Author Archives: Fouad Egbaria

The Renewables Monthly Metals Index (MMI) ticked up one point this month, rising to a June MMI value of 102.

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Glencore, Umicore Reach Cobalt Supply Agreement

As we reported last month, miner Glencore reached an agreement with Umicore in which it would supply the latter with cobalt from its operations in the Democratic Republic of the Congo (DRC).

Umicore is a global materials technology and recycling group based in Brussels.

“Umicore has assessed each operation as fully compliant with its sustainable procurement framework for cobalt which excludes artisanally mined cobalt from its supply chain, as well as any form of child labor,” Glencore said in a prepared statement. “The cobalt units will be shipped to Umicore’s cobalt refineries globally, including the Kokkola refinery in Finland once the ongoing acquisition process is complete.”

The agreement comes on the heels of a May 23 announcement by Umicore that it had moved to acquire Freeport Cobalt’s cobalt refining and cathode precursor activities in Kokkola, Finland.

Plate Prices Fall

As MetalMiner’s Belinda Fuller noted in the Raw Steels MMI report, plate prices last month joined other forms of steel (HRC, CRC and HDG) in their overall downward trend.

“Even plate prices dropped this month after stubbornly sticking at around $1,000/st for a lengthy stretch after rising longer term,” she wrote. “This month the price dropped by nearly 7%, from $962/st at the start of the month to $902/st in early June.”

Grain-Oriented Electrical Steel (GOES)

The GOES MMI dropped three points this month, down to a June reading of 172.

The GOES price fell 1.8% month over month to $2,368/mt as of June 1.

In other GOES news, the TEX Report reported Japanese mills are entering negotiations regarding 2H 2019 shipments of grain-oriented electrical steel sheet to the U.S. and Europe. In addition, TEX Report said China’s Baosteel raised its price for domestic grain-oriented electrical steel sheet, adding Beijing’s stimulus measures could lead to increased demand for grain-oriented electrical steel sheet in power grid improvements.

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Actual Metal Prices and Trends

Japanese steel plate was the lone steel plate price point in the subindex to rise this past month, moving up 3.1% month over month to $796.05/mt as of June 1.

Korean steel plate fell 1.2% to $589.79/mt, while Chinese steel plate dropped 3.8% to $625.55/mt.

U.S. steel plate fell 6.2% to $902/st.

Chinese cobalt cathodes dropped 2.4% to $96,294.50/mt.

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This morning in metals news, ArcelorMittal’s CEO urged the E.U. to do more to combat the effects of the U.S.’s Section 232 steel tariff, April steel shipments fell 1.4% and China’s Ministry of Commerce said the U.S. is not being taken advantage of on trade.

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ArcelorMittal Urges More Action from E.U. on Steel

The E.U. imposed steel safeguards earlier this year, but ArcelorMittal CEO Lakshmi Mittal think they haven’t been enough.

The safeguards were imposed to combat rising imports into the E.U., which came about as a result of diverted supply from the U.S. (on the heels of its Section 232 tariffs on steel and aluminum).

However, Mittal told a German newspaper the safeguards haven’t been effective, Reuters reported.

U.S. Steel Shipments Fall 1.4%

U.S. steel shipments in April fell 1.4% from the previous month, according to the American Iron and Steel Institute (AISI).

April shipments reached 8.21 million net tons, down from 8.33 million net tons in March. However, shipments through the first four months of the year were up 3.5% compared with the same period last year.

MOFCOM: China Not Taking Advantage of the U.S.

A frequent talking point used by President Donald Trump is the concept that other countries are taking advantage of the U.S. when it comes to trade.

China’s Ministry of Commerce recently released a report, titled “US Gains from the China-US Trade and Economic Cooperation,” outlining the ways in which it argues the U.S. benefits from the two countries’ trade relationship.

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“The trade deficit with China results from both artificially-imposed restrictions, such as export control, and market forces,” the Ministry of Commerce said in a release. “Multiple factors are at play, including industrial competitiveness, economic structure, trade policies, the position of the US dollar as reserve currency, etc. The US has not been taken advantage of.”

