Author Archives: Irene Martinez Canorea

HRC and HDG prices seem to have recovered a bit since the start of the month. CRC price increases appear less sharp, but may follow suit.

U.S. HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

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

Some steel forms have increased such as CRC and HDG for three consecutive weeks. If the price increases continue at this pace, prices could breach previous levels, which may signal strength and the start of a rally.

Chinese Steel Prices

Chinese steel prices drive U.S. domestic prices. Both usually tend to follow a similar pattern, which means that when Chinese steel prices increase, we would expect a similar movement in U.S. prices.

Despite the Chinese steel price’s cooldown during the last quarter of the year, a new sharp uptrend appears to have started this month.

China HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

Increasing Chinese prices add strength to the bullish case for steel. Buying organizations may want to follow Chinese prices closely, as they seem to have recovered.

Let’s Remember the Bullish Case

MetalMiner has watched steel prices closely since commodities and industrial metals turned bullish in August 2017.

Although base metals and steel do not necessarily trade in the same direction at the same time, industrial metals do tend to move together. December began with a stronger U.S. dollar caused by expectations of the Congress passing a tax bill. A stronger U.S. dollar caused commodities to fall slightly. However, this commodity downtrend appears short term, as the bullish case remains supported.

What This Means for Industrial Buyers

Buying organizations may want to closely follow both domestic steel prices and Chinese steel prices. Now that the bullish case appears more probable, steel-buying organizations may want to readjust their purchasing strategies.

MetalMiner sends automatic notifications when buying signals trigger a change in purchasing behavior.

Free Download: The December 2017 MMI Report

Take a free trial now to our Monthly Buying Outlook for a short-term analysis.

The Copper MMI dropped one point this month, primarily driven by a 0.6% drop in the LME copper price.

This comes as no surprise as base metal price increases have slowed in November, while LME copper prices saw a small pullback.

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

Source: MetalMiner analysis of FastMarkets

During the first week of December, LME copper prices fell sharply. However, we can expect these movements in bullish markets as a mechanism for prices to digest previous gains.

Trading volumes also support the uptrend. LME copper prices remain well above May levels, when MetalMiner provided a “buy signal” to forecast subscribers.

Chinese copper output could increase by 300,000 tons in 2018. Some analysts suggest higher output together with a slowdown in the Chinese real estate market may result in a slight cooldown for copper prices.

However, no signs suggest a cooldown.

According to the International Copper Study Group (ICSG), the market could see a a 50,000-ton deficit for 2017 and a 105,000-ton deficit next year.

Copper Scrap vs. LME Copper

The drop in scrap prices this month appears sharper than the one for LME copper prices. Chinese scrap prices decreased by 2.71% this month. However, both LME copper and Chinese scrap copper do tend to follow a similar trend.

What This Means for Industrial Buyers

As copper prices remain bullish, buying organizations may want to “buy on the dips.”

For LME copper prices, buying organizations can also read more about longer-term copper price trends with our free 2018 Annual Outlook, or take a free trial now to the Monthly Outlook.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Copper Prices and Trends

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The Stainless Steel MMI dropped five points this month as nickel prices fell by 10%. Despite the increase in stainless steel surcharges this month, the sharp fall in nickel prices drove the index lower.

Nickel price volatility has increased over the past few months. Prices currently trade in a +/-$3,000/mt range. Strong demand in the stainless and battery sectors and heavy trading volumes have driven nickel prices.

Price volatility is being driven by increased activity in nickel transactions. Nickel has become one of the “hottest metals” due to its demand in electric batteries. Therefore prices and trading volumes have shifted:

Source: MetalMiner analysis of FastMarkets

Trading volume for LME nickel remains strong, and does not reveal a downtrend. Although the red lines in trading volume above seem to signal heavy selling volume, prices do not slip together with volume. Therefore, the outlook for nickel remains bullish.

In bullish markets, buying dips also present good opportunities to buy some additional volume.

