Author Archives: Irene Martinez Canorea

The Copper MMI (Monthly Metals Index) increased one point in May. Stronger LME copper prices led the increase.

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LME copper prices recovered previous price momentum and increased in April. At the beginning of last month, LME copper prices fell. At this point, buying organizations had an opportunity to buy some volume.

LME copper prices then recovered and moved toward the $7,000/mt level. LME copper prices have also risen so far this month.

Source: MetalMiner analysis of FastMarkets

Despite a falling copper short-term trend at the beginning of 2018, LME copper prices remain in a long-term uptrend. Therefore, buying organizations can expect further copper price increases.

In May, most of the prices that comprise the Copper MMI basket increased. LME copper rose by 1.5% this month. Indian copper prices increased by 1.33%, while Chinese primary copper prices increased further by 2.03%. Prices of U.S. copper producer grades 110 and 122 rose by 1.06%. Meanwhile, the price of U.S. copper producer grade 102 increased by 1.01%.

Copper Bullish Narrative

The fundamentals also support LME copper prices. Forecasts suggest copper demand will grow this year, while copper mine supply appears unsecured. Therefore, the balance for demand and supply in 2018 could result in a deficit, as it previously did in 2017.

Mitsubishi Materials Corp., Japan’s third-biggest copper smelter, might increase refined copper production by 7% in the April-September period this year. Production in this period will reach 187,374 tons. The increased production comes as a result of stronger domestic copper demand, mainly in the automobile and semiconductor sectors (where copper is used).

The pace of copper demand growth will likely increase and  continue until 2020 due to  construction in anticipation of the Olympic games.

India’s copper consumption has increased over the last few years. Local demand has grown  at a 7-8% rate per year. If the country’s consumption rate increased, India will become a net importer of copper by the end of March 2020.

In April, Vedanta Resources Plc, one of India’s biggest copper smelters, had its renewal of consent to operate its copper smelting plant rejected. The plant remains closed due to scheduled maintenance. The company planned to double capacity at the smelter to 800,000 tons per year. This closure may create more copper imports over the next few months.

Has the EV Boom Lost Its Relevance?

Despite the EV boom that pushed some base metal prices up in 2017, copper demand corresponding to this electric-vehicle sector does not appear strong enough.

Copper demand for the EV sector could reach 1.5% of global copper consumption in 2018. The EV demand for copper will likely increase up to 3% in five years.

Chinese Scrap Copper

Since the announcement of the ban on copper scrap in China last summer, MetalMiner has followed Chinese copper scrap prices closely.

Source: MetalMiner data from MetalMiner IndX(™)

LME copper prices and Chinese copper scrap prices follow the same trend. Both appear to be in a long-term uptrend. However, the latest LME copper price increase appears sharper than Chinese copper scrap prices.

In addition, the spread between Chinese copper scrap prices and LME copper prices appears wider. The wider the spread, the higher the copper scrap consumption — and, therefore, the price. However, this equation may not play out as formulated here, depending on the U.S. Section 301 investigation. The investigation could lead to an additional 25% tariff to copper electric conductors and copper winding wire. Chinese copper products and buying organizations purchasing those could see price increases.

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What This Means for Industrial Buyers

LME copper prices recovered from their previous lows and increased in April, remaining in a long-term uptrend. Therefore, buying organizations could expect further copper price increases.

Buying organizations reading the Monthly Metal Outlook had the opportunity to identify the buying signal at the beginning of April and reduce price risks by purchasing some volume.

For those who want to understand how to reduce risks, take a free trial now to MetalMiner’s Monthly Outlook.

U.S. domestic steel prices steadily increased after the release of the Section 232 report and President Donald Trump’s formal proclamation. However, the pace of the increases has started to slow down, signaling a possible top.

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After what now looks like sluggish steel momentum in 2017, the current steel price rally appears to have no end. Prices climbed to more than seven-year highs. However, MetalMiner previously reported on a possible top for steel prices.

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

So far, steel prices have not dropped. In fact, HRC and CRC prices have moved closer toward the $900/st and $1,000/st, respectively. Also, the approaching date of May 1, when several countries’ tariff exemptions expire, could still add support to domestic steel prices. This expiration date involves the Section 232 country exemptions for the EU, Argentina, Brazil and Australia.

