Author Archives: Belinda Fuller

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The Stainless Steel Monthly Metals Index (MMI) jumped six points for an August reading 75 on the back of strong nickel price gains.

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Within the Stainless MMI basket, LME nickel prices increased the most once again this month, recording a 13% increase. Rather than correcting back to pre-spike levels, traders continued to buy into the market.

Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets

In addition to the price rise, stock levels have also risen as a result of Chinese stockpiling activities ahead of the Indonesian export ban.

Very recent rumors of Indonesia possibly pushing up a raw ore ban created a fresh round of speculative buying activity during this past week, which gained even more steam in the first week of August.

The new export ban regulations, initially announced in 2017, will take effect by 2022. This most recent round of nickel price escalation through speculation may also spur a new round of Chinese direct investment into Indonesia (aimed at securing future stocks of the metal ore).

Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets

Looking at a longer-term chart, nickel prices previously spiked at various points in time. After a steep period of rising prices, we should expect to see a quick correction followed by a period of time with higher prices.

For example, it appears that a speculative price spike took the price away from fundamentals back in 2016, as called out by the rectangular box in the chart below. In that case, the price stayed higher for about six weeks before dropping back.

Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets

Should a steady uptick in positive trading volume continue, that would indicate the uptrend will continue. During the past week or so, we have seen lower trading volume; however, volumes still look relatively strong.

Global Demand Outlook Declines

According to Outokumpu’s Q2 results, the company saw weaker stainless steel demand heavily impacting declining sales, which dropped by around 8% compared to Q2 2018.

Difficult competitive conditions in Europe hurt sales, with that market struggling against cheap Asian imports. Permanent safeguards became effective in February, but import penetration increased back to 30%. In addition, a new quota period started July 1.

While import levels into the U.S. remain low, the company reports ongoing distributor destocking will limit volume upside in the Americas in the short term. Further, the company expects challenging conditions to continue through 2019.

The International Stainless Steel Forum (ISSF) released Q1 production figures in early July showing a 2.5% year-on-year decline in global stainless steel melt shop production.

In Europe, the decline reached 5.7%. Asian production outside of China also declined by an estimated 5.7%. The U.S. saw a decline of 2% and Chinese production declined by 1.5%.

SHFE Nickel Prices Jump

SHFE prices also reacted to the rumor regarding Indonesia’s consideration of moving up its ore export ban.

SHFE nickel prices reached a new high for 2019, in addition to a new longer-term high.

Source: MetalMiner analysis of FastMarkets

While prices increased recently, prices were much higher at previous points in time.

Most notably, nickel prices surged past $50,000/mt, or roughly around CNY 500,000/mt, and then sank back down to around $10,000/mt during a three-year period from 2006-2009, according to data from the International Nickel Study Group (INSG). At the start of that period, prices were similar to current prices and jumped about 400% in around 1 1/2 years (at the the midpoint of the aforementioned period).

On the way back down, prices stalled at the $30,000/mt level for a year during a period of historically low stocks.

Domestic Stainless Steel Market

Source: MetalMiner data from MetalMiner IndX(™)

Stainless 304 and 316 NAS surcharges nudged back up in early August, still maintaining sideways movement.

Weaker demand outweighed higher nickel prices this month as surcharges reversed.

What This Means for Industrial Buyers

MetalMiner’s stainless steel price index hit a one-year high. Industrial buyers need to stay alert for the right opportunity to buy, as nickel prices may be at a short-term speculative high that still seems to be going strong. As ingot prices rise, expect premiums to follow.

For buying guidance, including resistance and support pricing levels by metal, industrial buying organizations can request a free two-month trial to our Monthly Metal Buying Outlook report.

Buying organizations will want to read more about our longer-term steel price trends in our Annual Outlook.

Actual Stainless Steel Prices and Trends

Nickel prices registered double-digit increases this month, extending last month’s sizable gains.

The LME primary 3-month nickel price increased by 13.1% to $14,380/mt. China’s primary nickel price increased by 11.7% to $16,367/mt. India’s primary nickel price increased by 11% to $14.50/kg.

The U.S. 316 and 304 Allegheny Ludlum stainless surcharges increased this month by 4.9% and 7%, respectively, to $0.88/pound and $0.59/pound.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Chinese Ferro Alloys FeMo lumps also jumped by 11.7% this month, while FeCr lumps increased by 0.6%, reversing mild declines for both prices last month. Other Chinese prices in the index moved sideways, with only mild price movements of under 0.5%.

Korean prices for 430 CR 2B stainless steel coil and 304 CR 2B stainless coil decreased by 5.8% and 4.5%, respectively, to $1,221/mt and $2,149/mt.