Domestic Stainless Steel Market

Despite the slower momentum of the Stainless MMI, domestic stainless steel surcharges increased again this month. Surcharges reached May 2015 levels and remain far from last year’s lows (under $0.4/pound).

Source: MetalMiner data from MetalMiner IndX(™)

Global Stainless Steel Market

Chinese crude stainless steel output has grown five-fold since 2006, reaching approximately 55% of total worldwide output. This month, Chinese domestic stainless steel prices fell. The drop in stainless steel prices followed nickel’s short-term downtrend.

Chinese chrome metal prices and the ferrochrome prices demonstrate a market anomaly. Ferrochrome (FeCr) is a chromium and iron alloy, containing 50% to 70% chromium by weight. Ferrochrome price increases in the May-September 2017 period appear sharper than the chrome metal price increase.

Source: MetalMiner data from MetalMiner IndX(™)

Therefore, iron ore may be the culprit increasing the ferrochrome price. When looking at the iron ore chart, readers may see that iron ore prices appeared higher during Q2 and Q3.

Source: MetalMiner analysis of Trading Economics

Despite the sideways trend during the last few months, iron ore prices increased in November and have continued their uptrend in December too. Therefore, ferrochrome prices may continue to increase driven by higher prices in both raw materials (iron ore and chrome metal).

India overtook Japan in 2016 and serves as the world’s second-largest stainless steel producer. Indian stainless steel output continues to expand and is forecasted to reach 4 million tons in 2018. Strong domestic demand from both the automotive and construction sectors has driven Indian growth.

The European domestic 304 stainless steel remains flat due to weaker domestic demand.

What This Means for Industrial Buyers

Stainless steel momentum appears slow, just as it does for all the other forms of steel. However, due to nickel’s high price volatility, buying organizations may want to follow the market closely and buy in the dips. To understand how to adapt buying strategies to your needs, dive deeper into our Monthly Metal Buying Outlook or you can take a free trial now.

To read more about longer-term stainless steel price trends, download the free Annual Outlook.

Actual Stainless Steel Prices and Trends
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The Raw Steel MMI jumped 6.5%, reaching 82 in December. This MMI sub-index remains one point above September’s reading, when steel prices were slightly higher.

Raw material prices increased this month together with Chinese steel prices and Midwest premiums, which drove the increase in this month’s Raw Steels MMI.

U.S. HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

Early December prices suggest a drop in HRC, CRC and plate. Only HDG appears to have increased from November’s closing price. Steel prices have failed to move into bullish mode, similar to both industrial metals and commodities.

Chinese Prices Started December Strong 

Despite U.S. steel prices falling at the beginning of this month, Chinese steel prices increased this week. Increases range between 1.5% for hot-rolled coil and 3.5% for cold-rolled coil.

China HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

The China Metallurgical Industry Planning and Research Institute (MPI) reported that Chinese steel output will increase in 2017 despite capacity curtailments. Output in 2017 will have increased by approximately 3% up to 832 million tons, while 2018 will result in an additional 0.7% output increase driven by the restart of mill operations.

Chinese steel demand will likely increase in 2018 up to 726 million tons from 722 million tons in 2017 due to domestic economic growth. An increasing Chinese steel demand could create upward movements in iron ore demand, which is expected to rise by 1.3% this year.

Raw Materials and Domestic Scrap

Iron ore prices increased this month after trading sideways for a couple of months. Steel prices and raw material prices are generally correlated. Raw material price increases generally support steel prices.

Source: MetalMiner analysis of Trading Economics

The latest price rise for iron ore appears sharp. Buying organizations may expect additional upward movements in iron ore prices. This fact may also result in increasing steel prices (despite the drop earlier this month).

What This Means for Industrial Buyers

Steel price dynamics showed some upward momentum this month. Although U.S. steel prices have risen (yet appear to lack strength), Chinese steel prices increased at the beginning of December together with raw material prices. Buying organizations will want to pay close attention to Chinese price trends, lead times and whether domestic mill price hikes stick. To understand how to adapt your buying strategy this season, take a free trial now to our Monthly Buying Outlook for a short-term analysis. 

