Author Archives: Belinda Fuller

The Stainless Steel Monthly Metals Index (MMI) gained one point for a January reading of 75.

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Just a few months back, in September 2019, the index hit a five-year high of 91.

LME nickel prices increased again in the second half of December after finding support just above the $13,000/mt price level:

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The Copper Monthly Metals Index (MMI) increased by three points this month to 76, the highest value seen since hitting 78 in May. Individual price increases in the Copper MMI basket fell in the range of roughly 1-6%.

LME copper prices managed to regain the $6,200 level but proceeded to move sideways from there due to a lack of further indications regarding a pickup in demand.

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

From a longer-term perspective, copper prices do not appear particularly strong, but they have not dropped all the way back to 2016 price levels — indicating some level of supply dynamics is still at work and supporting prices.

Source: MetalMiner analysis of FastMarkets

Overall, recent weekly trading volumes looked positive overall but muted from a volume perspective, indicating limited support at this time for the recent uptrend (reflected in the sideways turn in the second half of December).

SHFE copper prices finally break six-month sideways trading band

Like LME prices, SHFE copper prices broke out of a short-term sideways trading band that formed in June and are now trading higher.

Source: MetalMiner analysis of FastMarkets

Breaking the next critical resistance level of CNY 50,000/mt will provide a clearer signal that higher prices will hold throughout Q1 2020.

Source: MetalMiner analysis of FastMarkets

Positive reports regarding a pickup in manufacturing demand late in the year supported prices.

Additionally, recent government measures — particularly monetary easing — appeared to support construction demand, a positive development for copper prices.

Demand for copper, a critical industrial, automotive, and construction metal, will remain high.

Current prices remain supported from a long-term perspective, even in the weaker demand environment seen since last year.

Source: U.S. FRED

Chinese construction demand corresponded with noticeable price increases beginning in 2004. That was followed by a drastic decline in prices and trading volumes in 2008-2009, corresponding to the timing of the global recession, which stalled out property growth in China.

While copper presently trades with lower volumes than during the peak years of China’s construction activity, overall copper trading volumes remain higher than during past decades. Baseline demand should continue to support the somewhat higher copper price level. Falling mining output also matters but may exert less immediate impact on prices.

Looking at the long-term chart of price values provides some sense of the metal’s price downside,  upside risk and potential volatility.

Assuming that supply moves toward surplus, as projected for the year by the International Copper Study Group (ICSG) according to its October annual forecast for 2020, it may be difficult for copper prices to increase this year unless demand improves, despite the long-term downtrend in mine supply.

What this means for industrial buyers

Copper prices increased but then stalled out and have not yet regained momentum.

With prices already somewhat higher, industrial buying organizations will need to watch the prices carefully from here for further increases.

Need a platform to view all of your metals and forecasts together in one place? Request a demo of the MetalMiner Insights platform.

Buying organizations seeking more monthly insight into copper price trends can learn more about our MetalMiner Monthly Buying Outlook.

Free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook

Actual copper prices and trends

Copper prices increased across the board this month, with the LME primary three-month price showing the largest gain at 5.8%, to $6,215/mt. Japan’s primary cash price increased by 5.4% to $6,421/mt.

China’s primary cash and copper wire prices both increased by 4.6%, up to $7,045/mt and $7,040/mt, respectively. China’s copper bar price increased by 4.5% to $7,034/mt. China’s copper #2 scrap price increased by 1.0% — the weakest increase in the index this month — to $5,514/mt.

U.S. producer copper grade 110 and grade 122 increased by 4.3%, both now at $3.62 per pound. U.S. producer copper grade 102 increased by 4.1% to $3.84 per pound.

Korean copper strip increased by 2.8% to $8.14 per kilogram.

The Indian copper cash price increased by 2.3% to $6.20 per kilogram.

The Aluminum Monthly Metals Index (MMI) bounced off last month’s three-year low with a three-point increase to 86. All prices in the index increased by more than 3%.

LME aluminum prices increased in December and surpassed $1,830/mt in early January.

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

Now analysts are watching to see if lackluster demand will allow recent increases to stick.

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The Raw Steels Monthly Metals Index (MMI) showed some strength this month with a three-point increase, rising to 69 from 66 last month.