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A 15-year trade dispute between Airbus and Boeing could send copper prices skyrocketing, with an even greater impact on U.S. manufacturers than the Section 232 tariffs had on steel and aluminum. MetalMiner has long covered this current dispute between Airbus and Boeing.

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Last year, the U.S. claimed victory in the dispute, essentially setting the groundwork for retaliatory tariffs against European imports. Though it took some time to go through an appeals process, Bloomberg has reported that tariffs appear imminent and, as a result, the U.S. copper industry has been galvanized into action.

The tariffs apply to a wide range of products, including hundreds of items unrelated to airplane parts, including cheese, whiskey and wine.

However, the following copper alloys and products could face a 100% — that is not a typo — duty if coming from the E.U.:

  • 7407.10.50: Refined copper, bars and rods
  • 7407.21.90: Copper-zinc base alloys (brass), bars and rods nesoi, not having a rectangular cross section
  • 7409.11.50: Refined copper, plates, sheets and strip, in coils, with a thickness over 0.15 mm but less than 5 mm
  • 7409.21.00: Copper-zinc base alloys (brass), plates, sheets and strip, in coils.
  • 7409.29.00: Copper-zinc base alloys (brass), plates, sheets and strip, not in coils.
  • 7409.31.50: Copper-tin base alloys (bronze), plates, sheets and strip, in coils, with a thickness o/0.15 mm but less than 5 mm and a width of 500 mm or more
  • 7409.31.90: Copper-tin base alloys (bronze), plates, sheets and strip, in coils, w/thickness o/0.15 mm but less than 5 mm and a width of less than 500 mm
  • 7409.40.00: Copper-nickel base alloys (cupro-nickel) or copper-nickel-zinc base alloys (nickel silver), plates, sheets and strip, w/thickness o/0.15 mm.
  • 7409.90.90: Copper alloys (o/than brass/bronze/cupro-nickel/nickel silver), plates, sheets and strip, w/thickness o/0.15mm but less than/5 mm and width less 500 mm
  • 7410.11.00: Refined copper, foil, w/thickness of 0.15 mm or less, not backed

These alloys cover 16% of the U.S. copper market, according to the Precision Metal Forming Association, and go into a broad range of industries, including electronics, automotive, aerospace, agribusiness, defense and home appliances.

In fact, the Bureau of Economic Analysis estimates these sectors represent approximately $1.7 trillion in U.S. output annually, according to testimony delivered Aug. 5 by ABC Metals President Dan Kendall.

In the Section 232 steel and aluminum exclusion requests, some companies received exemptions where no domestic supply exists. That scenario certainly applies to some copper alloys — nobody produces the C101, C102, C103 up to C110 (oxygen-free copper) grades, nor does the U.S. cast C500 series (phosphor bronze).

The copper industry, unlike the steel and aluminum industries, has already heavily consolidated. As Kendall explained at the hearing with regard to a monopoly in copper supply:

“On July 16th, Wieland Metals, headquartered in Germany, completed its acquisition of Global Brass & Copper, the last remaining US-owned brass and copper strip manufacturer. Prior to that, on May 28, Olin Brass, a division of GBC (which was about to be acquired by Wieland), petitioned the USTR for inclusion of these metals for tariff protection that are sourced in Europe.”

Wieland has petitioned to essentially create a virtual U.S. monopoly of more than 23 copper alloys. Furthermore, Wieland has no quoted ABC Metals. (Wieland did ship 10,000 pounds, though certainly not enough to fill an order!)

Trump can’t be blamed for this set of tariffs. However, this 301 WTO case has the power to wreak havoc throughout many manufacturing supply chains.

OEM manufacturers will act quickly to reconfigure their supply chains to continue to access copper products competitively. They will likely move offshore for electronic production. In addition, the remaining domestic copper suppliers will raise prices because they can.

Product substitution in copper remains limited compared to other metals, such as aluminum and steel, particularly due to the tough mechanical and chemical performance criteria demanded by consumers such as Aptiv, Lear, Molex, TE (Tyco Electronics), Ford, Chrysler, Denso, etc.; few suppliers can meet such demands.

MetalMiner gives these tariffs a 50% probability based on the USTR recommendation to the administration, expected in September.

Domestic suppliers have already raised prices.

We remind readers, however, that nothing kills high prices like high prices.

Monopoly Pricing on the Horizon?

The Copper Monthly Metals Index (MMI) moved sideways in July, maintaining its value of 74.

While prices in the index lost some value, the declines were modest.

