Copper

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This morning in metals news, Kobe Steel’s share price continues to plummet in the wake of its data falsification scandal, London copper hits a three-year high and palladium is having a strong 2017.

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Kobe Steel Shares Hit Lowest Price Since 2012

Kobe Steel, Japan’s third-largest steelmaker, continues to see its share price drop on the heels of its data falsification scandal.

The fallout from the scandal has already seen Kobe lose approximately $1.8 billion in market value, Reuters reported.

On Friday, Hiroya Kawasaki, Kobe’s chief executive, said about 500 companies received falsely certified products from Kobe, which was more than double a previously released number, according to the Reuters report.

LME Copper on the Rise

London copper is on the way up again, this time rising to hit a three-year high, Reuters reported.

The metal eclipsed the $7,000 mark, powered in part by good news on the Chinese economy, according to the report.

Palladium Powered by Automotive Demand

Recently, the palladium price recently eclipsed that of platinum for the first time in 16 years.

It’s been that kind of year for palladium.

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According to a CNNMoney report, 78% of palladium demand this year came from the automotive market.

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This morning in metals news, the world’s top copper producer expects a moderate rise in the metal’s price going forward, the Aluminum Association announces new leadership and Kobe Steel continues to reel from its data falsification scandal.

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Copper on the Rise

The price of copper is set to experience moderate increases, according to the mining minister of Chile, Reuters reported.

Aurora Williams, the mining minister of Chile (the world’s top copper producer), said Wednesday that there will be moderate increases in the metal’s price, but not enough to push it above $3/pound for the year.

According to the Reuters report, copper exports reached $3.18 billion in September, their highest level in nearly three years.

Changing of the Guard

The Aluminum Association announced new leadership on Wednesday.

Michelle O’Neill, senior vice president of senior vice president of global government affairs and sustainability at Alcoa, was elected as Aluminum Association Chair, becoming the first woman in the association’s 84-year history to hold the position. She replaced Garney Scott, president and CEO of Scepter, Inc., following a two-year term.

Kobe Steel Data Scandal Continues

It’s difficult to quantify lost trust, but it’s a problem Kobe Steel, Japan’s third-biggest steelmaker, is dealing with now on the heels of a data falsification scandal.

Now, the chief executive of the company is admitting the scandal is a serious hit on the company’s image, one that leaves it with “zero credibility,” The Guardian reported.

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According to The Guardian’s report, General Motors is the latest manufacturer to check whether its cars contain falsely certified parts or components sourced from Kobe Steel.

This morning in metals news, the Environmental Protection Agency (EPA) announced it will take steps to repeal the Obama-era Clean Power Plan, copper hit a four-week high and two Russian tycoons are selling a 3% stake in aluminum giant Rusal.

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Obama Initiative to Curb Emissions to be Rolled Back: EPA

The EPA announced Monday that it would begin to take steps to roll back the Obama-era Clean Power Plan, which sought to bring down emissions from power plants, The New York Times reported.

While constituting a loss for the environment, the measure marks a win for industry. (For a review of the costs associated with the plan, our Taras Berezowsky delved into the issue in this 2015 post.)

Scott Pruitt, head of the EPA, made the announcement in Kentucky yesterday.

“The war on coal is over,” Pruitt said, as quoted by The New York Times. “Tomorrow in Washington, D.C., I will be signing a proposed rule to roll back the Clean Power Plan. No better place to make that announcement than Hazard, Ky.”

The repeal proposal will be filed with the Federal Register today. The EPA announced its launch of a review of the plan on April 4.

Copper Bounces Back

After a cooling down in September, copper has hit a four-week high, Reuters reported.

The uptick comes as a function of expected supply shortages in China, according to the report.

Rusal Stake to Be Sold Off

Russian tycoons Mikhail Prokhorov (who also owns the NBA’s Brooklyn Nets) and Viktor Vekselberg are selling a 3% stake in aluminum giant Rusal, Reuters reported.

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The value of the 3% stake is worth $341 million based on Rusal’s closing price Tuesday, Reuters reported.

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This morning in metals news, a Japanese steelmaker is mired in scandal after admitting to falsifying inspection data, copper exports by Sicomines have been halted by the Congolese government and Shanghai zinc hits a 9 1/2-year high.