The only exception is South Korea, which is exempted from steel imports under the bilateral trade deal, KORUS. The agreement with South Korea removes steel tariffs permanently but replaces that with a quota. The steel quota is equivalent to 70% of South Korea’s average exports to the U.S. from 2015-2017. In return, South Korea has agreed to improve access for U.S. automakers, who can now export up to 50,000 vehicles per OEM per year. South Korean aluminum tariffs however will go into effect after May 1, similar to the other countries listed above.

Whether the countries remain exempted or not may affect U.S. domestic steel prices. The country exemption could create downward price pressure on steel. However, steel prices could stay well supported if the country exemptions go away.

Global Steel Demand

According to the World Steel Association, global steel demand is forecasted to grow by 1.8% in 2018 and 0.7% in 2019. Despite the steel markets’ risks from current trade tensions (Section 232 tariffs, Section 301), the world’s favorable economic momentum may drive actual demand growth. Global steel demand in 2018 is forecasted to reach 1.616 billion tons, increasing to 1.627 billion tons next year. Read more

Numerous factors weigh heavily on the base metals and commodity complex: the Chinese copper scrap ban, the Section 232 proclamation on aluminum and steel combined with country-specific exemptions set to expire on May 1, the Section 301 investigation, and multiple strikes at copper and nickel mines to boot. After the turmoil of the first few months of 2018, MetalMiner reviews how base metals and commodities performed during Q1.

Aluminum, copper and nickel on the rise

Aluminum, copper and nickel prices started 2018 weaker than at the end of 2017. The end of 2017 showed a sharp rally for these base metals, following the bullish uptrend that began in the summer of 2017.

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The short-term downtrend sounded alarms as prices dropped significantly, not finding a floor. However, LME prices started to climb at the beginning of April, leaving the downtrend behind.

Read more

At the end of week before last, aluminum prices seemed to struggle; some thought the metal might have shifted to bearish country.

However, after that LME aluminum prices jumped by more than 13% in a week.

LME aluminum prices retraced to August resistance levels ($1,972/mt), and then increased sharply again.

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The fact that LME aluminum prices rebounded to the current level suggests a sign of price strength. Buying organizations had a chance to commit to some volume last month, to reduce price risks on their aluminum purchases.

In bullish rallies, staying on top of buying dips remains critical.

A Brief Look at Other Base Metals

This latest price rally has extended to  other base metals. The two-month downtrend in copper prices reversed this month, as prices have increased. Copper prices again appear to have moved  toward the $7,000/mt level.

Nickel prices also traded higher so far this month, reaching $13,810/mt. However, 2018 nickel prices did not fall as far as aluminum or copper did.

Both zinc and lead prices show weaker trading volume. The price trend is more sideways and less volatile than the other base metals (copper, aluminum and nickel).

However, LME zinc prices have shown a strong long-term uptrend since the beginning of 2016.

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What This Means for Industrial Buyers

The LME aluminum price retracement gave buying organizations a good opportunity to buy, as prices skyrocketed again.

Adapting the right buying strategy becomes crucial to reducing price risk. Given the latest jump in LME aluminum prices, buying organizations may want to take a free trial now to our Monthly Metal Buying Outlook to identify future buying dips.

The Stainless Steel MMI (Monthly Metals Index) inched one point higher in April. The current reading is 76 points.

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The index’s increase was driven by the rise in stainless steel surcharges, despite slightly falling  LME nickel prices this month. Other related metals in the stainless steel basket increased.

LME Nickel

In April, nickel price momentum appears to have recovered from its previous pace.

LME nickel prices dropped in March, along with other base metals. However, the drop appears less sharp than for aluminum or copper. 

Source: MetalMiner analysis of FastMarkets

LME nickel prices remain high and far away from 2017 lows back in May or June, when MetalMiner recommended buying organizations buy some volume forward. Prices back at that time were around $8,800/mt versus the current $13,200/mt price level.

Domestic Stainless Steel Market

Following the recovery in stainless steel momentum, domestic stainless steel surcharges increased this month.

The 316/316L-coil NAS surcharge reached $0.96/pound. Therefore, buying organizations may want to look at surcharges to identify opportunities to reduce price risk either via forward buys or hedging.