LME copper prices moved firmly sideways since early June. In July, the price hit a brief low of $5,823/mt and a brief high of $6,067/mt, trading within a band between $5,850/mt and $6,050/mt during most of the month.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets

Copper tends to be a beacon for industrial metals trading, typically experiencing more pricing volatility due to macroeconomic conditions than other metals.

With the trade uncertainty around the U.S.-China relationship following the U.S. announcement of more tariffs, the copper price reacted and dropped in early August.

What This Means for Industrial Buyers

Trade conditions deteriorated somewhat in early August on the heels of the latest U.S. announcement of tariffs on an additional $300 billion in Chinese goods. As a beacon industrial metal, copper prices reacted by dropping.

Meanwhile, the U.S. implementation of 301 WTO tariffs of up to 100% on European copper product imports may result in serious ramifications for copper prices and related industrial organization needs.

In light of the shifting trade environment, industrial buyers will need to keep on their toes in August and as we move into the annual planning season for industrial metals buying.

It’s important for buying organizations to understand how to react to copper price movements. The MetalMiner Monthly Metal Buying Outlook report helps buyers understand the copper marketplace.

Actual Copper Prices and Trends

­­­Copper prices across the index weakened slightly this month.

The Indian copper cash price dropped 1.7% to $6.42 per kilogram.

Korean copper strip dropped 1.4% to $8.17 per kilogram.

U.S. prices in the index decreased in the range of 1.6%-1.7%, offsetting last month’s gains of a similar magnitude. U.S. producer copper grade 110 decreased to $3.43 per pound, grade 102 priced at $3.62 per pound and grade 122 at $3.43 per pound.

Chinese prices decreased in the range of 0.3%-1.7%. China’s copper wire price dropped by 1.3% to $6,802/mt. The primary cash price dropped 1.7% to $6,779/mt. Copper bar dropped by 1.7% to $6,767/mt.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Chinese scrap copper #2 decreased by 0.3% to $5,577/mt.

The Japanese primary cash price decreased by 0.4% to $6,138/mt.

The LME primary 3-month price decreased by 0.5%, falling to $5,950/mt.

The Raw Steels Monthly Metals Index (MMI) fell one point this month for an August reading of 74.

Small price increases for some metals did not outweigh a few steeper price drops, bringing the index down for the month.

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U.S. steel prices seemed to find a bottom recently (at least for HRC, CRC and HDG). Plate prices stopped dropping and moved sideways with the most recent price changes.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese HRC and CRC Prices Move Sideways

Source: MetalMiner data from MetalMiner IndX(™)

Chinese HRC and CRC prices continued to move sideways this month. However, CRC prices showed more strength, with another modest increase in early August, while HRC prices declined slightly as August started, reversing the recent mild uptick that occurred in July.

U.S. HRC and Chinese HRC Prices Start to Diverge Again

Source: MetalMiner data from MetalMiner IndX(™)

Since peaking in mid-2018, the spread between U.S. and Chinese HRC prices began to narrow. The spread hit its narrowest point in about 1.5 years last month when it dropped to a difference of around $37/st — the third-lowest value since January 2014.

The recent increase in U.S. prices increased the spread once more, but it remains low at just $70/st. This does not yet reflect the recent devaluation of China’s currency back to the range of CNY 7-to-1, which should further increase the steel price spread (unless Chinese prices start to rise to a greater extent than U.S. prices).

Source: MetalMiner data from MetalMiner IndX(™)

Chinese and U.S. CRC prices moved more similarly, overall, with both prices increasing again of late.

Similar to HRC, the spread between prices closed quite a bit, but a larger spread remains for CRC. The spread between the two CRC prices currently measures $158/st, up slightly from around $149/st last month — the lowest values seen since late 2017.

What This Means for Industrial Buyers

The global steel prices tracked by the index once again showed mixed performance this month.

The U.S. Midwest HRC futures spot price increased slightly, turning around after last month’s decline. The U.S. Midwest HRC futures 3-month price increased once again this month. China saw mixed price signals, with some prices up and others down.

With prices giving sustained mixed signals, industrial buying organizations seeking more pricing guidance should try a free two-month trial of our Monthly Metal Buying Outlook report.

Buying organizations will want to read more about longer-term steel price trends can do so with the Annual Outlook.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Raw Steel Prices and Trends

Prices in the index showed mixed performance this month.

Korean prices showed a clear drop. Korean standard scrap steel prices dropped by 8.3% to $122/st and pig iron prices fell by 2.6% to $332/st.

Chinese price movements remain mixed. Chinese steel slab prices increased the most (by 3.2% to $489/st). Chinese HRC prices increased by 1.3% to $479/st.

