Copper

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This morning in metals news, European aluminum maker Constellium moves its U.S. offices from New York to Baltimore, copper and aluminum take a step back, and AK Steel announces a price hike.

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Constellium to Set up Shop in Baltimore

European aluminum firm Constellium announced it will move its U.S. corporate offices from New York to Baltimore, The Baltimore Sun reported Wednesday.

According to a statement from Constellium, at least 25 senior management and executives will be relocated to the new Baltimore office by the end of 2018.

Constellium, which has its corporate headquarters in Amsterdam and two additional corporate offices in Paris and Switzerland, produces aluminum products for a wide range of industries, including aerospace, automotive, transportation, defense and packaging.

Copper, Aluminum Fall Back

After recently hitting multi-year highs, copper and aluminum fell on Thursday.

According to Reuters, the drop is the result of investors who “locked in profits from a steep rally amid doubts about future demand in top metals consumer China.”

Speculator activity has seen the LME index rise 16% from early June, according to the report.

AK Steel Announces Price Hike

Effective immediately, AK Steel will raise the price for all carbon flat-rolled steel products by a minimum of $30 per ton, according to a report on Nasdaq.com.

Since last August, AK Steel’s shares have risen 5%, compared with 21.8% for the industry, according to the report.

Despite that disparity, AK Steel had a strong second quarter, topping earnings and sales estimates, according to the Nasdaq report.

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The company reported net income of $61.2 million (or 19 cents per share), up 253.7% from net income of $17.3 million (or 8 cents) recorded in the prior-year quarter, the report says.  The company also recorded net sales of $1,557.2 million for the quarter, up 4.3% from the year-ago quarter, exceeding the Zacks Consensus Estimate of $1,530 million.

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This afternoon in metals news, supply-side reform in China is having significant effects on global markets, U.S. Senate Minority Leader Chuck Schumer calls for trade action to combat cheap imports of steel and aluminum from China and other countries, and scientists have resolved a long-standing mystery about a prehistoric copper smelting event.

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Chinese Supply-Side Reforms Leave Their Mark

There are many who question the impact of China’s efforts to curtail excess production, but according to a report by Platts, supply-side reforms in the country are having major impacts around the world.

China’s net steel exports through the first seven months of the year were down almost a third, according to the report. Hot rolled coil prices have also risen in the process, reaching their highest point since 2013.

“Given the current protectionist bent that seems to span the globe, it will be interesting to see how China’s metal exports will be perceived in a few years’ time,” the Platts report concludes. “In the US, for example, there is not enough steel capacity to deliver upon the infra-build being promised by President Trump, should Section 232 be imposed, and the build go ahead.”

Schumer Calls for Action on Cheap Steel, Aluminum Imports

The Trump administration launched Section 232 investigations into imports of steel and aluminum, with a particular focus on China.

On Tuesday, U.S. Senate Minority Leader Chuck Schumer, a Democrat, sounded a similar note, according to a report in the Watertown Daily Times.

“There are top notch manufactures like Alcoa and Nucor ready to provide high-quality aluminum and steel to businesses in and around the country, but China’s overproduction has resulted in a substantial threat to Upstate New York’s metal industry by making it almost impossible for companies that play by the rules to compete,” Schumer said in a statement.

According to the report, Schumer has sent letters to Secretary of Commerce Wilbur Ross and United States Trade Representative Robert Lighthizer on the matter.

Scientists Resolve Ancient Copper Smelting Mystery

For more than half a century, the origins of a copper smelting event at a prehistoric archaeological site has remained a mystery.

But recently, a team of scientists hit paydirt at the Late Neolithic site of Çatalhöyük in central Turkey.

“Scholars have been hotly debating the origins and spread of metallurgy for decades, mainly due to the relationship this technology had with the rise of social complexity and economy of the world’s first civilisations in the Near East,” according to a report in phys.org.

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According to the report, a study published Tuesday in the Journal of Archaeological Science concludes that that after “the re-examination of a c. 8,500-year-old by-product from metal smelting, or ‘slag’, from the site of Çatalhöyük presents the conclusive reconstruction of events that led to the firing of a small handful of green copper minerals.”

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This afternoon in metals news, experts say that despite the delay in the Section 232 investigation of steel imports, they still expect President Donald Trump to impose tariffs, U.S. steel production is up 2.9% in the year to date and copper and steel output from Kazakhstan rose significantly from January to July.

Section 232 Tariffs Still Coming, Experts Say

The wait continues for the Trump administration’s announcement of what it is going to do at the conclusion of its Section 232 investigation into steel imports.

