, but are nevertheless keen to understand what is going on and whether we are seeing a temporary dip or a move into a prolonged bear period.

Commodities in general are facing multiple headwinds.

While demand for iron ore and oil is steady, both markets are in oversupply. Oil prices have received short-term support from favorable comments around output cuts. Prices have subsequently continued to soften as long positions have been unwound and investors have concluded prospects of a supply balance are receding.

In China, the authorities have been squeezing investors by increasing shadow banking borrowing costs, resulting in positions being unwound and prices softening.

In the U.S., markets surged after President Donald Trump’s election victory with the expectation his campaign promises of trillion dollar infrastructure investment would create a building and consumption boom.

Since those heady days, the realization has set in that the desperately needed investment may not be quite as significant as first thought.

Read more

Our June MMI Report is in the books, and there’s a lot to unpack.

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

Out of 10 MMI sub-indexes, four posted no movement from our May MMIs. That wasn’t true for all, though, as the report shows promising signs for construction (compared with last year). Like the Construction MMI, growth in the automotive sector slowed a bit, but still performed better than at the same time last year.

In terms of policy, several things happening around the world will have macroscopic effects on these industries.

Domestically, the Trump administration’s ongoing Section 232 investigation into steel imports will have ripple effects at home and abroad (namely in the Chinese steel market).

In the U.K., the recent shocker of a parliamentary election leaves question marks regarding the way forward — is it going to be a “hard” or “soft” Brexit? Does Theresa May have the political capital to make a hard Brexit happen? It seems unlikely now, but that situation continues to develop. In terms of business and metal markets, whichever iteration of Brexit takes hold will have effects on the ways in which British companies do business with Europe.

In China, many analysts expect growth to slow in the second half of 2017 as the government aims to put the squeeze on credit growth. (Moody’s recently downgraded China’s credit rating for the first time since 1989.)

While several MMI sub-indexes did not go up or down this past month, there was still quite a bit going on in each sector. You can fill yourself in by downloading our June MMI Report, which offers all of the storylines and trends for our 10 MMI sub-indexes, presented in one convenient place.

Download the free report by filling out the form below! *Members: Skip the form and log in to grab the free PDF! Please note: Since we securely host our reports, the URL link will be live for 60 seconds upon downloading – so please save the PDF to your files!
















captcha

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

TTstudio/Adobe Stock

Copper prices rallied late last week on the heels of severe weather striking several South American mines, as well as labor issues cropping up in Indonesia.

According to a report from MarketWatch, copper prices climbed 1.12% to $5,688 per metric ton on the London Metal Exchange last Thursday morning.

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!

Copper had previously opened the month on the low end, but unexpected weather and labor issues quickly reversed that trend:

“Those mine disruptions in Chile are the major supply-side news this week,” BOCI Global Commodities’s Xiao Fu told the news source.

In China, import data revealed an 8.5% month-over-month increase in refined copper imports.

“That increase is a fairly substantial one and is helping prices rebound after being beaten up over the past few weeks,” ETF Securities strategist Nitesh Shah told the news source.

Copper Prices Affected by Chinese Demand

The MetalMiner Copper MMI remained steady in June. Writes our own Irene Martinez Canorea:

“Currently, copper prices are directly affected by Chinese demand, as well as by uncertainty in supply. This downtrend in copper prices might be just a brief pause in a dynamic market. Thus, copper-buying organizations should watch the market closely, looking for a possible uptrend that would show a recovery.”

How will copper and base metals fare in 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:

Editor’s Note: This is the second of two posts — the first of which ran yesterday — from our Sohrab Darabshaw on renewable energy in India. 

India saw nearly $10 billion invested, both in 2015 and in 2016, in renewable energy projects. Last year, $1.9 billion of green bonds were issued. India’s solar targets alone need $100 billion of debt.

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

Posting in the Bloomberg View opinion section, columnist Mihir Sharma, however, struck a slightly skeptical note.

“India is not like China, or the U.S., or Australia or Germany when it comes to meeting its Paris pledges,” he wrote. “In India, hundreds of millions of people still live without electricity — a big part of what keeps them desperately poor. India also has a shrunken manufacturing sector, partly because electricity is so expensive (relatively) and its supply so variable. No democratically accountable Indian government can ever favor an international agreement over fixing these two problems.”