U.S. steel prices rebounded in November when recent mill prices increases took effect.

Source: MetalMiner data from MetalMiner IndX(™)

Once again, plate price increases have lagged behind the other forms, (similar to July, when plate prices failed to gain):

Source: MetalMiner data from MetalMiner IndX(™)

However, plate prices now look in line with historical norms, in terms of relative values across key types. Plate prices may now begin to move with other prices, rather than on a unique trajectory.

U.S. capacity utilization slipped below 80% during late November. The rate stayed lower during the week ending Dec. 7, when capacity utilization totaled 78.7% based on production of 1.82 million tons. During the same period last year, production totaled 1.86 million tons based on a capacity utilization of 79.4%.

Year-to-date capacity utilization through Dec. 7 totaled 80.1%, with 90.74 million tons produced. This represents a 1.9% increase compared to last year’s production of 79.06 million tons during the same period (based on a capacity utilization of 78.2%).

Chinese HRC, CRC steel prices show slight gains

Chinese HRC and CRC prices increased during November — by roughly 6% and 4.5%, respectively — bringing prices back to September levels.

Source: MetalMiner data from MetalMiner IndX(™)

HDG and plate prices held flat, however, keeping prices among the four key forms sideways overall.

Nippon Steel to potentially shutter two blast furnaces; Japanese fiscal stimulus package likely to boost demand

In order to better align fixed production costs with domestic demand, Nippon Steel may close two of 15 blast furnaces in operation across the country by March 2024.

Demand for steel slowed for the Japanese producer due to decreasing domestic population, higher export barriers, and trade issues, according to management team discussions with the press.

Typically, the company exports more than 40% of output. Recently, however, export levels suffered due to the desire of other Asian countries to boost domestic steel production, in addition to increased Chinese exports.

The Japanese government recently announced a $122 billion fiscal stimulus package that will likely boost demand levels due to infrastructure development targeting natural disaster mitigation.

Major merger on the horizon for Cleveland-Cliffs, AK Steel

Cleveland-Cliffs Inc. recently announced its intent to purchase AK Steel Holding Corp. for $1.1 billion.

As detailed in a recent MetalMiner article, the deal provides Cleveland-Cliffs with built-in demand for pellet production, while also entering Cleveland-Cliffs into steel production.

Cleveland-Cliffs now derives around 23% of annual income from AK Steel, the company’s largest customer with the exception of ArcelorMittal SA.

The agreement still faces antitrust vetting. Completion of the deal is expected during H1 2020.

U.S. economic indicators remain positive overall

While growth remains somewhat constrained as 2019 comes to a close, the U.S. economy continues to maintain momentum overall.

According to the most recent Beige Book report released by the Board of Governors of the Federal Reserve System, based on data collected through Nov. 18, economic activity in aggregate expanded modestly from October through mid-November, at a similar pace as the previous reporting period.

Most districts reported increases in auto sales. Also, an increasing number showed improved manufacturing activity, but the majority still reported flat activity.

Residential home sales were flat to higher across districts, while residential construction improvements expanded to more areas.

Nonresidential construction continued to increase modestly, while the energy sector showed modest deterioration in activity.

The Federal Reserve Bank of Atlanta’s GDPNow model estimate of GDP growth jumped by 0.5% to 2.0% on Dec. 6 based on recent data inputs.

GDPNow provides a running forecast of the official estimate in advance to its release and is based only on mathematical results of the model.

What this means for industrial buyers

Improved demand appeared to push up prices this month.

So far, however, price increases look fairly mild, with some recent momentum attributed to pushed-forward Q1 2020 demand.

It’s still too soon to tell if price increases will continue from here.

Buying organizations interested in tracking industrial metals prices with ease will want to request a demo of the all-new MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term steel price trends may want to read MetalMiner’s Annual Metal Buying Outlook.

Free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook

Actual raw steel prices and trends

LME billet three-month prices increased the most among index values this month, rising by 9.3% month over month to $262/st as of Dec. 1.

The U.S. Midwest HRC futures spot price dropped 0.4% to $493/st, while the Midwest HRC futures three-month price increased by 7.5% to $590/st.

U.S. shredded scrap prices increased 4.4% to $235/st.