Chinese steel billet decreased by 2.7% to $470/st and coking coal prices dropped by 1.1% to $278/mt. Chinese iron ore prices edged down slightly, by less than 0.5%.

U.S. shredded scrap prices fell by 6.2% to $257/st, while U.S. Midwest futures 3-month price increased by 3.2% to $619/st.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

LME billet 3-month prices dropped 2.7% $268/mt.

The Aluminum Monthly Metals Index (MMI) dropped two points this month to 84. Most of the prices tracked for the index dropped this month, with European prices dropping the most (by close to 7.5%). 

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LME aluminum prices fared best of all of the aluminum prices this month, posting a mild increase of less than 1%. Aluminum prices continued to move sideways in July, generally trading above $1,800/mt.

However, the price ended July weaker, then dropped — along with most industrial metals —  following the U.S. announcement of $300 million in new tariffs on China (effective Sept. 1).

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets

SHFE aluminum prices moved sideways recently, but with some upward momentum evident and higher lows throughout the year.

Source: MetalMiner analysis of Fastmarkets

China produced 2.97 million tons of aluminum in June, down slightly from May’s production of 2.98 million tons. However, the June total was still up year on year by 1.3% up over May on a daily average basis, according to Reuters calculations. In May, production averaged 96,000 tons per day, and rose to 99,000 tons per day in June.

China’s higher daily production levels followed a jump in prices during May to around CNY 14,350/mt, which helped turned margins positive again for some smelters and fueled a production ramp-up.

China’s Zhongwang Holdings and its controlling shareholder, Liu Zhongtian, were recently charged with evading $1.8 billion in tariffs on aluminum imports. The company allegedly disguised the aluminum as pallets in order to evade the duties on U.S. imports from China.

Novelis Announces New High-Strength Automotive Aluminum Product

Novelis recently announced a new high-strength aluminum product for next-generation automotive body sheet design called AdvanzTM 6HS-s650.

According to the company, the advanced aluminum offers improved strength, lightweighting capabilities, formability, performance and structural integrity. The company estimates a 15-25% improvement over existing high-strength aluminum alloys. Compared with steel in similar applications, the end-weight outcome can be improved by 45%.

Novelis’ acquisition of Aleris faced new hurdles this month. European Union competition authorities required Novelis to offer concessions by Aug. 9. to gain approval for the $2.6 billion takeover.

U.S. Aluminum Premiums

The U.S. Midwest Premium dropped once again, but only slightly, to $0.17/lb. Softer demand in the U.S. still fails to offset supply tightness in the market, keeping premiums higher.

Source: MetalMiner Ind(X)SM

What This Means for Industrial Buyers

Demand weakness in most markets impacted the index this month. While macroeconomic uncertainty due to the latest trade situation recently impacted some prices, in the case of the weakening index, this came from a genuine downturn in demand.

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Actual Metal Prices and Trends

This month European prices decreased after increasing by around 2% last month. European commercial 1050 sheet and 5083 plate both dropped by 7.4% to $2,364/mt and $2,788/mt, respectively.

Korean prices also reversed and decreased this month after increasing in the 2% range in June. Korean commercial 1050 sheet, 5052 coil premium over 1050, and 3003 coil premium over 1050 all decreased in the range of 3-4% to $2.98, $3.15 and $3.02 per kilogram, respectively.

India’s primary cash price dropped by 2.9% to $2.03 per kilogram.

Chinese price movements were mixed and mild, holding essentially flat.

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The LME aluminum price gained the most, rising 0.8% to $1,807/mt.

The Stainless Steel Monthly Metals Index (MMI) bounced back this month, rising two points to 69 after last month’s two-point drop.

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Movements of individual prices within the index were mixed.

LME nickel prices increased the most among price points in the index, up by 6.8% month over month. After June’s trend toward higher prices, the price dropped around July 1, then surged again and is essentially moving sideways at this time.

Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets

In June, rainy weather brought widespread flooding to Indonesia’s nickel hub on Sulawesi island. Estimates indicate a production shortfall of between 50,000-100,000 tons of nickel ore as a result, according to Indonesia’s Nickel Miners Association in press reports.

According to the latest numbers published by the International Nickel Study Group (INSG), as reported by Reuters, the supply deficit for the refined nickel market came in at 27,000 tons for the first four months of the year, down from 59,000 tons during the same period in 2018. The most recent INSG projections indicate the supply gap will close during the second half of 2019.

Domestic Stainless Steel Market

Source: MetalMiner data from MetalMiner IndX(™)

Stainless 304 and 316 NAS surcharges fell again this month, now similar to surcharge rates at the start of the year. Surcharges are still above 2016 lows and are still moving within the sideways band that formed in December 2016. Should the supply gap close as projected, this may cause surcharges to fall even further.