Sharma added coal “looks bad” in India at the moment because “its economy is struggling and because it is so services-intensive. Over the past few years, coal plants have used less and less of their capacity as growth has slowed.”

But, if India’s economy does take off, Prime Minister Narendra Modi might indeed be faced with such a choice.

Read more

After a 17-point leap in our Renewables MMI from April to May, the sub-index — which tracks metals and materials going into the renewable energy industry — posted no movement for our June reading, standing at 71.

(A quick note: Last month, the sub-index rose to 71 after a recalibration of our index to better account for cobalt price fluctuations.)

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

But that doesn’t mean there were not big swings within the sector — far from it.

U.S. steel plate, the heavy hitter of this group, posted a 4.8% drop last month — but that quickly reversed itself.

This time around, U.S. steel plate bounced back, posting a 2.7% increase. The bounceback followed a trend of exclusive growth for U.S. steel plate in 2017, as the 4.8% drop reflected by the May 1 price marked the only month-to-month drop of the year thus far.

Unlike steel plate, U.S. grain-oriented electrical steel (GOES) went in the other direction, posting a price drop that nearly erased previous the April-May price increase. This month, GOES dropped 6.2%, one month after prices rose by 9.1%. (More on how GOES does/doesn’t trend along with broader steel markets in the section below.)

Abroad, steel plate also had good months in China and Japan. Chinese steel plate rose by 2.8%, while Japanese steel plate got a 0.7% boost.

What’s the Deal With GOES?

As MetalMiner’s Executive Editor Lisa Reisman wrote Thursday, GOES prices have been on a “roller coaster ride” so far this year.

“GOES prices do not tend to follow general steel price trends, nor does simple fundamental (supply and demand) analysis help explain price trends,” Reisman wrote.

Globally, however, GOES prices are on the rise. Why? That has been driven by an increased demand for electric cars and GOES producers in the U.S., Korea and Japan securing tonnage at a $400-500/metric ton increase over previously contracted prices.

Domestically, while prices for GOES — metals used in electrical transformers — went down this month, Reisman predicted that likely won’t become a trend throughout the remainder of the year.

“It’s hard to see any outcome not resulting in rising U.S. GOES prices for the second half of the year,” she wrote.

Again, looking to the global picture, good news for this sector is the growth of the renewable energy industry overall.

Free Download: The May 2017 MMI Report

The BBC reported the U.K. has set renewable energy production records this year. In the U.S., CNBC reported even in states like Kansas — which two years ago repealed a renewable energy mandate that called for 20% of the state’s electrical power to come from renewable sources by 2020 — have ramped up renewable energy production.

Actual Metal Prices

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

Here’s What Happened

  • All quiet on the precious-metals front this month, as our Global Precious Metals MMI held pat from May to June at a reading of 84.
  • Since we tend to keep a closer eye on the platinum group metals (PGMs) due to their automotive applications, the U.S. platinum price tracked by the MetalMiner IndX posted only a negligible gain, while the U.S. palladium price suffered only a negligible loss…reflected directly in the wash that was the sub-index’s June performance.
  • Interestingly, gold has been getting hot as of late. More on that below.

What’s Going On in the Background?

  • Although the Global Precious Metals MMI did not reflect it in the May-to-June time period, the U.S. gold price increase after June 1 has gotten some heads turning. As my colleague and new MetalMiner Editor Fouad Egbaria reported earlier this week, “gold neared its year-to-date high on Tuesday,” according to Reuters. “The rise comes in a climate of political uncertainty, with an election in the United Kingdom, former FBI Director James Comey’s testimony before the Senate Intelligence Committee on Thursday and a European Central Bank meeting this week,” Egbaria noted.
  • Back to platinum. As a reflection of the metal’s dawdling short-term pricing, South African producer Lonmin has been struggling, so much so that Reuters reported earlier this week that the company is “pulling every lever to try to restore confidence in its ailing business, including reopening a major shaft and expanding its biggest operation,” according to Lonmin’s CEO. Low prices and skyrocketing costs have reportedly conspired to present the company with a cash problem over the past near-decade.