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Kobe Steel Hit by Scandal

The third-largest steelmaker in Japan, Kobe Steel, admitted to falsifying inspection data, according to the Financial Times.

The falsified data was for about 20,000 tons of metals used in aircraft and automobiles.

Copper Exports Halted for Sicomines

Export of copper by Sicomines in the Congo have been halted by the Congolese government, according to a Bloomberg report.

The Congolese government order Sinohydro Corp. and China Railway Construction Corp.’s local mining venture to stop exporting unprocessed copper and instead exporting “high-value products.”

Shanghai Zinc Hits 9.5-Year High

Zinc on the Shanghai Futures Exchange jumped 4% on Monday, reaching its highest point in 9 1/2 years, according to Reuters.

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According to Reuters, the metal rose on both supply concerns and “expectations for improved liquidity in markets in China.”

The Automotive MMI dropped for the first time since June, falling one point for an October reading of 93. 

Much of the automotive basket of metals was stuck in neutral this month, but a few did show some notable movement. U.S. HDG steel dropped 1.7% and LME copper, one of the darlings of August, dropped 4.2%.

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Chinese primary lead rose 8.7%. Our Irene Martinez Canorea wrote about environmentally-based smelter shutdowns in China, which supported the lead price.

“The Chinese environmental campaign has heavily impacted lead,” Martinez Canorea wrote. “According to research group Antaike, 80% of illegal secondary smelters have been shut down during the second half of 2017. China has also lost an important source of raw materials from North Korea due to its commitment to international sanctions.”

Palladium Pulls Past Platinum

One tidbit worth noting is the relationship between palladium and platinum. As of Oct. 1, palladium closed higher than platinum.

The last time that happened? Sixteen years ago.

According to a report by Kitco News, however, many analysts don’t expect palladium’s dominance over platinum to last.

The report attributes the price dynamic to a rise in demand in gasoline-powered vehicles and platinum’s fall alongside gold.

“Palladium is benefitting from its inclusion in catalytic converters in gasoline-powered vehicles, which is expecting robust growth from the shift from diesel engines following the 2015 Volkswagen emissions-rigging scandal, and hybrid electric vehicle demand,” according to a research note from commodities broker SP Angel quoted by Kitco.

Dr. Copper Loses Ground

After surging throughout the summer and hitting three-year highs, copper has been backsliding of late.

As of Oct. 1, LME copper dropped from the previous month’s closing price by 4.2%. The metal, often cited as a global indicator of economic health, lost steam in September like a number of other base metals, as Martinez Canorea wrote on Tuesday.

After a booming August, copper slowed down in September.

“Copper has retraced and the general downtrend has slowed down this month. However, the CRB commodities index has increased, something we had suggested might happen and something that signals a potential bull run,” Canorea wrote.

U.S. Auto Sales

In U.S. auto sales, light trucks continued to be a popular option for buyers. In the year to date, over 8 million units have been sold in the U.S., which is up 4.4% from the same time frame last year, according to sales data released Tuesday by Autodata Corp.

By month, September 2017 light truck sales hit 967,547 units, up 12.4% from September 2016. Meanwhile, sales of passenger cars dropped 3.3% last month compared with September 2016 and dropped 10.5% in the year to date (compared with the same time frame last year).

In short? Trucks continue to be in.

As for sales by manufacturer, General Motors led the way with 279,176 units sold, which was up 11.8% from its September 2016 sales total. On the year, however, GM’s sales are down 0.8%.

Similarly, Ford had a strong September, with sales jumping 8.9% from September 2016. However, like GM, Ford’s sales are down in the year to date (2.7%).

Reuters reported Tuesday that GM’s shares rose 3.1% and hit a record intraday high, while Ford’s stock rose 2.1%.

It wasn’t a great month for Fiat Chrysler. September sales dropped 9.7% year-over-year. In the year to date, the automaker’s sales are down 7.9%.

A number of other automakers boasted strong September 2017 sales figurers that raced past September 2016 sales.

Toyota (14.9%), Honda (6.8%), Nissan (9.5%), Volkswagen (22.8%) and Mitsubishi (17.2%) all had solid September year-over-year increases. In the year to date, all five of the aforementioned automakers have exceeded sales compared with the same time frame of last year — Volkswagen posted the largest year-to-date jump of that group at 7.8%.