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This morning in metals news, U.S. steel mills churned out steel at a capacity utilization rate of 81.5%, the E.U. officially blocked the proposed joint venture of the European operations of Tata Steel and Thyssenkrupp, and the Aluminum Association is looking for a new CEO.

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Capacity Rate Hits 81.5% Through June 1

The U.S. steel sector reached a capacity utilization rate of 81.5% for the year through June 8, the American Iron and Steel Institute (AISI) reported.

Adjusted year-to-date production for that period reached 43.1 million net tons, up 6.0% from the 40.7 million net tons during the same period last year (the capacity utilization rate for that period was 76.7%).

E.U. Blocks Tata, Thyssenkrupp JV

Signs were pointing in a negative direction last month for the fate of the proposed joint venture of Tata Steel and Thyssenkrupp’s European operations.

The E.U.’s competition regulators made it official this week, rejecting the proposed JV.

“Steel is a crucial input for many things we use in our everyday life, such as canned food and cars,” Commissioner Margrethe Vestager said in a release. “Millions of people in Europe work in these sectors and companies depend on competitive steel prices to sell on a global level. Without remedies addressing our serious competition concerns, the merger between Tata Steel and ThyssenKrupp would have resulted in higher prices. So we prohibited the merger to avoid serious harm to European industrial customers and consumers.”

Competition regulators were concerned the merger would raise prices and result in fewer choices for steel consumers in the market, arguing the firms did not make enough concessions to assuage those concerns.

The proposed JV would have yielded the second-largest steelmaking entity in Europe, behind only ArcelorMittal.

Aluminum Association CEO Resigns

The Aluminum Association announced the resignation of President and CEO Heidi Brock, who is leaving the industry group to become president and CEO of the American Forest & Paper Association.

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Brock led the Aluminum Association for eight years.

“I am grateful for the outstanding engagement and support I have received from the leadership, members and staff of the Aluminum Association for the past eight years,” Brock said in a release. “Working together, we have contributed to the growth of the U.S. aluminum industry and strengthened the communities in which it operates. It has been a privilege to serve in this role, and I will miss working closely with the exceptional team at the Aluminum Association and the wonderful representatives of our member companies. Given their talent, commitment, and strong industry story, I have every confidence in the Association’s continued success.”

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The Global Precious Monthly Metals Index (MMI) fell one point for a June MMI reading of 93, marking the third consecutive month of decline for the MMI.

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The Platinum-Palladium Spread

Contrary to historical trends, the palladium price has soared past the platinum price for approximately a year and a half now.

Last month, however, MetalMiner’s Taras Berezowsky noted a short-term shift against that trend, as the spread between the two metals narrowed to $479 (palladium fell 2.6%, while platinum rose 4.5%). As Berezowky noted, a recent poll forecast the platinum-palladium price spread to average $485 per ounce this year.

This month, however, both platinum and palladium dipped; the spread rose in the process to $489 per ounce.

According to consultancy Metals Focus, palladium will post a supply deficit this year while platinum will be in surplus, which will continue to maintain the premium palladium has obtained over the last 18 months.

The interplay between high palladium prices and depressed platinum prices can be seen in South Africa, where miners are reaping the benefits of the former but struggling with the latter, Reuters reported. Per the report, miners in the country are faced with ore that produces twice as much platinum as palladium.

As MetalMiner’s Belinda Fuller recently explained in an analysis of palladium and platinum prices, platinum likely won’t stay this down for long.

“Platinum prices, however, remain somewhat low historically,” she wrote. “The recent performance against the DXY does not necessarily suggest the metal is undervalued. However, given that platinum can serve as a substitute, it’s doubtful the price will stay suppressed long term, as high palladium prices will drive a push toward substitution.”

Gold Star

Elsewhere in the Global Precious MMI basket, gold is outperforming other commodities, MetalMiner’s Stuart Burns noted.