What Metal Buyers Should Look Out For

  • Platinum specifically has had a low-price problem this year — but that’s obviously less of a problem if you’re purchasing metal. While we’re unsure of when prices will swing back up, mainly because output cuts in South Africa and elsewhere have seemingly not helped, it may be hard to discount current windows for smaller spot buys.

Exact Prices of the Key Movers and Shakers

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

selensergen/Adobe Stock

Our Aluminum MMI sub-index has steadily climbed since a score of 79 to start the year. For our June reading, this sub-index checked in at 88, holding steady after an 88 reading in May.

Prior to May, the Aluminum MMI last hit or exceeded 88 in May 2015, when it checked in at 90.

Two-Month Trial: Metal Buying Outlook

The major players in this sub-index, primary 3-month aluminum on the London Metal Exchange (LME) and Chinese primary aluminum, posted price drops, by 1% and 1.6%, respectively. Chinese scrap also fell by a similar margin, dropping in price by 1.3%.

On the other hand, solid price jumps in other aluminum products leveled the balance for the month.

Chinese billet, for example, rose by 1.1%. On the LME, 5083 aluminum plate prices rose by a robust 6.3%.

Aluminum Around the World

In light of several Arab nations’ decision to sever diplomatic ties with Qatar — alleging that Qatar is financing terrorism in the region — aluminum exports from the small nation have been disrupted. According to Reuters, an aluminum plant partly owned by Norsk Hydro will have to seek alternate routes for aluminum exports from the country, due to air space restrictions imposed by Qatar’s neighbors.

Meanwhile, as Raul de Frutos wrote, there were high expectations for aluminum to start the year.

Goldman Sachs added to the hype by being particularly bullish about the metal, predicting LME primary three-month aluminum will hit $2,000/metric ton this year. For now, the market stepped back from that prediction after the 1% drop from the May to June readings.

Chinese supply-side reforms, namely cutting aluminum (among other metal) production to curb pollution, could have positive effects on prices — if they are implemented. Aluminum prices got a boost early this year when the Chinese government announced a proposal to curtail its output of aluminum and other metals.

On top of all that, President Donald Trump’s administration’s national security probe into metal imports continues to loom. The probe is ongoing; it is still unclear when it might conclude or what practical policy effects it might have.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Metal Prices

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

U.S. domestic prices of grain-oriented electrical steel (GOES) fell this past month, continuing the roller coaster ride of price increases and decreases in the GOES M3 index since the start of this year.

GOES prices do not tend to follow general steel price trends, nor does simple fundamental (supply and demand) analysis help explain price trends.

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

Globally, for example, GOES prices are on the rise, on the back of several developments.

Demand for electric cars

An increased demand for electric cars that use high-quality non-oriented electrical steel (NOES), is one such development. MetalMiner has reviewed market growth data supplied by an automotive manufacturer indicating that demand for electric vehicles is anticipated to take about 8% market share away from internal combustion engine (ICE) automobiles by 2020, with battery electric vehicles (BEV) taking up the largest share of electric vehicle (EV) growth.

NOES is required to get the power from the battery to the motor. How does this impact GOES prices? High-quality NOES often needs to run on GOES product lines, thereby limiting GOES capacity.

In theory, this should cause prices to rise.

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

eugenesergeev/Adobe Stock

Aluminum exports from Qatar hit a roadblock, and it could be some time before the situation is resolved.

According to a recent Reuters report, Egypt, Saudi Arabia, Bahrain and the United Arab Emirates cut ties with Qatar, leading to an aluminum manufacturing plant, partly owned by Norway’s Norsk Hydro, to seek other routes for export.

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!

The reason for top Arab nations breaking ties with Qatar? Alleged support of Islamic militants, which Qatar denies.

Read more

Bautsch/Adobe Stock

An article this week in Bloomberg catches the eye with a title announcing “hard-to-believe” steel shortages in China.

After years of excess supply, over-capacity and atrocious levels of resulting pollution, it would be a bit much to hear the country was short of steel — but that is what Fortescue’s CEO Nev Power is quoted as saying in an interview with Bloomberg Television in Beijing on Monday.

The gist of his claims? Closures of induction furnaces are creating a shortage of rebar, not because market demand is strong but because supply has become constrained, Power explained.

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

Actually, the story is not a new one.

Read more