LME copper

US auto sales remain the bright spot in the drivers of the monthly Automotive MMI®.

The Real Steel Story

Seasonally adjusted annual rate of sales for light vehicles rose to 17.8 million compared with 17.3 million a year earlier and was the highest since July 2005, according to researcher Autodata Corp. August was the fourth consecutive month that adjusted sales remained above the 17 million mark.

Automotive August-2015The Automotive MMI® still registered only a value of 73 in September, a decrease of 3.9% from 76 in August. Weak prices for most of the base metals that make up the index (HDG, copper, aluminum and lead) abound despite strong end user sales in the US. In China, auto sales are falling with the rest of the domestic economy there.

Need More Purchasing Information? See a Sample of Our Metal Buying Outlook

China Again

Chinese auto sales fell by 7.10% in July 2015 compared to July 2014, the largest fall since February 2013 and such a large economy’s fall is dragging down the prices of automotive metals just as it is dragging down the prices of oil and other commodities.

Major iron ore producers, Rio Tinto PLC, BHP Billiton, Vale SA and Fortescue Metals Group Limited have ramped up production again despite massive iron ore and steel oversupply. Zacks.com believes they intend to continue exploring for iron ore in Australia despite lower growth forecasts from China and weaker iron ore prices, betting on continued strength in iron ore demand over the long term.

What This Means For Metal Buyers

This is normal behavior from major miners such as the Big Three (Rio, BHP and Vale) and almost-there cousin Fortescue. They can make a profit by squeezing volume out of their mines at low prices based on scale, alone, but iron ore investment is coming from non-traditional miners, as well.

India’s Essar Steel is making a $1.9 billion investment in the steelmaking ingredient in Minnesota, of all places. It’s difficult to imagine how such an investment makes long-term sense for Essar without a turnaround in both iron ore and steel prices. Since high-strength automotive steel alloys are one of the best-performing steel products on today’s market, it’s even more difficult to imagine those prices turning around without continued strong auto sales in the US and Europe and a turnaround in China and other emerging markets.

Free Download: Compare Price Trends With the August MMI Report

This Month’s Prices and Trends

For exact pricing, join or log in below!

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

Copper prices are dipping below the psychological basement support level of $5,000 per metric ton.

3M LME Copper since 2010

Three-month London Metal Exchange copper since 2010. Graph: MetalMiner.

The metal has done nothing but fall since 2011, but the declines have become steeper over the past few months. Investors particularly dislike copper, as worries about China’s economy are simultaneously rising. China’s stock market crash and the recent devaluation of its currency are just aggravating expectations of a further copper fall.

Meanwhile, China’s latest Purchasing Managers’ Index numbers fell to a two-year low, while construction numbers are still disturbing to investors. The slowdowns in the Chinese manufacturing and construction sectors are significantly hitting copper demand, or at least any hopes of demand coming back.

The monthly Copper MMI® registered a value of 67 in August, a decrease of 8.2% from 73 in July and an all-time low.

Copper_Chart_August-2015_FNL

Copper prices hit another fresh low last month. Three-month LME prices are near $5,000 per metric ton, a level last seen in 2009. For many months now, producing costs relative to prices have been under close scrutiny in metals like aluminum and nickel. Now it’s copper’s turn.

Free Sample Report: Our New Monthly Outlook

Prices Below Production Costs

Many analysts are arguing that copper prices have fallen to the point where cost of production is exceeding the spot price, and many miners are going to look at cutting production and future spending. Does that mean that higher-cost producers will start closing capacity, triggering a supply response and therefore end this copper bear market?

First, cost-curves are not constant targets. They fluctuate depending on a bunch of factors such us input costs, exchange rates, etc. Copper prices are not the only thing falling. The entire commodity market is sinking, with falling energy prices continuously lowering input costs. Moreover, a stronger US dollar is lowering the costs in local currencies like the Chilean peso.

* Get the complete prices every day on the MetalMiner IndX℠

Second, even when produces are underwater, they tend to hang out as long as they can. Closing mines is usually a later response to financial and social pain.

What This Means for Copper Buyers

In conclusion, it’s good to understand where production costs are relative to prices but they are not useful when it comes to guessing a price bottom. Prices can remain below production costs for long periods of time, as we’ve seen in aluminum and nickel before.

The market probably won’t change that much until we see a resurgence in demand. Although we could see some short-term rebound in prices, the long-term picture doesn’t look good yet. On January 2014 we were bearish on copper, today we still are.