All Chinese prices in the index increased. Coking coal increased the most, by 6.4% to $264/mt, while HRC increased by 6.3% by $530/mt. Steel billet increased by 2.9% to $510/mt, while slab rose by 2% to $519/mt.

Iron ore prices remained essentially flat, with a mild 0.1% increase to around $64 per dry metric ton.

Korean scrap prices registered a third double-digit monthly decrease, down by 11.5% to $72/mt. Korean pig iron prices also dropped this month, falling 1% to $364/mt.

The Stainless Steel Monthly Metals Index (MMI) dropped again this month, by thirteen points to 74, the third and largest consecutive monthly drop, with nickel prices correcting significantly.

LME nickel prices finally corrected, now back to levels last seen in late July. While prices held on to higher levels for a few months based on supply concerns, sluggish demand ultimately trumped supply concerns during Q4.

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

Prices have now dropped below the average year-to-date value of $13,960/mt.

Later in the month, price declines stalled out around the $14,500/mt level before continuing to plunge toward long-term support levels.

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

Based on nickel’s uptrend since 2016, prices may soon begin to find support once more, rather than continuing to fall.

SHFE nickel prices drop back significantly

SHFE nickel prices also showed significant corrections this month, dropping by nearly 20% during November. Values now look back in line with prices from earlier in 2019.

Source: MetalMiner analysis of FastMarkets

Based on a longer-term look at the price trend, like LME nickel prices, SHFE nickel prices look close to finding support once more. Therefore, from a technical perspective, we can anticipate the price to strengthen once more as we move into 2020.

If prices cannot hold at long-term support, this will be due to poor demand, which could indicate sustained bear market conditions during Q1 2020.

China’s property sector may be the key to where prices head in Q1 2020

Long-term expansionary monetary policy fueled real estate growth in China, as explained in this recent article by MetalMiner’s Stuart Burns.

Beginning in 2017, the Chinese government began putting measures in place to reduce speculative investments in real estate, toward preventing future bubble markets.

In spite of these efforts — and due to extended negative real interest rates continuing to drive strong demand for real estate investments — real estate market prices continue to appear inflated.

As such, China looks susceptible to a real estate market downturn that could send nickel prices below long-term support levels.

Based on the most recent data available from the International Stainless Steel Forum, during 2019, only China saw sustained stainless steel demand growth, while demand contracted in the rest of the world. However, growth in stainless output outpaced demand growth in that country, according to recent press reports.

Excess stainless steel stocks built up as a result, reflected in weaker stainless prices recently, as represented by falling SHFE stainless steel futures prices.

Vale to divest New Caledonian nickel mine assets

Vale announced plans to divest its New Caledonian operations due to technical difficulties, according to press reports. However, the company plans to boost mining operations in Indonesia.

The company plans to boost Indonesian mine production by 70% into the foreseeable future with joint venture partners. Expansion will target ramped up output of 360,000 tons per year, with no deadline to hit the target given.

Domestic Stainless Steel Market

Source: MetalMiner data from MetalMiner IndX(™)

Stainless 304 and 316 NAS surcharges dropped this month, following from recent corrections to nickel prices. Surcharges for 304 dropped to $0.68/pound, similar to the September rate of $0.66/pound. NAS 316 surcharges dropped back to $0.94/pound for December, comparable to September’s rate of $0.97/pound.

Both surcharges will likely see further corrections back to August levels at a minimum, which were at $0.57/pound and $0.86/pound, respectively.

What This Means for Industrial Buyers

Nickel prices retraced significantly once again, with the retracement progressing at full steam during November. While prices look close to stabilizing, further price weakness cannot be ruled out as 2020 arrives.

Buying organizations interested in tracking industrial metals prices with greater ease will want to request a demo of the all-new MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term industrial metals price trends may want to read MetalMiner’s Annual Metal Buying Outlook.

Download your free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook now.

Actual Stainless Steel Prices and Trends

The LME primary 3-month nickel price finally showed a significant correction following the speculative price increase a few months back, losing 17% this month, based on a value of $13,915/mt, compared to $16,800/mt in October.

Primary nickel prices in China and India showed similar price corrections – of 18% and 17% respectively. China’s nickel price dropped to $15,890/mt compared to $19,356/mt last month, while India’s price dropped to $14.0/kilogram compared to $16.9/kilogram last month.