What This Means for Industrial Buyers

Stainless price performance was mixed this month, as primary nickel prices rose while stainless surcharges dropped once again.

For buying guidance, including resistance and support pricing levels by metal, industrial buying organizations can try a free two-month trial of our Monthly Metal Buying Outlook report.

Buying organizations will want to read more about our longer-term steel price trends with our Annual Outlook.

Actual Stainless Steel Prices and Trends

The U.S. 316 and 304 Allegheny Ludlum stainless surcharges dropped again this month — by 6% and 9%, respectively, to $0.83/pound and $0.56/pound.

Meanwhile, nickel prices were up quite a bit. The LME primary 3-month price increased by 6.8% to $12,710/mt. China’s primary nickel price increased by 4.27% to $14,658/mt. India’s primary nickel price increased by 4.3% to $13/kilogram.

Chinese nonferrous FeCr lumps decreased by 3% to $1,595/mt and FeMo lumps dropped by 2.3% to $17,548/mt.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

The remaining prices in the index generally increased mildly, between 0.6% and 1.9% (with the exception of Chinese 316 stainless scrap, which declined by 0.4% to $1,908/mt).

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The Raw Steels Monthly Metals Index (MMI) fell slightly this month, following last month’s more significant decline. The index came in at 75 this month, down one point from the previous month.

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U.S. steel prices continued their clear drop this month, with prices dropping for HRC, CRC, HDG and plate.

Source: MetalMiner data from MetalMiner IndX(™)

HRC prices dropped by around 12% over the course of June, the steepest price decline in the Raw Steels basket of metals. HDG dropped by around 7%. CRC and plate prices dropped by 5% and 4%, respectively.

Recently, the American Iron and Steel Institute (AISI) reported that U.S. steel production capacity utilization reached 79.4% during the week ending on July 6, up from 77.4% one year ago. Capacity utilization decreased from the prior week by 0.2%.

Production totaled 1.85 million tons for the week, with year-to-date production at 50.46 million net tons based on a capacity utilization of 81.2%. So far this year, production numbers increased by 5.3% compared to the same period last year.

According to the most recently published U.S Census Bureau numbers, May steel imports dropped to a value of $1.9 billion, compared with $2.5 billion in April. In May, imports totaled 1.9 million metric tons compared to 3 million metric tons in April. Imports of blooms, billets and slabs dropped during May, while imports of reinforcing bars, sheets and strip, and heavy structural shapes increased.

Through the first four months of the year, imports totaled 10.4 million metric tons, down from 11.3 million metric tons during the same period of 2018. While imports of hot-rolled and cold-rolled sheets fell, imports of blooms, billets and slabs increased compared with the same period last year.

The U.S. Department of Commerce ruled July 8 in favor of duties on structural steel imports from China and Mexico based on the argument that the imports benefited from state subsidies. Meanwhile, the Department of Commerce made a negative determination with respect to imports of fabricated structural steel from Canada, finding Canadian exporters benefited from countervailable subsidies ranging from 0.12-0.45%.

Chinese HRC, CRC Prices Moving Sideways

Source: MetalMiner data from MetalMiner IndX(™)

Rather than continuing to drop, prices of HRC and CRC increased slightly this month; however, they did not fully recover from the previous month’s price drops. HDG and plate prices, meanwhile, continued to drop into early July.

The Chinese government’s stimulus measures, combined with additional capacity closures, appear to be supporting some prices at this time.

Reuters recently reported Hebei, China’s top steelmaking province, moved up its December 2019 capacity cut targets by two months to the end of this October, according to provincial authorities.

Coal and coke will also see planned reductions of 10 million tons and 3 million tons, respectively. as authorities continue to work on improving air quality. Last year, around 12 million tons of steel capacity, along with some coal and coke capacity, were eliminated in the region and some cities closed steel production.

Regardless, Chinese steel output in aggregate continues to rise in 2019, as demonstrated by the production volume statistics published by TradingEconomics.com. Figures indicate steel production hit a new monthly high in May of around 89.1 million tons, up from the then-monthly high in April of 85 million tons.

With iron ore prices still high and representing around 30% of the price of steel, this may also provide some support to Chinese steel prices.

What This Means for Industrial Buyers

The global steel prices tracked by the index showed mixed performance this month, with U.S. prices showing the greatest weakness.

The U.S. Midwest HRC futures spot price dropped significantly, while the U.S. Midwest HRC futures 3-month price increased, showing some bullishness despite currently falling prices.