Actual Raw Steel Prices and Trends

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November ended with a general cool-down for the base metals complex, contrary to commodities, which increased sharply. MetalMiner expected the industrial metals price pullback since the uptrend started earlier for base metals than for commodities. In bullish rallies, prices usually pull back to recover from prior gains.

Source: MetalMiner analysis of StockCharts

Despite the slight downtrend for industrial metals, the uptrend appears sustainable. Rising commodity prices and a weaker dollar both help to support the bullish sentiment.

For the second month in a row, commodities breached previous levels. When commodities move above previous peaks, the index shows signs of strength.

Source: MetalMiner analysis of StockCharts

The CRB index has now climbed close to its starting value for 2017. If the CRB index breaches the 196 level, the bullish trend could continue. Increasing oil prices drove the jump in commodities this month, together with raw material price increases such as iron ore.

What about the U.S. dollar?

This month, however, the U.S. dollar decreased sharply. In October, some analysts intimated that the U.S. dollar may have reversed its longer term downtrend. However, this month the U.S. dollar has shown weakness, and it seems that the downtrend appears set to continue. Read more

The Aluminum MMI dropped four points this month, falling to 95. The drop came on the back of lower LME aluminum prices for November. Aluminum prices decreased by 5.6% during this month.

MetalMiner expected this retracement because aluminum prices rallied since August, and broke our own resistance levels (upper price ceiling). When prices pull back, buying organizations can buy on the dips. Despite November’s price declines, the early days of December show price increases.

Source: MetalMiner analysis of FastMarkets

SHFE aluminum spot prices also decreased in November. The SHFE tends to follow LME trends. We could see the SHFE spot prices increase at any time.

Source: MetalMiner analysis of FastMarkets

Both LME and SHFE prices have traded sideways since the rally back in August, holding above the $1,970/mt level. Trading volumes still signal upward momentum, so buying organizations need to consider their longer-term buying strategies.

Macro-economics also support aluminum prices. November saw a higher CRB index (which we will cover in depth in an article tomorrow), driven by skyrocketing oil prices as well as other raw materials such as iron ore and alumina. Aluminum faces significant raw material price pressure. Generally, increasing raw material and gasoline prices result in aluminum price increases.

Gasoline prices. Source: MetalMiner analysis of Stockcharts.

MetalMiner previously reported that the Commerce Department announced a new self-initiated antidumping and countervailing duty investigation on imports of Chinese common aluminum alloy sheet at the end of November. The estimated dumping margin is in the range of 56.54% to 59.72% for Chinese imports.

Low-Carbon-Footprint Aluminum

Low-carbon aluminum is becoming more popular among carmakers. Low-carbon aluminum differs from traditional alloys by the way it is produced — using hydropower instead of high-emission fossil fuels. Low-carbon aluminum can cut emissions by half by changing the way aluminum is produced (averaging around eight tons of carbon dioxide in Europe and the U.S.). But producing and buying low-carbon aluminum is not free. Aluminum smelters will charge “green premiums” for the newest trend in aluminum. Will buying organizations be paying this new premium?

Aluminum Scrap

Another trend aluminum smelters have deployed involves using aluminum scrap instead of raw materials. Recycled aluminum requires only 5% of the energy used for the complete process. Recycled aluminum includes up to 75% of aluminum scrap, but cannot be used in every industry. The auto industry, for example, requires higher-quality aluminum.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese aluminum scrap prices increased and appear in a long-term uptrend since 2016. However, the latest drop in LME and SHFE aluminum prices also results in a drop in aluminum scrap prices. Chinese scrap prices decreased this month by 9.5%.

What This Means for Industrial Buyers

Despite aluminum prices dropping this month, aluminum remains bullish. Therefore, adapting the “right” buying strategy becomes crucial to reduce risks by knowing when to buy. Oil and gasoline prices have breached their sideways trend and have supported aluminum prices.

Actual Aluminum Prices and Trends

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Gold prices seem to be moving sideways after prices peaked in September.