Source: Source: MetalMiner data from MetalMiner IndX(™)

The pace of stainless steel surcharge increases appears to have slowed this month. However, surcharges have increased from 2017. The 316/316L-coil NAS surcharge is closer to $0.96/pound.

What This Means for Industrial Buyers

Stainless steel momentum appears stronger this month, with steel prices skyrocketing.

As both steel and nickel remain in a bull market, buying organizations may want to follow the market closely for opportunities to buy on the dips.

To understand how to adapt buying strategies to your specific needs on a monthly basis, take a free trial of our Monthly Outlook now.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Actual Stainless Steel Prices and Trends

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The Raw Steels MMI (Monthly Metals Index) fell four points this month, dropping to 88. Despite the drop in the Raw Steels MMI, domestic steel price momentum has been on a tear throughout March. All prices for the main forms of flat-rolled steel products have reached more than seven-year highs.

Domestic steel prices accelerated their pace of increases in such a way that HRC domestic prices have risen from the $600-$650/st level to around $850 in the last three months.

Source: MetalMiner data from MetalMiner IndX(™)

The steel price increase comes as a result of several factors. First, the long-term trend that started in 2016 created upward movement for steel prices. Second, the delayed steel sector cyclicality (seasonality) has pushed the steel price slope even steeper.

Historically, prices usually increase during Q4 as many companies renegotiate their annual agreements as part of the budgeting season for the following year. However, this year, steel price increases didn’t occur until later. Prices appeared to wait for the Section 232 outcome (with its corresponding tariffs), which acted as a support for domestic steel prices.

However, domestic steel prices seem closer to the end of this latest price rally. Based on historical steel price cyclicality, lower Chinese steel prices and decreasing raw material prices, domestic steel prices may fall in the coming months.

The Divergence in Steel Prices

Chinese steel prices and U.S. steel prices usually trade together. However, the short-term trend sometimes shows some divergences.

Short-term trends may be created by local uncertainty or sudden disruptions with local supply. But these short-term trends tend to correct, and return to their historical pattern.

Source: MetalMiner data from MetalMiner IndX(™)

When looking at Chinese and U.S. HRC prices in tandem, the price divergence observed this month leaves no one surprised.

U.S. HRC prices skyrocketed, while Chinese HRC prices continue to fall. It is true that Chinese HRC prices increased sooner in 2017 (starting June 2017), supported by the steel industry cuts in China. The spread between Chinese and domestic steel prices dropped in Q3 2017, as U.S. domestic steel prices traded sideways. The recent drop in Chinese steel prices may create downward price pressure for domestic steel prices.

Global Steel Market

Chinese steel production cuts continue. The city of Handan ordered steel mills to cut around 25% of their steel production to continue the pollution curb measures. These cuts will be extended from April to mid-November. The coking coal industry will also cut production by around 25% over that period. The cuts started on April 1.

According to the Mexican government’s official gazette, the Mexico economy ministry has formally imposed anti-dumping duties on carbon steel pipe imports from South Korea, Spain, India and Ukraine.

Raw Materials

After the prior raw material price increases at the end of 2017, raw material dynamics seem to have slowed down.

Iron ore prices fell sharply in March. Iron ore prices increased slightly at the beginning of this month. However, the sharp decrease in prices last month may not support the current highs in domestic steel prices.

Source: MetalMiner analysis of TradingEconomics

Coal prices also fell in March. Coal prices seem to be increasing slightly again this month, even if current prices remain far away from the $110/mt highs in January 2018.

Source: MetalMiner analysis of TradingEconomics

What This Means for Industrial Buyers

As steel price dynamics showed a strong upward momentum this month, buying organizations may want to understand price movements to decide when to commit to mid- and long-term purchases. Buying organizations looking for more clarity on when to buy and how much to buy of their steel products may want to take a free trial now to our Monthly Metal Buying Outlook. 

Actual Raw Steel Prices and Trends

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The April Aluminum MMI (Monthly Metals Index) fell three points. A weaker LME aluminum price led to the price retracement. The current Aluminum MMI index stands at 94 points, 3% lower than in March.