Other Chinese prices in the index generally dropped. FeMo lumps dropped by 6.1% this month to $15,215/mt, and FeCr lumps dropped 10.3% to $1,479/mt. Stainless steel scrap prices held flat.

The U.S. 316 and 304 Allegheny Ludlum stainless surcharges fell by 11.1% and 7.1% respectively, to $0.97/pound and $0.72/pound.

Indexed Korean prices dropped 1% with stainless steel coil 430 CR 2B and 304 CR 2B at $1,523/mt and $2,454/mt, respectively.

The Copper Monthly Metals Index (MMI) held at last month’s value of 73 based on November price data. 

LME copper prices took a sideways turn during November as uncertainty over the strength of the global economy continued to constrain copper prices.

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

The price continued to trade below $6,000/mt throughout November, averaging a value of $5,877/mt for the month.

SHFE copper prices continued firmly sideways

SHFE copper prices continued to move sideways once again in November, with the trading range continuing to move tightly around the CNY 47,000/mt price level.

Source: MetalMiner analysis of FastMarkets. 

Like LME prices, SHFE prices continued to look slightly stronger by remaining higher than values seen a couple of months ago.

China’s increased smelting capacity pushes 2020 TC/RCs lower

China copper smelting capacity will increase by an estimated 900,000 tons this year,  according to press reports, plus another 350,000 tons during 2020.

As a result, competition for concentrate drove down treatment charges this year. Therefore, official TC/RCs recently set for 2020 contract negotiations remain lower at $62 per ton for smelting and $0.062 cents/pound for refining.

Demand for copper in China could start to pick up in 2020

China’s manufacturing sector could be rebounding, based on positive PMI readings for November, with both the official and private Caixin/Markit readings coming in higher than expected.

The Caixin/Markit manufacturing index edged up to 51.8, from 51.7 last month.

The official PMI manufacturing reading of 50.2 also crossed 50 this month.

This brings both indexes back into expansionary territory.

Rio Tinto extends Kennecott project through 2032 with $1.5 billion investment

Rio Tinto approved a plan to invest $1.5 billion in its Kennecott copper site in the U.S. The investment will allow mining in a new area of the ore body, which will extend Kennecott operations through 2032. As a result, the company expects to mine close to one million tons of copper from 2026 through 2032.

Kennecott operations presently supply close to 20% of annual U.S. copper production, according to the company.

What this means for industrial buyers

Copper prices moved predominantly sideways of late — with prices generally holding value rather than dropping back, even with slowed Q4 demand growth. Industrial buying organizations need to stay alert for further signs of price increases, in case a pickup in manufacturing impacts prices into the new year.

Want an easier solution to tracking industrial metals prices and trade news? Request a demo of the MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term copper price trends may want to read MetalMiner’s Annual Metal Buying Outlook.

Free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook

Actual copper prices and trends

Copper prices showed mixed movements this month, but the majority of prices in the index increased mildly.

U.S. producer copper grade 110 and grade 122 increased by 1.5%, the largest increase this month, both now at $3.47 per pound. U.S. producer copper grade 102 increased 1.4% to $3.69 per pound.

China’s copper bar prices increased by 1.0% to $6,729/mt. China’s primary cash and copper wire prices both increased, by 0.8% and 0.9% respectively, to $6,736/mt and $6,732/mt, respectively. China’s copper #2 price held nearly flat at $5460/mt.

Japan’s primary cash price fell by 1.0% – following last month’s 4.0% jump – now at $6,090/mt.

The LME primary 3-month price stayed relatively flat with a 0.5% increase, now at $5,877/mt.

Korean copper strip fell by 1.9% to $7.92 per kilogram.

Indian copper cash prices fell by 1.8% to $6.06 per kilogram.

The Aluminum Monthly Metals Index (MMI) held relatively flat this month, with a one-point increase to 83, as the majority of prices in the index showed mild increases.

LME aluminum prices generally moved sideways during November and were unable to generate strong upward price momentum due to slower recent economic growth rates and uncertainty over demand in early 2020.

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

While prices have not gained as much value recently — even compared to early November highs — prices have not dropped as low either.