Sales in China

According to the most recently available sales data from the Chinese Association of Automobile Manufacturers (CAAM), August automotive sales in China were up 5.3% year-over-year.

For the first eight months of the year, 17,511,000 units were sold, up 4.3% from the same time frame last year.

Volvo was among the big winners in China in September. Volvo’s September global sales rose 11.2% year-over-year. In China — Volvo’s biggest market — sales rose a whopping 29.8%, according to a company release. From January-September, Volvo’s Chinese sales are up 29.9% compared with the first three quarters of 2016.

Feeling the Electricity

Meanwhile, our Stuart Burns wrote about an announcement that could represent the rise of the electric vehicle (EV) in China, a shift that has massive implications for the automotive world.

China, the largest automotive market in the world, moving toward the EV constitutes a significant development, to say the least.

Burns covered the recent announcement from Beijing outlining the government’s plans to move toward EVs, as the country — and the world — prepares for the phaseout of vehicles powered by fossil fuels. The U.K. and France have made similar announcements this year, setting long-term goals to ban the sales of gas and diesel cars by 2040.

India, too, announced a push toward electrification earlier this year, with an ambitious goal of selling only electric vehicles by 2030.

For now, of course, these are merely government statements — actual implementation of the processes necessary, in both the public and private sectors, to reach these goals is another story entirely.

As for automakers, GM announced Monday its plans to move toward an all-electric fleet.

“General Motors believes in an all-electric future,” said Mark Reuss, General Motors executive vice president of product development, purchasing and supply chain. “Although that future won’t happen overnight, GM is committed to driving increased usage and acceptance of electric vehicles through no-compromise solutions that meet our customers’ needs.”

The automaker plans to introduce two new all-electric vehicles in the next 18 months, according to the GM announcement, and a total of at least 20 new all-electric vehicles by 2023.

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After two months of a breathtaking industrial metals price rally, September has shown pretty significant price pullbacks for August’s outperformers (nickel and copper).

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Some prices have increased by more than 18% (copper) over the past two months, so these pullbacks should come as no surprise.

However, when many analysts study this kind of a chart such as the one shown below, some might scream bloody murder and declare a full on nickel bear market.

Source: MetalMiner analysis of FastMarkets

And we can’t lie — nickel prices fell sharply this month on heavy trading volumes. On the other hand, prices went up with about the same momentum last month. Now, prices appear at levels last seen in August.

Looking at the nickel outlook, rising stainless steel demand has boosted nickel prices so far. As reported by Ingrid Sternby, senior research analyst at Blenheim Capital Management, approximately two-thirds of world nickel demand comes from stainless mills.

UBS has increased its stainless demand growth to 3.5% for 2017 and 6.2% for 2018.

What is Going on With the Other Base Metals?

To better understand this short-term downtrend, let’s take a look at the price trends for other base metals.

Copper has retraced and the general downtrend has slowed down this month. However, the CRB commodities index has increased, something we had suggested might happen and something that signals a potential bull run.

Even if the chart for nickel looks bearish, some other base metals are still supporting the base metals bullish sentiment. Aluminum and zinc, which both started the rally this summer too, have shown resilience this month. Therefore, the nickel price downtrend does not equate to bearish sentiment (or changing an organization’s buying strategy).

Aluminum price. Source: MetalMiner analysis of FastMarkets

Zinc price. Source: MetalMiner analysis of FastMarkets

What Does This Mean for Buying Organizations?

Buying organizations will want to understand price signals together with trading volumes to properly react and adapt buying strategies to price changes.

MetalMiner will publish a free Annual Outlook Report this week that will summarize the drivers and price trends for 2018.

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However, consider subscribing to our Monthly Metal Buying Outlook in order to get the most out of this report and better understand the buying strategies.

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This morning in metals news, the recent agreement between Tata Steel and Thyssenkrupp to merge their European operations will likely mean job cuts at the U.K.’s biggest steel plant, copper moves up and Rio Tinto will deploy driverless iron ore trains in western Australia.