With prices giving mixed signals, industrial buying organizations seeking more pricing guidance should request a free two-month trial of our Monthly Metal Buying Outlook report.

Buying organizations will also want to read more about longer-term steel price trends can do so with MetalMiner’s Annual Outlook.

Actual Raw Steel Prices and Trends

Once again, U.S. prices registered the largest price decrease this month.

The U.S. Midwest HRC futures spot price dropped by 7.6% on a month-over-month basis to $536/st, while the U.S. shredded scrap price dropped by 7.1% to $274/st.

In contrast, the U.S. Midwest HRC futures 3-month price increased by 2.4% to $600/st.

Korean standard scrap steel prices increased by 5% to $133/st. Korean pig iron prices increased by 1.9% to $341/st.

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China’s HRC price fell by 3.5% to $497/st and steel slab dropped by 1.5% to 490/st, while other Chinese prices in the index increased. Steel billet increased by 2% to $493/mt, while the remaining Chinese prices increased in the range of 0.5% to 1%.

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The Copper Monthly Metals Index (MMI) rebounded to 74 following last month’s fairly sizable drop from 78 to 73 (hitting a 2019 index  low).

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LME copper prices dropped by nearly $100/mt around the first of July after gaining strength in June, then traded sideways during the first week of the month.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets

Meanwhile, LME warehouse stocks increased.

Source: MetalMiner analysis of FastMarkets

However, copper mining disruptions continue to impact mine output. According to Reuters, Chile’s exports of copper declined by 14% in June compared with June of 2018, coming on the heels of extremely rainy weather early in 2019. Additionally, falling ore grades continue to hurt Chilean mining production.

The Congo army recently evicted illegal miners working at Kamoto Copper Company (KCC), a Glencore subsidiary in the Kolwezi area. According to the company, around 2,000 illegal, small-scale miners intruded illegally daily, on average. The move followed a landslide that killed 43 people at the KCC concession.

Zambia announced plans for a law that will compel miners to procure locally, according to the country’s mine minister, as reported by Reuters. Zambia continues to take a greater role in the mining sector. Zambia ranks second in Africa in copper export volume, with the metal dominating the country’s exports.

Chinese Copper Scrap vs. LME Copper

The price gap between Chinese copper scrap and LME copper narrowed last month considerably due to the steep LME price drop. This month, however, the slight LME price increase exceeded the slight increase in Chinese copper scrap prices.

Notably, China’s refined copper output in May dropped by 5.2% compared with May 2018. Output totaled 711,000 tons, marking a 3.9% decrease compared with the previous month.

The recent crackdown on scrap imports has likely caused the production decline. Further restrictions impacting high-grade copper scrap came down in early July as the Chinese government continues to ramp up its crackdown on scrap.

Given that scrap imports fueled about 10% of production last year, producers need to find alternative sources of raw material. According to China Minmetals Corporation in press reports, copper imports made by the company from a preferred Chilean trading partner look set to increase this year to a value of $900 million.

What This Means for Industrial Buyers

With copper prices showing some strength in June, industrial buying organizations will need to pay careful attention to macroeconomic growth, which could continue to support prices.

It’s important for buying organizations to understand how to react to copper price movements. The MetalMiner Monthly Metal Buying Outlook helps buyers understand the copper marketplace.

Actual Copper Prices and Trends

Copper prices strengthened this month across the index with the exception of Korean copper strip, which dropped 0.4% to $8.29 per kilogram.

The Indian copper cash price increased by 10.9%, the largest increase in the index this month, to $6.53 per kilogram.

Chinese prices turned around this month, as all of the Chinese prices in the index increased. China’s primary cash price and copper wire price increased by 2.7% to $6,898/mt and $6,892/mt, respectively. Copper bar increased 2.8% to $6,885/mt.

Chinese scrap copper #2 increased by 0.6% to $5,592/mt.

U.S. prices in the index all increased by 1.7%. U.S. copper producer copper grade 110 increased to $3.49 per pound, grade 102 priced at $3.68 per pound and grade 122 at $3.49 per pound.

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The Japanese primary cash price increased by 2.1% to $6,163/mt. The LME primary 3-month increased by 2.8%, up to $5,982/mt.

The Aluminum Monthly Metals Index (MMI) held steady at 86 this month based on mixed price movements. While prices in China dropped in the 1% to 2% range, all other prices in the Aluminum MMI basket rose slightly.

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LME aluminum prices continued to fall into June, but recovered toward the end of the month. LME prices are currently moving sideways at around $1,800/mt, with the present price slightly higher at $1,807/mt.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets

Due to lower LME prices, a recent forecast for Indian production projects a slowdown in output growth. Domestic production costs increased by around 25% during the past three to five years, putting break-even costs above the current LME price, which was at $1,777/mt in late June.