During the past month, prices dropped back below the $1,800/mt level after trading above that level during the first week or so of November, but still found support firmly above the $1,700/mt level.

Overall macroeconomic conditions continued to restrain price increases.

SHFE aluminum prices continue sideways

SHFE aluminum prices continued to move firmly sideways during the past month.

Source: MetalMiner analysis of Fastmarkets

Since March, prices traded in a firm band between CNY 13,500/mt and CNY 14,500/mt.

The sideways trend looks set to continue. However, prices recently hit some progressive lows, (although the drops look mild):

Source: MetalMiner analysis of Fastmarkets

Aluminum production in China will most likely continue to grow much faster than demand, according to a webinar by analysts at Shanghai Metals Market (SMM).

In 2020, China’s output of primary aluminum looks set to increase by 2.5% to 36.44 million metric tons (after contracting by 1.51% this year).

This year, capacity totaled around 40.69 million tons, with actual production of around 35.1 million tons on an annualized basis.

Aluminum consumption in China will increase by 0.3% next year to 36.19 million metric tons, after declining by 1.48% this year.

Increased use of aluminum in autos will not be enough to absorb China’s rising production

According to a report prepared for the International Aluminum Institute on long-term automotive use in China earlier this year, aluminum demand for use specifically within the sector in China will increase from an estimated 3.8 million tons in 2018 to 10.7 million tons by 2030, based on a compound annual growth rate of 8.9%.

Let’s put that in perspective.

This past October, Chinese production totaled just around 3.0 million tons.

High production levels likely to constrain price increases into early 2020

Surplus production could continue to weigh on prices next year, resulting in a price drop below $1,700/mt, particularly early in the year.

Once prices drop further, the rate of smelter closures will likely increase, thus relieving downward price pressure.

However, at this time prices continue to trade near break-even levels, likely delaying announcements of production closures into Q1 2020.

What this means for industrial buyers

Aluminum price momentum remained stalled overall this month, with most index prices holding sideways or making only mild gains.

A return of price momentum cannot be ruled out for Q1 2020, especially if both the automotive and manufacturing sectors see a strong global recovery.

Buying organizations interested in tracking industrial metals prices with ease, including embedded forecasting, will want to request a demo of the MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term aluminum price trends may want to read MetalMiner’s Annual Metal Buying Outlook.

Free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook

Actual metal prices and trends

This month, China aluminum scrap prices increased once again, rising by 2.4% to $1,849/mt. Chinese aluminum primary cash prices also increased again, by 1% to $1,994/mt. Chinese aluminum billet and bar prices saw increases of around 0.4%, to $2,049/mt and $2,144/mt, respectively.

Korean prices dropped back this month by around 3%. Korean commercial 1050 sheet came in at $2.95/kilogram. The 5052 coil premium over 1050 was $3.12/kilogram and the 3003 coil premium over 1050 was $2.92/kilogram.

The LME primary three-month price increased by 0.8% to $1,761/mt.

European commercial 1050 sheet and 5083 plate both increased mildly again this month, by 0.3% and 0.9%, respectively, to $2,482/mt and $2,862/mt.

India’s primary cash price increased by 0.5% to $1.87 per kilogram. 

misunseo/Adobe Stock

Gold prices surged this year due to greater uncertainty in the global macroeconomic environment.

By August, the price briefly regained the $1,500/ounce price point and stood at $1,460/ounce in late November.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Over the longer term, gold prices and the dollar tend to move in an inverse relationship, as demonstrated by this chart, which shows prices from July 2012 through early November 2019:

Source: MetalMiner data from MetalMiner IndX(™)

However, the relationship does not always hold true.

More recently, we’ve once again seen a break in the relationship, which started late last year (the vertical blue dotted line above) and picked up steam around June.

Source: MetalMiner data from MetalMiner IndX(™)

Both gold and the dollar trended up in value overall, especially from July until September. However, gold prices gained greater momentum and increased by a greater measure than the dollar. Then, both values fell in September and October.

The relationship appeared to switch back to an inverse pattern in November.

Gold prices and the dollar-yuan exchange rate

Source: MetalMiner data from MetalMiner IndX(™)

Because the value of the yuan is set by the central government, the graph above using the CNY/$ exchange rate serves as a proxy to examine the relationship between the currency and gold prices.