Gold prices followed similar patterns to other base metals (such as copper and nickel), and rallied during Q3. We might expect to see price pullbacks after volatile bullish runs.

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

Gold spot prices. Source: MetalMiner analysis of FastMarkets

Gold and the U.S. Dollar

U.S. dollar-price movements heavily impact gold; the weaker the dollar, the stronger the gold price.

The U.S. dollar has appeared weak since the beginning of this year, while gold prices have risen. This suggests a negative correlation.

Gold-Continuous Contract price in orange. U.S. dollar in black. Source: MetalMiner analysis of StockCharts

In the chart above, both gold and U.S. dollar prices appear in the upper half of the chart. The black line at the bottom reflects the correlation between the U.S. dollar and gold prices. Both correlate negatively, which supports our previous statement.

A weaker U.S. dollar will help boost gold prices. Moreover, the correlation value falls between  -0.70, and even closer to -1. Therefore, gold and the U.S. dollar have a strong negative correlation, and the U.S. dollar serves as a reliable indicator for gold.

However, at certain times the correlation appears positive.

In July 2016 and July 2017, both the U.S. dollar and gold prices traded together. This tells us that the negative correlation doesn’t always provide clues as to gold prices.

S&P 500 Supporting the Bulls

Stock markets also shed light on metals markets.

Even though increasing stock markets do not necessarily equate to booming metal prices, they do suggest confidence in the overall economy. The S&P 500 currently trades at its historical levels, even in uncharted territory.

S&P500. Source: MetalMiner analysis of StockCharts

A rising stock market reflects investors’ positive sentiment with respect to the economy. The S&P 500 has increased by 15% so far this year. A better economic performance may lead traders to put their money in commodities, which will support the rally in base metal and precious metal prices.

Chinese Stock Market

The Chinese FXI index reflects an expansion in that economy.

Even though the FXI index has fluctuated more than the S&P 500 during the last five years, the uptrend that began in 2016 appears sustainable (at least for now).

FXI Source: MetalMiner analysis of StockCharts

Long-Term Relationship: Copper and Gold Prices

Readers might be asking: how can I relate gold prices to base metals strategy?

The answer is simple: copper and gold have traded historically in the same trend. Both gold and copper prices are currently in a long-term uptrend.

Gold-Continuous Contract price in purple. Copper in black. Source: MetalMiner analysis of StockCharts

However, a couple of divergences took place at the beginning of 2016 and at the end of the same year.

Gold prices rallied at the beginning of 2016, while copper prices increased (but by a smaller amount). At the end of 2016, copper prices rallied and gold prices dropped. They recovered afterwards, continuing its uptrend together with copper.

What This Means for Industrial Buyers

Industrial metal buyers may want to consider gold price trends as an additional indicator at which to look.

Currently, stock markets are signaling a continuation of a commodities bullish market, as well as a healthy economy in U.S. and China. Therefore, buying organizations may want to understand how and when to buy to reduce their costs.

Free Sample Report: Our Annual Metal Buying Outlook

Buying dips are reflected in our Monthly Outlook and a long-term analysis for every base metal and steel forms in our free Annual Outlook. 

The contract season has already started and steel prices have yet to react. Although domestic steel prices increased during the last week of October and the first of November, prices fell again last week.

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

Source: MetalMiner data from MetalMiner IndX(™)

Steel prices have traded flat for most of 2017. Prices, however, started to weaken during Q3. We still want to see more upward price movements before changing the steel outlook.

Chinese Steel Industry

Of course, Chinese steel prices and production serve as the primary drivers of the world steel industry.

According to data released by the National Bureau of Statistics, Chinese daily steel output decreased by 2.5% in October. Capacity curtailment in the steel industry has finally resulted in less steel output from that market.

Some regions, such as Hebei province, plan to continue the steel capacity cuts until 2020, further reducing production by up to 20 million tons.

Source: MetalMiner data from MetalMiner IndX(™)

The spread between U.S. HRC prices and Chinese HRC prices has fallen again this month.