“The price of gold hit a three-month high Tuesday, at $1,327.9 per troy ounce as investors continued to buy into exchange-traded and physical gold. Inflows into the world’s largest gold ETF, the SPDR Gold Trust, rose by 2% Monday,” Burns wrote last week. “That marked its biggest one-day gain since 2016, the Financial Times reported, part of a wider inflow that bought holdings in gold-backed ETFs to their highest in a year.”

Given global economic uncertainty stemming from trade, it’s no surprise investors are turning to the safe-haven asset.

But how much further can the gold price go? Can it surge past the $1,400 per troy ounce threshold?

Pump the brakes on that thought — at least for now, Burns argues.

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“Global political and economic developments would have to take a dire turning for the worse to stimulate a rise above the mid $1,300s,” Burns argues.

Actual Metal Prices and Trends

The U.S. silver price fell from $14.93/ounce to $14.77/ounce as of June 1.

The U.S. platinum price fell 7.4% month over month to $820/ounce, while the U.S. palladium price fell 4.1% to $1,309/ounce.

Chinese gold bullion rose 3.1% to $42.92/gram. U.S. gold bullion rose 3.2% to $1,324.80/ounce.

The Rare Earths Monthly Metals Index (MMI) picked up three points, rising to a June MMI value of 22.

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China’s Rare Earths

In light of last month’s developments in the long-running U.S.-China trade talks, MetalMiner’s Stuart Burns delved into what could be a big play for China.

Last year, the U.S. left rare earths off a wide-ranging list of Chinese imports to be targeted by tariffs (as part of the U.S.’s Section 301 probe), as the U.S. — and the rest of the world — depends on China for rare earths.

Last month, the U.S. raised tariffs on $200 billion in imports from China and China responded with retaliatory tariffs. On the heels of the tit-for-tat and President Xi Jinping’s recent visit to a rare earth magnet facility, some commentators are wondering if China could put the squeeze on the rare earths market.

“China is rattling the saber ever so softly to say that it may be more exposed to general trade on a balance of payments position – China exports more to the U.S. than the U.S. exports to China — but the U.S. (and the rest of the Western world, as it happens) is uniquely exposed to China’s control of not just rare earth elements, but the whole supply chain,” Burns wrote. “That supply chain includes everything from mining through refining to manufacturing of myriad components used in high-tech applications including from electric vehicles, cellphones, laptops, missiles and fighter jets.”

According to CNBC, China’s exports of rare earths dropped in May to 3,639.5 metric tons, down from 4,329 metric tons in April.

The rare earths market is notorious for its volatility; as such, it remains to be seen if the drop in exports is a calculated move or a one-off blip. As trade talks between the U.S. and China continue to take shape, market watchers will want to keep an eye on China’s export levels.

Malaysia PM: ‘We’ll Have to Renew’ Lynas License

On May 30, Malaysian Prime Minister Mahathir Mohamad told reporters, with respect to the ongoing discussions regarding Australian rare earths miner Lynas Corp’s license to operate in the country, “We think we’ll have to renew the license,” according to a report in the Straits Times.

Lynas, the largest rare earths miner outside of China, has battled regulatory challenges in Malaysia related to waste disposal. Disposal of two forms of waste at the miner’s Malaysian facility has been the focus of the ongoing saga, as the miner’s license to operate in the country expires in September.

The miner has previously said it would not be able to comply with the government’s conditions vis-a-vis waste disposal in the required time frame.

“We welcome the Prime Minister’s comments acknowledging the importance of the continuation of the Lynas operations in Malaysia,” Lynas said in a prepared statement May 31. “We will update the market as we receive further clarification from the Malaysian government.”

Actual Metal Prices and Trends

Chinese yttrium fell 2.4% month over month to $32.58/kilogram as of June 1. Terbium oxide rose 1.3% to $529.26/kilogram. Neodymium oxide skyrocketed this past month, jumping 27.7% to $50,681.30/mt.

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Europium oxide fell 13.7% to $33.30/kilogram. Dysprosium oxide rose 29.8% to $285.99/kilogram.

Lithium batteries. konok1a/Adobe Stock.

This morning in metals, the London Metal Exchange announced a new partnership that aims to promote “market uptake of a transparent and representative global lithium price,” President Donald Trump backs off imposing a 5% tariff on all imports from Mexico and China’s May copper imports dropped. 