Keeping in mind that a higher value on the right axis means a weaker yuan, we should expect to see these two prices moving together.

As the yuan weakens against the dollar, gold prices weaken. As the yuan rises in value, gold prices rise in value.

In real life, the relationship gets impacted by multiple variables. The yuan and the dollar do not have to move in an inverse pattern; the yuan is not a commodity but a currency (the same is true for gold).

However, in recent months, the gold price appeared to more tightly follow the CNY/$ exchange rate in a predictive fashion, rather than holding to its longer-term inverse dollar relationship.

This type of pattern emerged during 2016, as well.

Will quantitative easing by the Fed send gold prices up in Q4?

Monetary policy is known to impact commodity prices.

Quantitative easing is a form of monetary policy; therefore, we can expect any such actions in this direction to impact gold prices.

Quantitative easing can be used when interest rates are already quite low. In effect, it increases liquidity in the system, thus spurring growth.

U.S. Federal Reserve balance sheet since 2008

Source: Board of Governors of the Federal Reserve System

Quantitative easing occurs when the government purchases certain financial assets, which in turn raises the value of the assets but lowers their yield.

Basically, easing targets asset classes that are performing poorly, thus correcting losses for financial institutions. This, in turn, allows financial institutions to lower borrowing rates, creating more liquidity in the system.

The ease of access to funds by businesses and individuals then stimulates economic growth.

Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!

What this means for industrial buying organizations

With the overall macroeconomic environment characterized as unstable, gold prices may generally continue to trend higher in the short term, as gold gets used as a hedge.

However, over a longer period, current monetary policies could weaken prices once more — assuming they take effect as intended.

gui yong nian/Adobe Stock

The Raw Steels Monthly Metals Index (MMI) showed mixed price movements in October, with declines outweighing increases for a one-point index drop to 66.

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U.S. steel prices continued to weaken during October, possibly reaching a new bottom.

Prices appeared to bottom out back in July (with the exception of plate), especially with price gains seen during August and early September.

Then, weakness set in again throughout September.

Source: MetalMiner data from MetalMiner IndX(™)

Plate prices dropped by another 14% since late August’s high price of $799/st down to $684/st, with prices near those for CRC. While plate prices are closer in line with historical pricing norms, plate prices tend to fall below CRC prices, despite being equal at this time.

HRC prices also looked particularly weak recently, dropping 18% to $483/st from the late August  price of $590/st.

While CRC and HDG also dropped below July values to reach new 2019 lows, recent declines were milder (but still significant). CRC and HDG prices dropped 10% and 11%, respectively, over the past couple of months, since reaching higher prices in early September/late August.

U.S. capacity utilization continues to hold above the critical 80% mark, at 80.3%, based on year-to-date production through Nov. 2. Production of 81.6 million tons during that period is up 2.5% year over year, according to statistics from the American Iron and Steel Institute (AISI).

Chinese Prices Fail to Gain Momentum

Chinese steel prices looked flat overall but were down slightly of late.

Source: MetalMiner data from MetalMiner IndX(™)

While prices failed to gain any upward momentum, price declines during the past month or two were mild.

Comparing average August prices to early November prices, cumulative declines ranged between 3.3%-5.4% over the period, with HDG and HRC dropping most (at 5.4% and 5.3%, respectively). CRC dropped 4.6% and plate by 3.3%.

U.S.-China CRC Spread Narrows Again, Nears Long-Term Low

With U.S. prices dropping more steeply than Chinese prices during the past few months, the spread between prices on key commodity forms narrowed once more.

Source: MetalMiner data from MetalMiner IndX(™)

Looking at the above chart showing the spread, valued in U.S. dollars per standard ton, we can see the spread dropped to an absolute value of $29/st — its lowest since December 2017’s value of $22/st.

The red line represents average costs associated with imports, indicating at this time U.S. prices should discourage imports by virtue of being relatively affordable.

The purple line represents the theoretical impact of tariff costs (to be adjusted based on actual tariff rates), which render an additional price buffer for domestic producers (in terms of increasing the price that can be charged before imports look more attractive).

