Author Archives: Irene Martinez Canorea

A magnifying glass is on steel, particularly Chinese steel.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

The U.S. Department of Commerce’s Section 232 steel and stainless steel investigation appears to be under the watchful eye of European leaders.

In that vein, newly released Chinese data has not gone unnoticed.

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So far, June is busting out all over, but not in the way metals producers would like.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Market observers may actually observe a possible change in trend (note: the current bull market, which began in May 2016, appears to have run out of steam).

First, the Fed hiked interest rates by 0.25% last Thursday. Though expected, it will most likely not impact markets in an abrupt way.

Let’s take a look at some of the key indicators:

Dollar Up

Source: TradingEconomics.com

The most recent Fed rate hike breathed a little life into the dollar, which has fallen for most of this year.

We believe this could have a direct impact on the metals industry — namely, causing prices to fall.

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Similar to other base metals, tin prices have started a gradual decline, starting from the beginning of June.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

A market analysis of tin prices and trading volumes suggests a more bearish scenario for tin.

The chart below shows both a sharp drop in tin prices accompanied by heavier selling volume, also known as a “selling climax,” and may be perceived as a signal of a bearish market to follow.  

Source: Fast Markets

According to the International Tin Research Institute (ITRI), the fluctuation of tin stocks has varied based upon tin prices in the market. Indonesian exports remain robust, with an increase of 10% in May compared to April. However, Myanmar tin exports decreased slightly again in May. This reduction of Myanmar output is expected to continue until the end of this year, as analyzed in detail in our monthly forecast reports.  

Chinese VAT removal could lead to price convergence

Tin prices may also be influenced by the approval of a new Chinese policy that will directly impact  the largest tin-producing company in China, Yunnan Tin Company.

This policy consists of the removal of the valued-added tax (VAT) structure, which taxes imports of tin concentrates and was supposed to provide a tax rebate of 17% on exports.

The catch? Exporters were never able to collect the rebate, so they ended up buying tin exclusively from domestic sources.

According to ITRI, by removing the VAT rebate scheme, the new policy will likely cause exports to increase and prices to rebalance between the London Metal Exchange (LME) and China.  In other words, the two prices will likely converge — China’s may come up and the LME price may fall.

We believe tin prices will move close to support levels — and may eventually fall below this limit.

Free Download: The June 2017 MMI Report

Considering the current situation and the sideways trend of commodities, tin should be analyzed closely this month.

What’s up — or should we say, down — with zinc?

Source: Fast Markets

Together with other base metals, zinc has experienced a downtrend during this past week, reaching a seven-month low on Wednesday. Since then, it has recovered slightly up to $2,540/metric ton.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Zinc is moving together with commodities and industrial metals, both of which have experienced a weaker start to June. These weaknesses began in the beginning of 2017, as zinc prices failed to reach new highs, turning into a sideways market.

Other metals, such as tin and lead, have also experienced lower prices during the first week of June, which could be a signal of a general trend reversal. We do not believe zinc will succeed in surpassing its previous $3,000/mt upper limit.   

In fact, zinc could be at the start of a downtrend.

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The June Stainless MMI follows its prior three-month trend, dropping 3 points again this month to end up at a value of 54. With the 5.3% loss, the sub-index is coming back to the same levels as one year ago.

The steel (and stainless steel) industry has always been strongly influenced by political issues. Now that the trade cases have largely been decided, the Trump administration’s Section 232 investigation will likely have an impact on domestic steel markets, including the stainless steel sector. Recommendations will likely be released in July.

Steel capacity utilization has increased this past month, according to the American Iron and Steel Institute (AISI). We’ve also seen a healthy manufacturing PMI, indicating positive industrial development.

Notwithstanding, the Chinese Caixin manufacturing PMI index hit an 11-month low. Despite strong growth indicators here in the U.S., steel market participants should carefully monitor the powerful link between the price of steel in China and that in the United States. A rebound in the Chinese economy — and consequently in the steel market — might result in increased steel (and stainless steel) prices. Conversely, the opposite is also true.

Nickel prices have also fallen this month due to Philippine mines reopening, together with increased Indonesian exports.

What This Means for Industrial Buyers

Stainless steel prices usually move drastically in one direction and then hold steady for a little while. While we watch a possible price correction, buying organizations might want to follow the market closely to identify possible buying opportunities should prices continue to decline.

Actual Stainless Steel Prices and Trends

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MetalMiner’s Copper MMI held steady in June, driven by the recovery of the LME Copper 3-month price, which held above previous lows.

The demand and supply balance has affected copper’s price over the past few months. The International Copper Study Group (ICSG) released the 2017-2018 Copper forecast, indicating a larger than expected supply deficit for 2017 and 2018.

Source: International Copper Study Group (ICSG)

Supply concerns have eased during this last month, as Chile’s Escondida mine ramps up production after the strike. May production levels have now reached pre-strike production levels. Workers at Freeport McMoRan’s Grasberg mine, however, are expected to remain on strike until July.

Meanwhile, demand concerns have driven this month’s price downtrend due to the direct impact of declining Chinese demand. Manufacturing activity in China has slowed down, as has market sentiment, forcing the Chinese government to pursue additional stimulus measures.

Despite China’s slowing demand for copper this past year, Latin America appears as a bright spot; from a long-term perspective, the region may boost copper demand. Investment in renewables and efficient building systems would increase copper’s demand. According to the International Copper Association (ICA), copper usage may increase by more than 4 million tons by 2030.

What This Means for Industrial Buyers

Currently, copper prices are directly affected by Chinese demand, as well as by uncertainty in supply. This downtrend in copper prices might be just a brief pause in a dynamic market. Thus, copper-buying organizations should watch the market closely, looking for a possible uptrend that would show a recovery.

Actual Copper Prices and Trends

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