Week-In-Review: Let’s Explore the New Normal

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Just one full week into the New Year, we at MetalMiner were confronted by several situations that have upset the commodity metals status quo. Up was down, left was right, black was… you get the picture.

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China Gives in on Rare Earths

The biggest news came as just as few lines in a massive government report out of Beijing. China looks like it’s finally giving up on its long and expensive World Trade Organization fight over rare earths with the US and Japan. A legal skirmish that began years ago. China has been using a rare earths export quota to essentially control prices of the roughly 90% of rare earths that come from its provinces.

While we had expected China to modify the quota since their latest WTO loss early last year, an outright end to the entire quota system coming from a rather mundane government report on January 1st was not expected.


Just like Det. Jane Rizzoli is handcuffed to Dr. Maura Isles, China is handcuffed by WTO rare earths rulings it lost. Source: TNT

So, why would China just give up on its nearly 3-year RE fight? Attrition, mostly. China is a WTO member, too, and keeping up the fight at this point would be like Rizzoli not listening to Isles in the last 5 minutes of an episode when every call she’s made has been right for the first 50 minutes. Even China has a breaking point.

New LME Transaction Fees

When the London Metal Exchange was purchased by Hong Kong Exchanges and Clearing Ltd. in 2012, the new owners pledged they would not increase fees until at least 2015. And they didn’t… until the very first day of 2015. The 137-year-old LME had announced the fee increase in September as HKEx moved to boost profit from the world’s biggest industrial metals market. With the increase comes discounts for ring and telephone trading, too. Check back here for more on the new fee structure next week. We at MetalMiner promise we won’t raise membership prices until at least 2018.

Oil Under $50 a Barrel

This might not be OilMiner (that’s coming in 2018, t00), but oil affects the prices of all commodities and the big crash in oil prices is generally dragging down all of the commodity metals we cover. Low oil prices don’t look to be turning around anytime soon as OPEC seems committed to flooding the market to force out shale oil and other new competition.

Combined with a rally US dollar it’s a perfect storm of bad economic news for most metals. Lead Forecasting Analyst Raul De Frutos writes “it’s very difficult (if not impossible) to predict how long this dollar rally will continue and how low can commodities go.”

Buy plenty of gasoline and get used to the new normal, readers!

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