Source: MetalMiner data from MetalMiner IndX(™)

In contrast to HRC, the CRC spread continues to exceed levels expected to discourage imports (pre-tariffs), with the spread remaining above $90/st — our theoretical average per standard ton cost associated with importing.

However, prices dropped below the purple line, indicating the tariff creates an import buffer for CRC at a tariff rate of 25% (based on current price differentials).

U.S. Commodity Steel Imports Decline

According to U.S. Census Bureau data, imports of hot roll sheets totaled 151,330 metric tons in September, compared to 157,636 tons in August. September imports of HRC decreased by 15.5%, from 179,105 metric tons in September 2018.

Imports of cold roll sheets totaled 124,286 metric tons in September, compared to 126,704 in August. Compared to September 2018, imports of CRC dropped by around 19.2%, down from 153,728 metric tons the year prior.

On a monthly basis, increased imports came primarily from Mexico, Canada and Turkey. Imports from Korea, Japan and Spain decreased last month.

In terms of year-to-date figures through August, steel imports totaled 18.8 million metric tons compared with 21.7 million metric tons during the first eight months of 2018.

HRC imports decreased the most, while black plate, line pipe and tin-free steel imports increased the most.

On a year-to-date basis through August, imports from Canada declined, while increases occurred from Brazil, Spain and Ukraine.

Chinese Steel Production Increases

Based on data from the World Steel Association (WSA), global production increases slowed in September.

Production from January through September of this year reached 1,391.2 million tons, up by 3.9% compared to the same period of last year. However, last month, the year-to-date increase measured 4.6% for the January-August period.

Year-to-date increases in Asia totaled 6.3% over the period, while E.U. production contracted by 2.8%. North American production of 90.6 million tons translated into a small increase of 0.3%.

September crude steel production declined in most major producer countries compared with September 2018, with the exception of China, India and Italy.

Crude production in China decreased to 82.8 million tons in September, compared with August production levels of 87.251 million tons, but increased by 2.2% compared with September 2018. India’s production increased by 1.6% to 9 million tons in September compared with last year, while Italy produced 2.2 million tons, a 1.1% increase compared with September 2018.

Japan’s September production dropped by 4.5% compared with September 2018, falling to 8 million tons. South Korea saw a drop of 2.7% during the same monthly comparison period, to 5.7 million tons. A decline of 4% hit German production, with 3.4 million tons produced, while France’s production dropped by 10.2% to 1.2 million tons.

What This Means for Industrial Buyers

Global production levels remain higher, primarily driven by high Chinese production, while demand still looks weaker.

If manufacturing gains continue in China, we could see some pricing momentum return. Some signs point in that direction; as of yet, demand has not yet pushed prices higher.

Buying organizations interested in tracking industrial metals prices with ease will want to request a demo of the all-new MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term steel price trends may want to read MetalMiner’s Annual Metal Buying Outlook.

Free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook

Actual Raw Steel Prices and Trends

Steel prices showed mixed movements in October.

Korean scrap prices registered another large drop this month — following last month’s 16.9% decrease — falling another 30.2% to $81/mt. However, Korean pig iron prices increased by 2.8% to $368/mt.

U.S. shredded scrap prices also decreased again this month, falling 11.4% to $225/st.

The U.S. Midwest HRC futures spot price dropped 5.2% to $495/st, while the Midwest HRC futures three-month price increased by 3.6% to $549/st.

LME billet three-month prices dropped 2.3% to $239/st.

Once again this month, Chinese prices in the index showed mixed, generally mild movements.

China billet prices increased by 1.6%, to $496/mt, while HRC prices decreased by 1.2% to $499/mt. Coking coal prices dropped by 5.4% to $248/mt, the largest Chinese price decline this month, while iron ore prices increased by 1.6% to around $63 per dry metric ton.

The Stainless Steel Monthly Metals Index (MMI) dropped again this month, by one point to 87.

The drop follows last month’s three-point decline to 88 on the heels of August’s five-year high of 91.

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LME nickel prices continued to move sideways overall, while slowly dropping from price surges that hit the metal recently due to future supply concerns.

Since hitting a peak closing price of $18,100 in early September, prices dropped by around 10% during the past two months.

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

Based on a longer-term look at price data, prices exceed an eight-year average price of $13,572/mt (corresponding to the graph’s timeline) which is represented by the blue line:

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

Trading volumes tapered off during recent weeks, indicating sideways movement could continue.