According to Reuters, Japanese aluminum premiums increased 3% to $108/ton for Q3 due to tighter aluminum supplies in Asia. Japanese producers initially sought increases to the $115-$120 per ton range. Weakness in the semiconductors market and trade worries capped gains.

Chinese Aluminum Prices

SHFE aluminum prices weakened during the past month, reversing the upward trend evident since around February 2019. Demand appears seasonally weaker at this time; therefore, market observers will want to watch prices carefully during the next month or two to see if the downtrend continues.

Source: MetalMiner analysis of Fastmarkets

In a normal cycle, prices might rise again as China moves away from seasonally hot and rainy weather.

According to a recent Reuters report, China’s aluminum production increased by 2.4% in May compared with May 2018 because of smelter restarts in response to higher prices, which could also contribute to the recent weakness.

Price weakness appears to be temporary. If prices do not increase, this will indicate a weaker-than-expected Chinese economy and/or that output continues to increase, with increased supply capping price gains.

Increased Aluminum Use on the Horizon Across Sectors

Aluminum prices may also receive future support from innovations beyond just the automotive sector, based on the metal’s flexibility and lightweight profile.

The Indian government announced that railway coach cars will transition to aluminum, while older conventional stock will begin a phaseout.

Coca-Cola announced its AQUAFINA® water brand will see an aluminum can package in U.S. food service outlets. The announcement comes as part of the company’s greater move to reduce the use of plastic packaging.

U.S. Aluminum Premiums

The U.S. Midwest Premium finally dropped, but only slightly, to $0.18/lb. With aluminum prices rising in most countries, supply tightness may continue to support the premium. The U.S. Midwest Premium still remains stubbornly high since the the U.S. removed its aluminum tariffs on Canadian and Mexican aluminum in May.

What This Means for Industrial Buyers

Price signals were mixed this month, with weaker Chinese prices contrasting with higher prices in the rest of the world. Global production increased, but not enough to offset overall tightness in terms of supply.

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Actual Metal Prices and Trends

Chinese prices dropped again this month, in the range of 1-2%. The Chinese primary cash price dropped 1.6% to $2,013/mt, while Chinese aluminum scrap fell 1.7% to $1,835/mt. Billet and bar prices dropped by 1.6% and 1.5%, respectively, to $2,080/mt and $2,177/mt.

This month, European prices increased. European commercial 1050 sheet increased by 2.3% to $2,553/mt, while the 5083 plate price increased by 2% to $3,011/mt.

Korean commercial 1050 sheet, 5052 coil premium over 1050, and 1050 all increased by around 2% to $3.1, $3.14 and $3.27 per kilogram, respectively.

India’s primary cash price increased 1% to $2.09 per kilogram.

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The LME primary 3-month aluminum price held essentially flat, increasing 0.28% increase to $1,794/mt.

Several years ago, analysts and mainstream publications once speculated the yuan would eventually replace the U.S. dollar as the world’s reserve currency.

But with most commodities still priced in U.S. dollars, especially oil, the U.S. dollar has remained the world’s reserve currency.

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The U.S. dollar is also a key currency in the precious metals market.

Source: MetalMiner data from MetalMiner IndX(™), Macrotrends.net and Yahoo.com

U.S. and Chinese gold bullion prices, as seen in the chart above, move closely together. Meanwhile, they both tend to move inversely against the dollar.

In other words, as the dollar gains strength, gold prices grow weaker in both countries.

The yuan fluctuates more widely against the dollar, with little apparent impact on gold prices.

Source: MetalMiner data from MetalMiner IndX(™) and Investing.com

Here is a more typical look at the relationship between U.S. values, with gold priced per ounce, which clearly shows the inverse price relationship.

MetalMiner recently caught up with Americas Silver Corporation President and CEO Darren Blasutti regarding underlying gold and silver price trends.

Blasutti explained the transition away from oil supports gold’s bullishness. Once that happens, the rationale for holding U.S. dollars weakens greatly, while currency diversification, including precious metal purchases, will continue to make sense.

Whereas industrial metals have shown more price volatility during certain periods, gold prices have stayed relatively more stable, according to Blasutti, therefore making it more attractive for mining companies.

Source: MetalMiner data from MetalMiner IndX(™)

Gold prices have enjoyed some price support during the past year or so, but still remain lower than in the recent past. Still, prices are trading in a fairly stable sideways band and have done so, more or less, since 2013.

Historical Roots in Silver

Prior to moving into gold mining, as most other major silver companies have done to date, Americas Silver Corporation mined a mixed market basket including silver, zinc and lead.