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LME Announces New Partnership

The LME announced its latest steps toward creation of an LME lithium contract.

“Over the past 18 months the London Metal Exchange (LME) has been working closely with the global lithium industry to meet the need for transparent and robust reference prices,” an LME release stated. “Following extensive market engagement, the LME is announcing today that it is partnering with price reporting agency Fastmarkets to promote market uptake of a transparent and representative global lithium price. Continued adoption of reference pricing across the industry will pave the way for launch of a LME lithium futures contract.”

Among other uses, lithium is coveted for its use in electric vehicle batteries.

“In recent years there has been unprecedented price volatility in the lithium market, driven particularly by explosive electric vehicle (EV) battery demand,” said Robin Martin, LME head of market development.The LME has been approached by a number of industry players, including producers, end users and several leading automotive firms, to develop effective lithium price-risk management tools. We are delighted to be announcing the next step in that process today.”

No Mexico Tariffs … For Now

Late Friday, the Trump administration announced it had reached a deal with the Mexican government and, as such, the U.S. would not impose a previously mentioned 5% tariff on all imports from Mexico.

Trump said last month that the U.S. would impose an escalating tariff, beginning at 5%, as of June 10 if the two countries could not reach a deal that addressed the flow of migrants to the U.S.

However, the threat of tariffs still looms.

In a tweet Monday morning, Trump said if the immigration deal does not receive approval by Mexico’s legislature, “tariffs will be reinstated.”

China Copper Imports Down

China’s imports of unwrought copper dropped 10.9% in May from the previous month, Reuters reported.

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Among other metals, China is the world’s top consumer of copper. The country’s imports of copper reached 361,000 tons in May, according to Reuters.

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Before we head into the weekend, let’s take a look at the week that was and some of the metals storylines here on MetalMiner:

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This morning in metals news, the LME copper price continued its tumble this week, U.S. imports from countries like Vietnam have increased and the June 10 Mexico tariff deadline draws near.

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Copper Down for Eighth Straight Week

The copper price is set to fall for the eighth consecutive week this week, Reuters reported.

LME copper fell 1% Friday and was down 1.4% for the week, according to Reuters.

Rising Imports

Amid ongoing trade tensions with China, the U.S. has seen import levels from other countries rise.

Citing Census Bureau data, CNN reported the U.S.’s imports from Vietnam increased 38% over the first four months of this year. Imports during that period from Taiwan (22%), South Korea (17%) and Bangladesh (13%) were also up.

Tariffs on the Horizon

Vice President Mike Pence said the U.S. is still planning to slap tariffs on imports from Mexico next week, Bloomberg reported.

President Donald Trump has threatened to impose an escalating tariff, beginning at 5%, on all imports from Mexico if the two countries can’t reach a deal to stem the flow of migrants into the U.S.

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According to Mexican Foreign Minister Marcelo Ebrard, talks to reach a deal and avoid tariffs continued Friday.

The Construction Monthly Metals Index (MMI) retreated this month, falling three points for a June MMI value of 81.

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U.S. Construction Spending

U.S. construction spending in April came in flat compared to March, but dropped 1.2% compared to April 2018, the U.S. Census Bureau reported.

April spending reached $1,298.5 billion, compared with $1,299.2 billion in March and $1,314.7 billion in April 2018.

Private construction spending came in at a seasonally adjusted annual rate of $954.0 billion, down 1.7% from the revised March estimate of $970.4 billion.

Under the umbrella of private construction, residential construction spending was at a seasonally adjusted annual rate of $499.3 billion in April, down 0.6% from the revised March estimate of $502.4 billion. Nonresidential construction was $454.7 billion in April, down 2.9% from the revised March estimate of $468.0 billion.

Meanwhile, public construction spending was $344.6 billion, up 4.8% from the revised March estimate of $328.7 billion. Educational construction reached $80.0 billion, up 2.1% from the revised March estimate of $78.3 billion. Highway construction hit $114.3 billion, up 6.8% from the revised March estimate of $107.0 billion.