LME aluminum price momentum slowed again this month. LME aluminum prices remain in a current two-month downtrend.

Buying Aluminum in 2018? Download MetalMiner’s free annual price outlook

Source: MetalMiner analysis of FastMarkets

Though some may want to declare a bearish market for aluminum, prices are still over the $1,975 level, when MetalMiner recommended buying organizations buy forward. Prices may retrace back toward that level. However, if prices fall below the blue-dotted line, aluminum prices could shift toward bearish territory.

SHFE Aluminum

SHFE aluminum spot prices also fell this month. The degree of the decline appears less sharp than for LME prices. However, SHFE aluminum spot prices started to fall in October 2017.

Source: MetalMiner data from MetalMiner IndX(™)

Shanghai Futures Exchange (SHFE) aluminum stocks fell in March for the first time in more than nine months. Decreasing stocks sometimes point to falling inventories of aluminum in China, the world’s biggest aluminum producer and consumer. SHFE stocks dropped by 154 tons in March, according to exchange data released at the beginning of April. However, SHFE aluminum stocks still stand at 970,233 tons. 

MW Aluminum Premiums

Meanwhile, U.S. Midwest aluminum premiums fell for the first time since November 2017. The $0.01/pound drop at the beginning of April comes after a sharp uptrend in the premium. Despite the lower premium this month, the pace of the increases may continue for some time.

What This Means for Industrial Buyers

LME aluminum price retracement may give buying organizations a good opportunity to buy, as prices may increase again.

However, as prices are currently trading lower, buying organizations may want to wait until the market shows a clearer direction. Therefore, adapting the “right” buying strategy becomes crucial to reducing risks.

Given the ongoing uncertainty around aluminum and aluminum products, buying organizations may want to take a free trial now to our Monthly Metal Buying Outlook.

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Actual Aluminum Prices and Trends

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The Copper MMI (Monthly Metals Index) traded lower again this month, falling two points to 85. The Copper MMI dropped to December 2017 levels, driven by falling LME copper prices.

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When looking at the long-term trend, copper prices have held above the dotted blue line since September 2016. Although prices dipped a bit below the blue dotted line at the end of March, the line represents the current copper floor. Prices falling below the dotted line could suggest a short-term price correction.

Source: MetalMiner analysis of FastMarkets

Meanwhile, trading volume appears to be about the same as last month, when selling volume appeared weak. As the selling volume remains weak, the downtrend seems more like a short-term price correction than a change of trend.

Buying organizations may want to closely follow copper prices in the coming month or read our Monthly Metal Outlook in order to anticipate copper price movements.

Copper Stocks and Supply

LME copper stocks currently stand at 324,900 tons, up by 13,075 tons since the start of 2017 and 85,500 tons since the start of 2016.

According to the International Copper Study Group (ICSG), the provisional 2017 refined copper deficit was 163,000 tons. The situation for 2018 will also depend on the supply side, as many of the largest copper mines have upcoming labor contract negotiations still pending.

On top of that, the Caserones copper mine in Chile announced a shutdown this month in order to replace a leaking pipe. However, this shutdown is only partial and may not have a big effect on copper production. 

Copper Scrap

Both Chinese copper scrap prices and LME copper prices typically trade together. In March, Chinese copper scrap prices fell to $6,035/mt. LME prices also fell but remain in a long-term uptrend. The same is true for copper scrap.

Source: MetalMiner data from MetalMiner IndX(™)

The spread between Chinese scrap copper prices and LME copper seems to be wider than it was back in 2016 and 2017. A wider spread may boost scrap copper demand for the applications that it are suitable due to its lower price.

What This Means for Industrial Buyers

Copper prices are currently approaching December support (at $6,530/mt) levels, when prices last dipped during the bullish rally.

Buying organizations bought some volume then. As long as copper prices remain bullish, buying organizations may want to buy on the dips. For those who want to understand how to reduce risks, take a free trial now to the MetalMiner Monthly Outlook.

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Actual Copper Prices and Trends

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Pavel Ignatov/Adobe Stock

Section 232 aside, given the market turbulence this month MetalMiner took a look back at commodities and other base metals to reassess trends.

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Commodities have traded lower in March, slowing down from their previous pace.