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The investigation was launched in April, and Secretary of Commerce Wilbur Ross has 270 days to present President Donald Trump with a report (making for a January deadline).

An announcement was expected to be made by the end of June, but that self-imposed deadline came and went without an announcement. However, despite the delay, some industry experts believe Trump still plans to impose tariffs, according to a report by Reuters.

Trading partners around the world, including the European Union, in recent months have warned of the possibility of retaliatory measures should the U.S. move forward with tariffs (or a quota system, or a hybrid tariff-quota measure).

A Trump administration official told Reuters the Section 232 review is active and is “still under the final stages of review within the administration.”

U.S. Raw Steel Production Up 2.9%

Per data released in the American Iron and Steel Institute’s weekly report, U.S. raw steel production in the year to date is up 2.9% compared with the same time frame in 2016.

Adjusted year-to-date production through Aug. 12 was 55,650,000 net tons, up 2.9 percent from the 54,106,000 net tons during the same period last year, according to the report.

For the week ending Aug. 12, production was up 1% from the week ending Aug. 5, up to 1,780,000 net tons from 1,762,000 net tons the previous week.

Copper, Steel Output Up, Zinc Output Down in Kazakhstan

Output of copper and steel rose significantly from January to July in Kazakhstan compared with the same time frame in 2016, according to Reuters.

Copper output rose 5.7% and steel output rose 10.1% for the first seven months of the calendar year.

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Meanwhile, zinc output dropped 0.9%.

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This morning in metals news, China pressured iron ore traders not to buy from North Korea even before the newest round of U.N. sanctions were imposed, a Chilean copper company is preparing to invest in Mongolia and China produced a record amount of steel in July.

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China Puts Pressure on N. Korean Iron Ore Business

As the political situation on the Korean peninsula continues to intensify and President Donald Trump criticizes China for allegedly not doing enough to rein in North Korea, a Reuters report indicates China has taken some action against North Korean interests.

According to Reuters, China pressured its iron ore traders not to buy North Korea iron ore, pressure that even preceded the latest round of U.N. sanctions.

Per two traders Reuters spoke to, the Chinese government stopped issuing permits to bring in iron ore “several weeks ago.”

Codelco Looks to Make Investment in Mongolia

Chilean state miner Codelco is planing to make an investment in faraway Mongolia, Codelco’s chief executive told Reuters on Friday.

According to CEO Nelson Pizarro, the company is looking for medium-term investments in the country, which may have untapped copper deposits.

Chinese Steel Output Hits 74M Tons in July

Chinese steel producers had a prolific July, churning out  a record 74 millions tons, Reuters reported.

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The output bested the previous month’s then-record total of 73.23 million tons, reached in spite of government efforts to combat pollution.

The bullish trend has become even stronger.

Copper and zinc prices have joined the bullish trend led by aluminum in the latest rally, which started at the beginning of August.

This new uptrend in these three metals is accompanied by heavy buying volume — signaling a a bull market.

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As suggested in our article published Tuesday, aluminum prices have outperformed and broke out from their sideways trend.

Source: MetalMiner analysis of FastMarkets

Copper prices have decided to join in on the fun, and are also trending up again.

After the breathtaking rise that copper prices demonstrated at the end of July, prices are up again. A bullish sentiment has returned for copper.

Source: MetalMiner analysis of FastMarkets

Zinc prices have also hit their highest levels recorded since 2007, according to FastMarkets historical data, and point to a possible continuing uptrend. A rally in zinc prices occurred just after the sharp increase in aluminum prices. Buying trading volumes remain heavy, therefore the uptrend is underpinned by strong buying sentiment.

Overall Outlook

Although MetalMiner considers a variety of variables, indexes and data to analyze market sentiment, the most important variable is how metal prices behave.

Commodities have re-started a short-term uptrend after they lost steam at the beginning of the year. Meanwhile, industrial metals have moved from bullish (to nearly sideways/top, as we had even considered switching our industrial metal outlook to bearish but did not) to absolutely bullish again (mainly caused by these three metals rallies). The U.S. dollar has fallen relentlessly since the beginning of the year.

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What This means for Buying Organizations

Buying organizations should watch metal prices closely to determine the best strategy to commit long- and short-term purchases.

For more insight into forward buys and hedging, subscribe to our monthly reports.

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This morning in metals news, the U.S. aluminum industry expressed support for the U.S. Department of Commerce’s ruling that Chinese aluminum foil is benefiting from government subsidies, Indian steel company Tata Steel is expected to detach its U.K. pension scheme from its business and, in consumer products news, a recent report says copper cocktail mugs may be causing food poisoning.