Compare Prices With Last Month’s MMI Report

The Copper MMI® collects and weights 12 global copper metal price points to provide a unique view into copper price trends over a 30-day period. For more information on the Copper MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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

There was no joy in automotive metals this month as prices retreated again amid ample supply and not enough worldwide demand.

Automotive_Chart_August-2015_FNL

The monthly Automotive MMI® registered a value of 76 in August, a decrease of 7.3% from 82 in July, another all-time low for the index. Before the last two months, its previous low was 85.

Steel Prices Falling

Base metals remain in a bearish market, one that’s starting to edge on historic proportions. Also, a glut of imported steel in the US market continues to drive down prices domestically while the lack of demand overseas only exacerbates the problem here.

Three Best Practices for Buying Commodities

US steelmakers have been forced to rely on anti-dumping actions again in hopes of creating some semblance of market equilibrium.

Steel is not the only ingredient in the Automotive MMI and its fall has been helped along liberally by steep falls for aluminum, palladium, platinum and copper.

Vehicle Sales Faltering

At least in the US, sales of automobiles are still strong, too. A sales collapse in China is one of the many effects of the stock market crash and slow economic growth there.

“There’s excessive competition and automakers are building excess capacity, and to raise utilization of the plants, they will engage in excessive selling,” Fumihiko Ike, chairman of the Japan Automobile Manufacturers Association, said in reference to the market many are looking at to create global sales increases.

The Chinese market is generally regarded as one that provides higher sales margins to manufacturers and Volkswagen, BMW and other manufacturers are taking on a hit on sales there.

With a continuing metals surplus and only the US end-user market in decent shape, it’s difficult to predict a turnaround for the Automotive MMI. The Thomson Reuters/Jefferies CRB Commodity Index is hitting new lows as well.

Actual Automotive Metals Prices

For this month’s exact prices and trends, log in or sign up below. Or check out our free sample forecast report…

Free Download: Sign Up for Our Monthly Outlook

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

Through half of 2015, US auto sales are on track to hit record levels not seen in 15 years. After climbing more than 4% through July annual sales could approach the previous annual record of 17.4 million if they stay on this pace.

Yet, none of that demand seems to be helping automotive metal prices.

Free Download: Last Week for the June MMI Report

As robust as the US automotive market is, it can’t entirely make up for sluggish sales elsewhere that are depressing demand for metals such as steel, aluminum and copper and pushing our index further down. Even the exhaust system metals, platinum and palladium, saw a deep dive this month.

Chinese New Car Sales Barely Growing

New car sales grew just 1.2% in China this May. Further complicating matters, is the fact that the nation of 1.37 billion is starting to develop a used car market and it’s looking very much like Chinese consumers like paying less for a used car, rather than paying more for a new one. What a shock?

This is, of course, bad news for raw materials suppliers as the massive Chinese auto market only recently transitioned to automobiles being the main form of transportation. Less-metals intensive bicycles and motorbikes had filled that role until recently.

Chinese steel and aluminum manufacturers had been counting on more robust growth from the domestic new car market and a strong used market could stunt the advances many were planning to reap from new car sales.

Bearish Market Hits Home

The monthly Automotive MMI® registered a value of 82 in July, a decrease of 3.5% from 85 in June.

Automotive_Chart_July-2015_FNL

As we have documented liberally, the strong US dollar has created a bearish environment for all metals and automotive inputs are no exception. The steep fall observed this month in palladium, a metal that had previously held our automotive index up, was an example of just how much the bearish market is affecting even metals with strong demand. Palladium hit a two-year low this month and the bottom, subsequently, fell out of an already listing price index.

Copper, zinc and lead also fell significantly.

What This Means for Automotive Metal Buyers

* Get the complete prices every day on the MetalMiner IndX℠

The drama surrounding Greece’s debt is compounding the bear market and, while it hasn’t yet caused strong currencies such as the dollar to see significant gains, its potential to do so threatens all commodities.
This September: SMU Steel Summit 2015

The Automotive MMI® collects and weights 7 metal price points used in automotive production to provide a unique view into automotive metal trends over a 30-day period. For more information on the Automotive MMI® constituent metals and their exact price movements, log in or register below!

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

The monthly Copper MMI® registered a value of 73 in July, a decrease of 2.7% from 75 in June.

Copper_Chart_July-2015_FNL

Copper suspiciously rallied in the first quarter, gaining almost 20% from trough to peak.

Free Download: Latest Metal Price Trends in the June MMI Report

However, copper prices fell again in May and June and those previous gains have almost vanished. The copper rally was always suspect at best.