Crude oil prices (one of the most important price indicators in the commodities basket) increased this month, which may still lead to a higher CRB index by the end of the month.

CRB index. Source: MetalMiner analysis of Stockcharts

However, the long-term uptrend for commodities remains in place. Next month, buying organizations can expect to see price increases.

Meanwhile, this month base metals have traded lower. Contrary to rising U.S. steel prices, base metal prices began the month with price declines. Price retracement occurs as a normal trading pattern.

In a bullish market, buying organizations may want to identify the lows to reduce price risk.

DBB index. Source: MetalMiner analysis of Stockcharts

As with commodities, the base metals long-term uptrend remains in place.

While the CRB and DBB indexes have both traded lower in March, domestic steel prices skyrocketed.

With the recent tariffs imposed on steel products, steel prices remain at more than four year-highs for plate, and at 2011 levels for all the other steel forms (HRC, CRC and HDG).

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To learn more about how Section 232 will impact both the aluminum and steel industry, check out our Section 232 special coverage.

This month, zinc prices started to trade lower, returning to the $3,200 level. This activity represents the first short-term price pullback we’ve seen in zinc prices since June 2017, when prices started their latest rally.

Source: MetalMiner analysis of FastMarkets

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But going back even further, the zinc price bullish rally started in 2016. Since then, zinc prices have increased around 120%, from $1,471/mt to current levels.

During this bullish rally, zinc prices reached a more than 10-year high, which signaled strength in the rally.

Source: MetalMiner analysis of FastMarkets

Some analysts believe this recent short-term downtrend serves as a possible peak for zinc prices. In other words, zinc prices may have already peaked and have started a new downtrend.

The alarms sounded on the London Metal Exchange when 78,950 tons of metal were delivered into LME stocks.

Before we speculate as to where zinc prices are going, let’s examine some of the indicators.

LME Stocks vs. Trading Volume

Traders commonly react to stocks changes, which is reflected directly in zinc prices. When a big delivery of any metal — in this case, zinc — reaches the LME stock, traders interpret this signal as a lack of tightness in the metal supply and demand equation.

In other words, traders think that the deficit is lower and sell their positions for the metal.

However, LME stock levels typically serve as a very short-term price driver (for days or weeks, not months). Rather, MetalMiner believes trading volumes better reflect the metal price trend. Zinc trading volume still supports the long-term uptrend, even if prices have so far trended lower this month.

Global Zinc Market

According to the International Lead and Zinc Study Group (ILZSG), 2017 left behind a deficit of 495 kt for refined zinc metal. Zinc mine output increased by 33.7% in India, while the increase in Peru was driven by higher output in the Antamina mine.

World output refined zinc production remained flat when compared to 2016, with increases in India around 30.4% versus a decrease in Canada, China, Peru and the Republic of Korea.

Despite the increases in zinc production, zinc demand increased by 2.6%, driven by zinc appetite in Australia, Brazil, China and Japan.

U.S. demand increased by just 0.6%, while European demand fell 0.5%.

Chinese Zinc Market

As for other industrial metals, Chinese numbers are commonly used as an indicator for the global metal industry. During the November 2017 to January 2018 period, China’s official zinc trade figures show 291,000 tons of refined zinc entering the country. This figure is the largest since 2009, when metallic trade flows were massive.

Shanghai Futures Exchange (ShFE) zinc stocks have recovered from a 2017 drop of 84,000 tons. Since the beginning of 2018, zinc stocks have rebounded by 46,000 tons, reaching the highest level since May 2017 (114,887 tons).

Brazilian Zinc

Brazilian mine Nexa Resources forecasts a deficit for zinc in 2018, with demand outpacing supply.

The deficit may continue due to the inability of Chinese small mines to renew permits under current environmental policies. Therefore, Chinese production may not be able to meet the annual demand growth of around 2-2.5% (based on previous growth).

What This Means for Industrial Buyers

MetalMiner sees the current pullback in zinc prices as short-term in nature as opposed to a price trend correction.

Therefore, while base metals and zinc remain in a current bull market, buying organizations may want to take advantage of lower prices and learn the exact time to commit to some zinc volume.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

To understand how to adapt buying strategies to your specific needs on a monthly basis, take a free trial of our Monthly Outlook now.