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DOC Rules Chinese Aluminum Foil Benefits From Government Subsidies

The U.S. aluminum industry came out in support of a U.S. Department of Commerce ruling Tuesday, which said that Chinese aluminum foil was benefiting from government subsidies.

According to the preliminary determination of the countervailing duty investigation, Chinese exporters of aluminum foil received countervailing subsidies 16.56 to 80.97%, Secretary of Commerce Wilbur Ross announced Tuesday.

Per a DOC release, the Commerce Department “will instruct U.S. Customs and Border Protection to collect cash deposits from importers of aluminum foil from China based on these preliminary rates.”

“The United States is committed to free, fair and reciprocal trade, and will continue to validate the information provided to us that brought us to this decision,” Ross said. “The Trump Administration will not stand idly by as harmful trade practices from foreign nations attempt to take advantage of our essential industries, workers, and businesses.”

Per the release, imports of aluminum foil from China last year were valued at an estimated $389 million.

The Aluminum Association applauded the DOC determination.

“The association and its foil-producing members are very pleased with the Commerce Department’s finding and we greatly appreciate Secretary Ross’s leadership in enforcing U.S. trade laws to combat unfair practices,” said Heidi Brock, President and CEO of the Aluminum Association, in a prepared statement. “This is an important step to begin restoring a level playing field for U.S. aluminum foil production, an industry that supports more than 20,000 direct, indirect, and induced American jobs, and accounts for $6.8 billion in economic activity.

“U.S. aluminum foil producers are among the most competitive producers in the world, but they cannot compete against products that are subsidized by the Chinese government and sold at unfairly low prices.”

The ruling stems from the March 9 filing of antidumping and countervailing duty petitions by The Aluminum Association’s Trade Enforcement Working Group. The petition marked the first time the Aluminum Association has filed unfair trade cases on behalf of its members in its nearly 85-year history, according to the Aluminum Association release.

Tata Steel Inches Closer to Potential Merger

According to a BBC report, an announcement from Tata Steel regarding the separation of its British pension scheme from its businesses could be coming within days.

The pension scheme has been a “significant barrier” in merger talks between Tata and German steel producer ThyssenKrupp, according to the report.

According to the BBC, Tata “has been in negotiations with pension regulators and trustees” of the £15 billion British Steel Pension Scheme.

Health Officials Say Copper Cocktail Mugs Could Cause Food Poisoning

A recent report might give drinkers of Moscow Mules pause.

CBS News reported health officials in Iowa made the declaration that copper cocktail mugs — often used to drink the popular Moscow Mule cocktail — might cause food poisoning “after examining the poisonous nature of copper and copper alloys mixing with food.”

Per an advisory bulletin from Iowa’s Alcoholic Beverages Division, the federal Food and Drug Administration’s Model Food Code prohibits copper from coming into direct contact with foods that have a pH below 6.0 — for example, vinegar, fruit juice or wine.

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The Moscow Mule, an increasingly popular cocktail, includes lime juice.

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This morning in metals news, some think copper’s hot 2017 could run out of steam, copper stabilized after hitting a two-year peak recently and Asian battery makers are looking to use more nickel instead of cobalt.

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Copper Outlook for Second Half of 2017

It’s not unreasonable to wonder whether or not copper can continue its robust run throughout the remainder of the calendar year.

The metal recently hit its two-year peak. Some, however, think the metal is due to fall off its current pace.

According to a report in Barron’s, there are numerous red flags indicating copper could reverse course — with a particular focus on China.

“Analysts believe regulatory tightening will soon weigh on growth, cooling demand for copper and other industrial metals in the months ahead,” writes Ira Iosebasvili. 

If the Chinese economy hits a period of slower growth — as many in recent months have warned will happen — then the copper market will certainly be affected.

For Now, Copper Holds Steady

Although many analysts are predicting a course correction for the metal throughout the rest of the year, copper is holding steady.

A rally in Chinese steel and iron ore prices painted a positive positive in China, the world’s largest metals consumer, Reuters reported.

Trading in Cobalt for Nickel?

For makers of batteries in Asia, cobalt is getting a little pricey — so much so that some battery makers are turning to even more nickel.

A rise in cobalt prices has inspired battery makers in Asia to adjust their battery ingredient formula, according to a report from Reuters.

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Cobalt prices have shot up over the last year on high demand and supply disruptions, Reuters reports. In fact, Reuters reports the price of cobalt rose to six times that of nickel in July.