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Fallout of the Tata-Thyssenkrupp Deal

After more than a year of anticipation and talk, Tata Steel and Thyssenkrupp recently announced they had reached a deal to merge their European operations.

This was exciting news to some, but not to workers in the U.K., who expressed fear at the possibility of job cuts.

According to a Reuters analysis, the U.K.’s biggest steel plant, in Port Talbot, will likely be the first to face the scythe of job cuts. The plant directly employs 4,000 workers.

Copper Moves Up

Copper futures gained Monday in a slow trading day, according to a Reuters report.

The metal’s rise was in part attributed to growth in Chinese manufacturing.

Three-month LME copper was up 0.4% to $6,509 per ton earlier today.

Driverless Trains

Driverless cars are the wave of the future — but what about driverless trains?

Rio Tinto will use driverless trains for the transportation of iron ore in western Australia, according to Reuters.

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The iron ore miner recently completed its first long-haul journey (60 miles), with a completely autonomous locomotive, according to the report.

India has bucked the global trend where non-ferrous metals are concerned.3

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A recent report by professional services agency KPMG has said demand for non-ferrous metals, including aluminum and copper was likely to grow around 8% over the next five years.

Titled “India Non-ferrous metals industry: Building the future,” the report added that the expected demand growth in the non-ferrous metals industry would be even better than the “healthy trend” observed in the last five years.

“Over 2016-17 to 2021-22, the demand for these metals is expected to grow by around 8% in line with strong economic prospects, thrust on manufacturing sector, healthy growth in key end-use segments further aided by rising usage intensity,” the report states.

What’s more, the report said India had also registered strong growth in recycling of metals, a major step forward for an otherwise unregulated sector. It said over time, the share of recycled metals had increased considerably and was almost equivalent to the global level.

But KPMG added a note of caution, saying legislative intervention was required to contain the level of scrap imports that still dominated the globe.

It’s no secret that globally, the non-ferrous metal industry faced a turbulent time owing to a number of factors, including the global economic growth slowdown at large, as well as the slowdown of the Chinese economy, in particular, along with the high raw material prices.

But India went the other way.

The KPMG report added that “strong resilience in the Indian economy” had resulted in its non-ferrous metal industry outpacing the global trend. Apart from a strong demand base and future potential, India was rich in terms of raw material reserves coupled with a relatively low-cost structure of production, thereby providing huge opportunity for the development of non-ferrous metals industry in India.

That said, downstream products, such as copper wire and aluminum foils, were still being dominated by imports, as the downstream industry is relatively undeveloped in India.

China, with its sheer population as well as advancement of manufacturing, was the largest consumer of non-ferrous metals and majorly influences the dynamics of the industry. But the recent slowdown in that country has significantly impacted the global industry in terms of supply and demand, trade, prices and profitability. The country accounts for 52% of the global aluminum consumption. In Asia, consumption showed a declining trend in Japan, but was counteracted by higher demand from India and the Middle East. The report said North America had also firmed up since the global financial crisis. Prices had recovered because of supply cuts in China and a healthy demand growth.

In India, with steady growth in demand, non-ferrous metals were being consumed in several emerging applications offered by defense, aerospace, hybrid and electric vehicles, railways, and more, requiring complex design (be it large aerostructure parts or miniature structural components). However, lately there has been technological disruption in multiple industries, including metals, such as metal additive manufacturing or 3D printing, which offered the possibility of complex parts production at a faster pace and lower cost, the report observed. There were a number of industries which were increasingly using these technologies to revolutionize the manufacturing process.

A well-developed non-ferrous metals industry is vital for any developing country, as it provides important raw material to many industries that are the pillars of economic development. With the increasing usage of these metals in several existing and emerging applications, coupled with new technologies, there is a paradigm shift that can change the way non-ferrous metals are consumed in the future.

The KPMG report provides a glimpse of opportunities that are available for the development of the non-ferrous metals industry in India, which is riding strong economic growth momentum.

With a slew of reforms undertaken by the government, the end-use sectors of non-ferrous metals —automotive, electricals, packaging, consumer durables, railways, ports and inland waterways, roadways and renewable energy  — were expected to experience a strong growth trajectory.

However, certain metals were characterized by import, especially downstream products such as copper wire and aluminum foils, because of various reasons, including the undeveloped downstream industry, global competition and quality availability.