Chinese Construction Feeding the Bear

The bearish commodity market is definitely not encouraging investors to pour money into copper. Another big factor that doesn’t help to lure investors into copper is weak Chinese demand for the metal. The latest Chinese numbers show poor demand from key sectors:

  • In the first five months of current year, real estate development firms purchased 76.50 million square meters of land, a year-over-year (YoY) decline of 31%. The floor space of completed buildings declined 13.3% YoY as of May. Finally, Chinese real estate firms have started construction on only 503 million square meters as of May, falling 16% YoY.
  • A lower growth rate in China’s automobile sector also hits copper’s demand. China’s passenger car sales only grew by a mere 1.2% YoY in May, sliding 3.6% from the previous month.

Meanwhile in May, China produced 0.65 million tons of refined copper, a 6% YoY increase.

What This Means For Metal Buyers

The latest figures don’t give investors reason to think that copper’s fundamentals are set to tighten up and, overall, the market sentiment on commodities is bearish. We shouldn’t expect copper to make significant upside moves.

* Get the complete prices every day on the MetalMiner IndX℠

This September: SMU Steel Summit 2015

The Copper MMI® collects and weights 12 global copper metal price points to provide a unique view into copper price trends over a 30-day period. For more information on the Copper MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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

The red metal met the Red Cross earlier this week in the kickoff post of our series on health-acquired infections (HAI) and copper’s role in the war against them – but what hospital procurement officers and facilities management departments may want to know is, what’s up with the copper price?

Free Download: MetalMiner’s Top Service Centers Guide

First step in the multi-step program of “What’s Up With the Copper Price?” is a look back at where prices have been: MetalMiner’s monthly Copper MMI® registered a value of 75 in June, a decrease of 2.6% from 77 in May.

Copper_Chart_June-2015_FNL

The index decline was driven mainly by spot and 3-month London Metal Exchange prices, US copper producer grades 102 and 110, and Chinese copper wire.

What’s Up With That?

Second step in the multi-step program of “What’s Up With the Copper Price?” is knowing some of the underlying fundamentals that may have to do with its shift. For that, we turn to MetalMiner Editor-at-large Stuart Burns, who writes that:

“Analysts expect China’s copper demand to grow by 4% this year, yet that figure is based on considerable use in power grid investment and assumes government spending plans will be met. Power grid investment actually fell by 8.65% in April, according to the FT, and in the first four months of this year China completed Rmb86.6bn of grid investment, only 20% of the planned amount for the year.

Investors agree with the pessimistic outlook cutting their net long positions in copper, joining Chinese speculators who have been betting against copper all year.

A CNBC report says recent weakness is due to weak premiums, high scrap discounts and a failure of the seasonally strongest quarter for copper to translate into solid demand. China’s factories are now approaching a summer slow-down and with it lower metal consumption.”

Outside China, there’s always Mongolia – and the Oyu Tolgoi copper mine, from which Rio Tinto‘s recent bullishness is born. According to the FT, “Rio Tinto recently forecast that copper prices will recover faster than expected with demand outstripping supply within two years. This bullish forecast comes as the Anglo-Australian miner steps up talks in May with the Mongolian government aimed at finalizing a deal on a $6 billion expansion at Oyu Tolgoi, which had been stalled for months. The lack of new copper projects in the pipeline could result in a market deficit earlier than expected,” the paper indicates, “but even if Rio Tinto was right, 2 years is still a long period of time where we could see further price declines.”

What’s Up With the Market?

For the third step in the multi-step program of “What’s Up With the Copper Price?”, we cast our focus onto the future by turning to our metals procurement specialist, Raul de Frutos:

“Copper prices have been rallying since February and, in the short term, they could continue doing so. For the short term, consider placing orders now for known demand. Don’t buy long-term forward, as copper is in a bearish market and we expect prices to lose steam soon and come back to lower levels.”

For more comprehensive commentary and specific copper price forecast thresholds, download our FREE sample forecast report!
And to get this month’s complete monthly copper price movements, see below:

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

MetalMiner’s basket of industrial metals used by the auto industry, the monthly Automotive MMI®, registered a value of 85 in June, a decrease of 2.3% from 87 in May.

Automotive_Chart_June-2015_FNLAs the chart shows, this move basically undoes May’s gains and puts the automotive metals index back where it was in April. The loss nearly erased the 2.4% gain last month as palladium and platinum prices either fell or traded sideways and the other metals tracked in the index weren’t really responsible for the recent movement, anyway.

Robust Car/Truck/SUV Sales

While automotive sales remain strong in the US and abroad, those sales are not creating the necessary demand for automotive materials to move the needle this year – even as companies such as Alcoa, Novelis, ArcelorMittal and others invest heavily in automotive aluminum and steel facilities worldwide.