In addition, all forms of steel in China except CRC saw price declines. Even if the decrease in Chinese prices appears less steep than the U.S. decline, we want to see more price movements to the upside before drawing any conclusions.

What This Means for Industrial Buyers

Steel price dynamics may recover at some point this month. Therefore, buying organizations will want to pay close attention to Chinese price trends and domestic lead times.

To read more about our longer-term steel price trends, download our free Annual Outlook.

To understand how to adapt your buying strategy this season, take a free trial now or subscribe to  the Monthly Outlook for a short-term analysis.

The CRB index has once again breached a ceiling, signaling a strong rally.

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

The CRB index now stands just 1.5 points below its 2017 peak, which occurred at the beginning of the year.

Source: MetalMiner analysis of TradingEconomics

Oil prices have led the latest commodities rally.

Energy accounts for up to 39% of the entire commodities basket, and oil serves as one of the largest energy components of the index.

Actual output cuts from Saudi Arabia, as well as political turmoil, have led the oil price surge. Oil prices have traded sideways for a long time, and at some point in time would have changed direction.

Source: MetalMiner analysis of TradingEconomics

Industrial Metals

Contrary to commodities, industrial metals have fallen slightly this month.

The base metals bull rally has slowed down, creating price pullbacks. Price pullbacks often occur in bullish markets, especially those metals with high volatility. Furthermore, price pullbacks create buying opportunities.

Source: MetalMiner analysis of StockCharts

In rising markets, buying organizations will want to follow how commodities, industrial metals and each particular metal behaves before committing to purchases.

Free Download: The November 2017 MMI Report

To learn more about how to reduce risks when committing to long-term purchases and when to just buy as needed, check out our free Monthly Outlook trial.

The Aluminum MMI increased two points this month, reaching 99 points.

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

Stronger LME and Chinese primary cash prices led to the jump. This month’s index reading brings the highest MMI reading of any index since January 2012, when MetalMiner launched the MMI series of indexes.

Source: MetalMiner analysis of FastMarkets

Upward price momentum may have slowed slightly, but the bullish run appears sustainable. We could expect additional upward movements.

The U.S. Department of Commerce imposed preliminary duties against aluminum foil imports from China. These duties range from 96.81-162.24% and apply to all aluminum foil products from China. The Chinese government requested consultation with the World Trade Organization (WTO) on  Nov. 3, claiming that the U.S. is using an expired 2001 clause.

China’s Ministry of Commerce said on Tuesday: “Regrettably, the United States has ignored the expiration of Article 15 … and still persists in its erroneous practice of continuing to use the ‘third country’ method in its anti-dumping investigations on imported products of China in violation of its obligation to WTO rules.”

Of course, China does not have market economy status, so the Department of Commerce will likely not agree with China’s Ministry of Commerce.

Oil, Gasoline Prices

Oil prices have already jumped in November, moving above levels that signal a bull market to MetalMiner. Oil prices hit a two-year high and currently trade over $55/barrel. The latest uptrend reveals strength in the latest oil rally.

Source: MetalMiner analysis of StockCharts

Since oil prices serve as one of the most important contributors to the CRB (commodities) index, we expect continuous upward movements for the index. Therefore, the case for a bullish commodity  — and industrial metals market, too — appears to have strengthened despite the latest short-uptrend of the U.S. dollar (dollars and commodities tend to move inversely).

Gasoline prices also increased with oil prices. MetalMiner previously analyzed the correlation between gasoline prices (and oil prices) and increasing base metal prices, specifically aluminum. When oil (and gasoline) prices increase, aluminum prices tend to follow. The degree of the increases does not always correlate, but aluminum prices tend to move together with the commodity.

Source: MetalMiner analysis of StockCharts

What This Means for Industrial Buyers

Aluminum showed resilience this month, maintaining its trend in the bullish market. Increasing oil prices also support the bullish case for aluminum. Therefore, adapting the right buying strategy becomes crucial for reducing risks.

MetalMiner released its longer-term annual outlook back in October. Readers can grab a free copy here.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Aluminum Prices and Trends

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