ABI: Billings Bounce Back

This month’s Architecture Billings Index (ABI), released monthly by the American Institute of Architects (AIA), shows billings bounced back in April after a down March.

The April ABI checked in at 50.5, up from 47.8 the previous month, when billings declined for the first time in over two years. An ABI value greater than 50 indicates billings growth.

“However, while this turnaround is welcome news, billings growth generally remains sluggish, with only a slightly larger share of firms reporting increasing firm billings than reporting decreasing billings,” the AIA said. “But inquiries into new projects and the value of new signed design contracts both strengthened in April, as firms remain fairly optimistic about future work.”

With an ABI value of 51.6, the South was the only region to post billings growth in April; the West, Midwest and Northeast all posted sub-50 values.

This month’s ABI survey asked company leaders about their clients’ reaction to economic uncertainty (particularly on the heels of the March billings slide).

The responses indicate anxiety over said uncertainty is not insignificant, as 52% of respondents said “nervousness about the economic outlook was affecting their clients either modestly, seriously, or a great deal.” Furthermore, of the firms reporting at least moderate nervousness regarding the economic outlook, 62% said their clients have reacted by slowing or stalling projects.

Waiting for Infrastructure

Even in this age of political polarization, infrastructure is an issue that draws broad support, regardless of political affiliation. After all, who doesn’t want safe roads and bridges?

However, general sentiment doesn’t always translate into action, particularly when passed through the filter of politics.

Last month, President Donald Trump told Democratic leaders to approve the pending United States-Mexico-Canada Agreement (USMCA) before working on an infrastructure bill, Reuters reported.

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The USMCA, which would succeed the 1994 North American Free Trade Agreement (NAFTA), must be ratified by the legislatures of Canada, Mexico and the U.S. before it can go into effect.

Trump last month lifted the Section 232 steel and aluminum tariffs on imports of the metals from Mexico and Canada, but a recent threat to impose a 5% tariff on all imports from Mexico beginning June 10 has ramped up tensions.

Actual Metal Prices and Trends

Chinese rebar steel fell 4.6% month over month to $579.21/mt as of June 1. Chinese H-beam steel fell 2.4% to $563.29/mt.

U.S. shredded scrap steel fell 8.1% to $295/st.

European aluminum sheet fell 4.6% to $2,496.57/mt. Chinese aluminum bar fell 2.5% to $2,209.70/mt.

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This morning in metals news, U.S. steel import permit applications dropped last month, the Trump administration’s Section 232 aluminum tariff left its mark on operations at the Port of Oswego and the Trump administration released a new strategy that aims to ensure a reliable supply of critical minerals.

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Steel Import Permit Applications Drop in May

Steel import permit applications fell 10.8% in May compared with April, the American Iron and Steel Institute (AISI) reported.

By country, the largest finished steel import permit applications for offshore countries were: South Korea (296,000 NT, up 8% from April preliminary), Japan (123,000 NT, down 22%), Germany (77,000 NT, down 46%), Taiwan (76,000 NT, up 8%) and Vietnam (60,000 NT, down 24%).

Oswego Impact

Last month, the Trump administration lifted its Section 232 tariffs with respect to imports of steel and aluminum from Canada and Mexico — but the impact of the tariffs was still felt throughout the year since their implementation.

One such community that felt the impact was Oswego, New York, and its port, WRVO Public Media reported. According to the report, aluminum shipments into the port are down 50% this year, resulting in job cuts at the port, according to the director of the Oswego Port Authority.

Critical Minerals Strategy

This week, the Trump administration unveiled a report titled “A Federal Strategy to Ensure a Reliable Supply of Critical Minerals.

“The strategy directs the U.S. Department of the Interior (DOI) to locate domestic supplies of those minerals, ensure access to information necessary for the study and production of minerals, and expedite permitting for minerals projects,” a Department of the Interior release states.

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Last year, the DOI released a list of 35 minerals deemed critical to U.S. economy and security. According to the DOI, the U.S. relies on other counties for more than a dozen minerals, used in cellphones, automobiles, airplanes, ships and computers, the release states.