FREE Download: Compare Prices With the May MMI® Report.

US car buyers bought new cars and trucks at the fastest pace in nearly a decade in May, US auto sales data released by the automakers showed. General Motors, Fiat Chrysler and Honda reported increases. Toyota, Nissan and Ford saw declines.

Americans bought about 1.63 million new vehicles in May, up 1.6% from about 1.61 million in the same month last year, according to automotive statistics provider Motor Intelligence. Industry forecasts had expected a 1% decline in sales, to 1.59 million, in part because May was one sales-day shorter than it was last year.

May’s seasonally adjusted annualized rate came in at 17.8 million, well past analysts expected 17.3 million.

Steel Inventories Still High

The big drag on the index continues to be the price of steel, which reached another new low this month. Cheap imports and high inventories are to blame in that market, and those high inventories will continue to make the road just as hard to ride for automotive.

Domestic steel producers have filed anti-dumping and countervailing duty petitions against five countries related to corrosion-resistant steel, the type used in automotive applications.

* Get the HDG steel price every day on the MetalMiner IndX℠

The petitions charge that unfairly traded imports of corrosion-resistant steel from China, India, Italy, South Korea and Taiwan are causing material injury to the domestic steel industry. The petitions further charge that significant subsidies have been provided to the foreign producers by the governments of those countries.

It will take months to know if this action produces significant relief of the cheap imports and, even then, the anti-dumping and CVD determinations might not be high enough to have an effect. The end-use automotive market and its much of its material supply chain is intrinsically tied to the steel market.

For exact and complete price trends of the Auto MMI, log in or sign up below!

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

Is this a serious rebound in copper prices? Hmm… we still doubt it.

The monthly Copper MMI® registered a value of 77 in May, an increase of 2.7% from 75 in April.

Not a Demand-Based Surge

Copper prices have surged so far this year but prices are still well below what they were just a year ago.

Free Webinar: What The EPA Clean Power Plan Could Cost Your Business

Demand coming from China is still weak. We believe that traders likely won’t get evidence of a meaningful uptick in demand as Chinese demand remains weak and not likely to make a significant comeback in the medium term. Therefore, demand alone has little chances of supporting prices through the balance of the year.

Supply Side? Nope

On the supply side, there have been some constraints in Chile (the largest copper producing nation) because of climate and labor problems. On the other hand, major copper miners are cutting costs. This helps miners keep producing even while copper prices fall, as major input costs like crude oil declined. Just this year, the industry’s total costs on average fell 6%. The industry seems well-supplied and at this point, we don’t see warnings in the supply side with the potential to dramatically change the direction of prices.

What IS Causing the Rally?

With this said, two things seem to be causing the recent copper’s rally:

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

Seems that somebody forgot to tell the automotive metals that the bear market was still going on this month. Strong aluminum and high-strength steel demand, and end-user purchases, have again made auto the standout in a field of mostly down markets.

After flattening in April, the monthly automotive MMI® registered a value of 87 in May, an increase of 2.4% from 85 in April. A big factor was the performance of aluminum coil on the index, as its index broke resistance and soared as well.

Pool 4 Tool’s Automotive SRM Summit

China removed export taxes on aluminum, opening more markets up to the automotive-grade sheet and coil prices that automakers in the West have been experimenting with for a decade now. Prices of palladium, lead and even copper also notched strong LME growth filling strong demand from domestic and foreign automakers.

Consumer Sales Rising

In the US market, April new car sales rose by 5% from a year ago, to more than 1.463 million units as predicted in a J.D. Power and LMC Automotive‘s mid-month auto sales forecast update. April’s totals are anticipated to be the highest since April 2005.

SUVs and smaller “crossover utility vehicles” were the main leaders in the sales surge. While not all US automakers posted strong Q1 results, profits were generally up even if they were up lower than some analysts expected. General Motors‘ results were better than in the same period a year ago, when costs associated with safety recalls limited quarterly profit to $125 million.

Fiat Chrysler Automobiles reported a profit of $101.2 million (€92 million) d​uring the first quarter compared with a loss of $173 million (€190 million) during the same period last year.

What This Means for Automotive Buyers

Consumer demand for automobiles traditionally picks up in the summer months, so this could be the beginning of a big turnaround for our Automotive MMI®. Fundamentals continue to look strong as the index had better supply and demand numbers than other metals even when it was losing price ground. Stay tuned.

For actual prices of the automotive metals this month, read the full article by logging in or signing up to become a MM member.

Free Download: Monthly MMI Report

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