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This afternoon in metals news, a recent survey of automakers indicates aluminum’s use in vehicles will grow in a big way over the next decade, U.S. steel production for the week is down slightly from the previous week and copper keeps on soaring.

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The Rise of Aluminum

According to a recent survey of automakers released by The Aluminum Association and conducted by Ducker Worldwide, automakers expect usage of the light, durable metal to increase significantly in the manufacturing of automobiles.

Total aluminum content for North American lightweight vehicles will increase to nearly 9 billion pounds, reaching 565 pounds per vehicle (PPV) and representing 16% of total vehicle weight by 2028, according to the survey results.

“As our automotive customers embrace a multi-material approach to new car and truck design, that directly translates to increased amounts of aluminum,” said Heidi Brock, president and CEO of the Aluminum Association, in the release. “On top of 40 years of uninterrupted growth, the aluminum industry is experiencing a level of sustained growth not seen before in any market or product sector. However, the true winners of this change are American consumers who can choose next-generation cars and trucks that are high performing, efficient, safe, sustainable and more fun to drive.”

According to the release, the expected rise in aluminum use is “consistent with the emerging trend of automakers transitioning to a multi-material vehicle (MMV) design approach, choosing aluminum for doors, hoods and trunk lids, body-in-white, bumpers and crash boxes.”

Steel Production Has Small Week-Over-Week Dip

U.S. steel production dipped 0.2 percent from the week ending July 22 to the week ending July 29, according to data from the American Iron and Steel Institute (AISI).

Approximately 1.67 millions tons were produced last week, compared with 1.77 million tons during the week ending July 22.

However, the July 29 total is a significant step up from total production for the same week in 2016. Production last week was up 6.1% from the same week in 2016.

Copper Continues Surge

Copper continues to have a great 2017, recently hitting its two-year peak. According to CNBC, the metal jumped 7% in July alone.

A global supply deficit and a flagging dollar have supported copper prices this year.

Free Download: The July 2017 MMI Report

While some think copper could keep its momentum in the short term, many analysts predict a slowdown as the year progresses.

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This morning in metals news, copper hits a two-year high, economic signals in July for China were a bit of a mixed bag and the London Metal Exchange continues a balancing act between tradition and change.

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Copper Reaches Highest Point in 2 Years

It’s been a big year for copper.

Copper reached a two-year peak on Monday, partially a result of solid manufacturing data in China, Reuters reported.

LME copper reached $6,431 per ton, its highest since May 2015.

Construction Up in China

Speaking of China, July saw a dip in factory growth but a surge in construction, Reuters reported.

China’s Purchasing Managers’ Index (PMI) remained above 50, however, as the Chinese government spent money on construction, fueling demand for building materials.

The Chinese steel industry, for example, had its strongest month of growth since April 2016.

Changing Times at the LME

Matthew Chamberlain became the boss of the world-famous London Metal Exchange at age 34.

A lot has changed for the LME, which was founded in 1877.

The exchange was sold to HKEX in 2012, and is currently engaging in efforts to bring back volumes, The Guardian reports.

The so-called “ring” where LME traders do their work is governed by a set of long-standing rules, like the prohibition on chewing gum. According to the report, Chamberlain says those rules aren’t likely to change.

However, he also acknowledges that the LME needs to be prepared to deal with changing demands — for instance, for cobalt and lithium to be used in electric car batteries.

Free Download: The July 2017 MMI Report

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Copper prices jumped to a five-month high on Tuesday. Chinese positive data (like the PMI and economic growth) and supply concerns have driven copper market sentiment, increasing the number of copper buyers and, therefore, the metal’s price.           

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Source: FastMarkets/MetalMiner analysis

Trading volumes,  for the first time this year, support the uptrend. Even if it is soon to be bullish on copper, copper could experience some additional price increases following this new uptrend. Investors  seems to be willing to buy copper. In particular, Chinese buyers have bought copper  based on lower stocks due to supply concerns, which also supports copper prices. 

MetalMiner indicated a ceiling price for copper at $6,000. Since the beginning of the year, copper prices have traded below this level. However, copper prices broke this psychological ceiling twice in July, encouraging traders — who actually move copper prices— to buy more copper.

Free Download: The July 2017 MMI Report

Based on historical analysis, when copper prices breakout over $6,444/metric ton and are supported by high trading volumes, that could signal a new long-term uptrend. Buying organizations should watch the U.S. dollar and industrial metals, very closely.  

A deeper analysis is discussed in detail in our Monthly Metal Buying Outlooks