With prices for silver quite low in the recent past, it’s difficult to justify mining the metal from a cost perspective. As a result of falling silver prices following the acquisition of two key silver projects, Americas Silver Corp. transitioned from predominantly silver mining toward lead and zinc.

Over time, the mining strategy shifted toward higher grades of lead and zinc and lower silver quality. It made more sense to take advantage of higher zinc and lead prices, while silver prices suffered a lengthy slump.

Into the foreseeable future, while silver prices remain lower, the company continues to focus on mining its lower grade silver, leaving the higher grades in the ground because the company remains bullish on long-term silver prices.

“When silver does come back, we can increase ounces quite dramatically on the silver side,” Blasutti said.

The company’s acquisition and startup of the Relief Canyon Mine, located in Pershing County, Nevada, for gold mining will transition the company from a base metals mining company back into a precious metals mining company.

“Part of the impetus to get back to precious metals was to get a commodity that we thought had less volatility,” Blasutti said. “Gold has shown to have less volatility in the last period, much more than the base metals. Base metals traded in a range and gold has traded in a range, but the range hasn’t been severe [for gold].”

Source: MetalMiner data from MetalMiner IndX(™)

So far, even with the trade war at hand, silver prices remain low.

Source: MetalMiner data from MetalMiner IndX(™)

As shown in the chart above, the gold-to-silver price ratio continues to increase toward gold.

But as pointed out by Blasutti, those remaining silver companies stand to win big once prices for the metal turn around. He pointed out the last time prices stood at around this ratio (90.3:1), silver came back.

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What This Means for Industrial Metal Buyers

Given projections for the reduction of oil use in the long-term as stricter emissions standards come into effect, demand for the dollar could decline into the future.

As demand for the dollar weakens, we can expect gold prices to rise. Once gold reaches higher prices, silver may finally follow suit, with the gold-to-silver ratio finally dropping back from current highs that strongly favor gold mine production.

(Editor’s note: This is the second of a two-part series. Read Part 1 here.)

The International Monetary Fund (IMF) recently lowered its 2019 growth forecast for China from 6.3% to 6.2%.

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China’s current economic slowdown shows in the FXI, a large-cap market index. After showing unexpected strength early in the year and rising through the first part of April, performance turned around and the index began to fall once more.

After falling back to nearly start-of-year values, gains managed to hold at around 40 points. This seems to coincide roughly with press reports that stimulus measures from early in the year had begun to wane.

Crude Steel Production Remains High as Prices Weaken

According to the monthly Caixin report numbers, steel production totaled 85 million metric tons, apparently the highest monthly production total on record and about 5 million metric tons higher than the previous month.

Demand from the construction sector remains robust, but Wu Jingjing, a deputy director for the China Iron and Steel Association (CISA), warned demand growth from the sector will wane during the second half of the year. CISA maintains its 2019 forecast for 1-2% demand growth. However, demand from the automobile, household appliances and energy sectors looks weaker.

CISA reported a 1% steel price drop in May and an iron ore price increase of 7%. Higher iron ore prices hurt operational profitability, with CISA’s members reporting a 19.38% year-on-year decrease in profits for the January to April period (despite an 11% increase in sales revenue).

Consolidation of the Steel Industry is Underway

According to Reuters, the Chinese government is seeking to consolidate its steel industry to some extent by 2020 in order to boost the industry’s efficiency.

If government plans to constrain production through consolidation succeed, this would support higher prices for the industry. U.S. prices would also benefit, given that China’s prices tend to lead U.S. prices by about one month.

China Baowu Steel Group, the second-largest steel producer worldwide in 2018, announced its intent to acquire a majority stake in Magang Group Holding Co Ltd, of which Maanshan Iron & Steel Co Ltd, the 16th-largest producer, is a listed entity.

Baowu Steel Group produced 67.43 million metric tons in 2018, according to the World Steel Association, while Maanshan produced 19.71 million tons in 2018.

Raw Material Inputs Continue to Face Supply Issues

Iron ore prices remain high as supplies remain tight. According to customs data, imports recovered to some extent during May, rising by 37% to 83.75 million tons. Overall, shipments dropped by 11% compared with May 2018. Imports for the first five months of the year dropped by 5.2% compared with the same period in 2018.

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According to the Xinhua News Agency, as reported by Reuters, all coke plants that do not meet special emissions standards slated to go into effect on Oct. 1 in Shanxi — China’s top coke-producing region — will be closed.

Additionally, the government is seeking to reduce capacity for 2019 by 10 million tons. The region failed to comply with similar capacity reduction goals in the recent past.