Aluminum

During 2011-12 to 2016-17, the demand for aluminum posted a CAGR of 5.4% led by a healthy growth recorded by the electrical and automotive sectors, which constitutes 60-65% of the total consumption of aluminum.

Primary aluminum demand was generally met through domestic supply, but there was considerable import of downstream products from China and the Middle East. Many players in the aluminum downstream industry were suffering from a lack of proper infrastructure and technology to efficiently process the raw material into high-quality products.

Significant capacity addition has taken place over the past five years due to implementation of various capacity addition plans by the major players. During 2011-12 to 2016-17, capacity has increased from 1.9 million tons per annum to 4.1 million tons per annum.

Copper

Demand for primary copper grew at a CAGR of 14% over the past five years, owing to the robust growth in the electrical sector and consumer durables.

Although India was a net exporter of copper, there was a significant proportion of import of downstream products. Many players in the copper downstream industry faced challenges such as outdated technology, improper infrastructure, high set-up cost, high funding cost and lack of skilled professionals.

During 2011-12 to 2016-17 copper imports, constituting mainly downstream products and alloys, grew at a CAGR of 15.4%.

Zinc

Demand for primary zinc in India was based on the growth of the steel market, which accounts for 70% of the total demand. It was mainly used in galvanizing and coatings of iron and steel to protect it from corrosion.

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During 2011-12 to 2016-17, demand for zinc grew at a CAGR of only 3%, mainly because of a surge in imports of galvanized steel.

In order to control imports, the government imposed a minimum import duty on certain steel products, in addition to a safeguard duty and anti-dumping duty.

In 2016-17, India’s imports of galvanized and coated steel fell by 47% compared to the previous year as a result of these supportive government policies.

Other government initiatives, such as the Smart Cities Mission, modernization of railways and the construction of highways were expected to boost the infrastructure industry, which uses galvanized steel for durability and endurance.

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This afternoon in metals news, black cabs in London will be moving toward electric power, production of copper and steel is up in Kazakhstan, and Dr. Copper appears to be backsliding after its previously torrid pace.

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Electric Cabs?

Further adding momentum to the electric vehicle industry, black cabs in London will soon be powered by electricity.

Sapa SA’s aluminum plant in Wales will reopen this week and supply parts for automakers like London Electric Vehicle Co., the maker of black cabs, Bloomberg reported.

The move is part of the overall comeback for aluminum, which works in tandem with the rise of the electric vehicle, particularly the U.K.’s effort to phase out vehicles powered by fossil fuels by 2040.

Copper, Steel Output Up in Kazakhstan

Cooper and steel production have surged in Kazakhstan through the first seven months of the year, according to a Reuters report.

For January-August, copper production is up 5.5% and crude steel production is up 9.7% in Kazakhstan, according to Statistics Committee data.

Copper Price Begins to Slide

The metal often referred to as “Dr. Copper” boasted a healthy diagnosis as late as last month, when the metal hit a three-year high.

But political tensions on the Korean peninsula, among other things, have seen the metal’s price begin to backslide.

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The copper price has dipped 6% since Sept. 8, when President Donald Trump said the U.S. would not rule out a military option vis-a-vis North Korea’s latest nuclear test, according to Reuters.

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This morning in metals news, Chinese steel production once again hit a record last month, copper took a dip, and the gap between high-grade and low-grade iron ore grew larger as China attempts to combat its smog problem.

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Steel Output Hits New Record in China

Steel mills in China cranked up production levels en route to hitting a new monthly production record, according to Bloomberg.

According to the report, Chinese crude steel output hit 74.59 million metric tons in August, surpassing the previous peak of 74.02 million in July.

Copper Falls Back

Copper has been having a good year, but it fell to a four-week low Thursday as a result of what Reuters calls lackluster Chinese economic data.

What appears to be slowing demand from China, the world’s top metals consumer, contributed to the metal’s drop, according to the report.

Premiums Soar for High-Grade Iron Ore

Sticking with the China theme, Reuters reported the gap between high-grade and low-grade iron ore in China grew as a result of the country’s efforts to fight pollution.

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The trading gap between the two forms of ore was at its highest since August 2011, according to the report.