Prices still remain high compared to the longer-term average; therefore, prices could also continue to drift lower, although some analysts expect prices to remain high.

In fact, over the long term, prices keep rising, with price bottoms progressively rising since 2016.

SHFE Nickel Prices Drop Slightly from September High Prices

Like LME prices, SHFE nickel prices remained higher but drifted back down from recent high prices.

Source: MetalMiner analysis of FastMarkets

Since hitting a peak high of CNY 146,850/mt in early September, SHFE nickel prices dropped back by around 11% over the course of roughly two months.

The SHFE nickel price dropped to CNY 130,320/mt in early November.

Global Supply Chains React to High Nickel Prices

China’s Jinchuan Group recently commented that its mine in Qinghai would help supply the company this year. Therefore, the export ban on Indonesian mined nickel will not impact the company’s operations significantly, according to Reuters.

The company’s joint venture laterite project in Indonesia ramped up this year, with the first ferronickel output in sight. However, an official launch date for the project, which is expected to have an annual capacity of 10,000 tons, has not yet been announced.

Mining output from the Philippines looks set to pick up, helped by higher prices. Higher prices make compliance more affordable as the country seeks to transition away from open pit mining. The government continues to regulate the industry stringently, constraining expectations of large output gains.

Forecasts call for modest growth in output, by around 2.5% per year annually through 2028, as reported by Reuters.

Tsingshan Holding Group Co., a top Chinese stainless steel producer, faced scrutiny recently for making large purchases of nickel from LME warehouses.

Chinese stainless competitors accused the company of manipulating the market, while the company could have made the advanced purchases to shore up future stocks ahead of the 2020 Indonesian export ban.

At any rate, large rounds of nickel purchases by the company appeared to impact prices; the situation is under examination by the LME.

China’s Stainless Sector Expected to See the Biggest Impact of 2020 Nickel Shortage

Given that most nickel ends up in stainless steel production, and since the majority of stainless steel gets produced in China, stainless steel production will be a key area impacted by a nickel shortage. The uptick in production in the Philippines is not expected to fully compensate for a drop in Indonesian supply.

According to data from the International Stainless Steel Forum (ISSF), stainless crude output increased in H1 2019 by 1.9% compared to H1 2018. That increase came entirely from China, with an 8.5% production expansion to 14.4 million tons for the first half of the year.

China’s gains offset output declines reported in all other global regions, which fell in the range of 3.4% to 6.4%.

Domestic Stainless Steel Market

Source: MetalMiner data from MetalMiner IndX(™)

Stainless 304 and 316 NAS surcharges stayed higher recently after rising during the past few months due to nickel price increases.

However, 316 surcharges dropped back slightly to $1.06/pound in November (compared to $1.08/pound during October). Surcharges for 304 held at $0.74/pound.

What This Means for Industrial Buyers

Nickel prices remained higher this month; therefore, industrial buying organizations need to stay alert for the right opportunity to purchase.

Buying organizations interested in tracking industrial metals prices with greater ease will want to request a demo of the all-new MetalMiner Insights platform.

Buying organizations seeking more insight into longer-term industrial metals price trends may want to read MetalMiner’s Annual Metal Buying Outlook.

Download your free Partial Sample Report: 2020 MetalMiner Annual Metals Outlook now.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Actual Stainless Steel Prices and Trends

The LME primary three-month nickel price dropped only mildly this month — following last month’s 6.8% correction — by 2.4% to $16,800/mt.

India’s primary nickel price dropped by 4.5% to $16.90/kilogram.

China’s primary nickel price increased by 1% to $19,356/mt. Other Chinese prices in the index generally increased in the range of 1.6% to 2.8%, with the exception of FeMo lumps, which dropped by 12.9% this month to $16,201/mt, and FeCr lumps, which increased 6.6% to $1,649/mt.

Indexed Korean prices increased 2.8% with stainless steel coil 430 CR 2B and 304 CR 2B at $1,539/mt and $2,480/mt, respectively.

The U.S. 316 and 304 Allegheny Ludlum stainless surcharges fell slightly — by 1.4% and 0.8%, respectively — to $1.10/pound and $0.77/pound.