Author Archives: Irene Martinez Canorea

The Raw Steels MMI increased again this month by seven points, returning to 2014 levels.

The increase came as a result of rising Chinese steel prices, which have rallied since April 2017.

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

Early September data reveal that Chinese hot-rolled coil (HRC) prices increased quicker than U.S. HRC prices.

Domestic steel prices, including HRC prices, mostly held steady in August. The spread between the two has fallen by 5% since the beginning of August. Rising Chinese prices typically lead to reduced imports overall, as U.S. prices become more competitive.

Chinese steel prices have been boosted by better-than-expected demand, together with supply concerns.

China Data Creates Uncertainty

China remains the dominant player in steel market.

Thus, Chinese economics serve as one of the most powerful indicators of the steel industry.

Chinese economic data, however, has created some uncertainty around the steel market. Even if the market expects a correction, economic indicators still reveal positive data.

Yet, some analysts believe China remains in a bubble set to explode at any time.

Raw Materials Show Some Weakeness

Steel prices also take their cues from raw material prices.

Steel prices commonly move together with iron ore, coking coal and steel scrap prices. Raw material price dynamics slowed in August. Both iron ore and coal prices have increased slightly, but showed some weaknesses during the middle of the month.

The previous uptrend for both iron ore and coal comes down to solid demand from China, as steel production has increased this year. However, July iron ore import data reveals a decrease of 8.9% from June’s reading, and 2.4% below last year’s reading. The lower import levels may signal possible future softness in the demand of this commodity. Chinese iron ore has increased by 2%, while Korean pig iron prices decreased by 0.44%.

What This Means for Industrial Buyers

Steel momentum appears to have lost some steam.

Buying organizations should watch commodities to analyze the signals for both the short- and long-term trend.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Raw Steels Prices and Trends

For full access to this MetalMiner membership content:
Log In |

This month’s Copper MMI beat its previous gain last month en route to a six-point increase.

The boost was primarily driven by an outperforming LME copper price, which has been seemingly unstoppable since the Chinese copper ban was announced July 24.

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

Source: MetalMiner analysis of Fastmarkets

Copper tends to correlate with the U.S. dollar. As a dollar-denominated commodity, a weaker dollar can stimulate copper buyers. The U.S. dollar has not found a floor yet, and has continued falling, reaching a two-year low now.

Commodities, on the other hand, have increased again during the first week of September. A recovery in oil prices has led the increase.

Though it’s much too early to change the commodity outlook to bullish, we did expect the correlation between commodities and industrial metals to come back to a more normal state (where they both tend to move in the same direction).

If commodities start an uptrend, then copper prices may continue their bullish rally, too.

What About China?

As China is the main commodity consumer of the world, analysts pore over Chinese economic data. Chinese economic data released during this summer resulted in better-than-expected — that is, increasing manufacturing PMI — manufacturing data. This fact, together with the government’s environmental policies, has supported base metal prices.

One curious correlation involves the Chinese Yuan (represented by the blue line below) and the copper spot price (red line). Both have moved in a similar fashion recently.

Source: MetalMiner analysis of StockCharts

Does the Chinese Yuan serve as a guide to what copper prices might do in the future?

A deeper analysis of this and other drivers will appear in our upcoming free 2018 Annual Outlook Report, which will be released next month.

What This Means for Industrial Buyers

Even if the uptrend remains strong, we still expect high volatility for copper prices.

Thus, we expect a price retracement at some point in the upcoming months. The price retracement is normal and prices digest previous gains (in this case, a 15% increase).

Source: MetalMiner analysis of Fastmarkets

To better understand how to adapt the industrial metal buying strategies based on these dynamics,  take a look at our Monthly Metal Buying Outlooks.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Copper Prices and Trends

For full access to this MetalMiner membership content:
Log In |

The Aluminum MMI increased eight points from last month’s reading, reaching its highest value since September 2014.

Two-Month Trial: Metal Buying Outlook

This rise does not come as a surprise to MetalMiner, as aluminum was the strongest performer in August, increasing by 10.73% during the month.

Aluminum has awakened  from its previous sideways trend and now continues its previous uptrend.

Source: MetalMiner analysis of Fastmarkets

Some analysts do not expect more movements to the upside, as the supply and demand equation appears unclear. Positive data and increasing demand in China have supported aluminum prices so far.

However, Morningstar forecasts a decrease in Chinese demand. Meanwhile, Indian demand may not increase quickly enough to balance global demand.

On the supply side, Chinese curtailment of capacity remains uncertain. Similar to steel, the real impact of curtailments on production remain to be seen.

“Green” aluminum appears to be a new trend  among buying organizations. The difference lies in the use of renewable energy instead of fossil fuels in the smelting process. Premium prices have risen for this type of aluminum as demand continues to rise due to pressure on buying organizations to lower their carbon footprint.

What This Means for Industrial Buyers

MetalMiner believes that aluminum has broken a ceiling that it previously could not break.

The sideways trend that started at the beginning of this year served as a pause in a bullish market, which has just restarted. Trading volumes have supported this late uptrend, which makes the uptrend stronger.

Thus, buying organizations might expect more upward movements in the upcoming months.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Aluminum Prices and Trends

For full access to this MetalMiner membership content:
Log In |

Commodities and industrial metals have historically moved in tandem.

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

However, recent market dynamics highlight that this correlation has started to change.

Commodities have not moved past resistance levels, and instead have continued on a downtrend. Industrial metals traded sideways at the beginning of 2017, but have shown recent strength with the latest rally.

In the graph below, the green line represents the DBB index and the blue line represents the CRB index. The analysis at the bottom is the correlation between CRB and DBB index. It should be noticed that historically it has been positive.

Source: MetalMiner Analysis of FastMarkets

Why the Divergence?

First, readers should understand what exactly the CRB index contains.

Energy accounts for 39% of the CRB index, while agriculture is 41%. Base and industrial metals make up only 13% of the mix.

Thus, oil prices (what we actually look at as a critical indicator) have an outsized impact on the CRB index. Oil prices have been down since the beginning of 2017, as have commodities.

Oil prices. Source: MetalMiner Analysis of TradingEconomics

In terms of  industrial metals, most of the base metals have rallied this month. Aluminum, copper and zinc, particularly, were the best performers of the month. Prices have increased steadily and show strength to continue rising.

Steel forms seem to have lost a little steam, but prices are still increasing. Steel prices have been in an uptrend since November 2016.

Source: MetalMiner Index

Both steel and base metals price increases have contributed to the uptrend in industrial metals, which now appears to have taken off like a rocket.

What Can Buying Organizations Expect?

Even if the source of the current lack of correlation is clear, MetalMiner believes that one of the two (commodities or industrial metals) may show a change of trend at some point soon.

One can move the other, and that is why buying organizations should track price movements in each.

Free Sample Report: Our Annual Metal Buying Outlook

To better understand how to adapt industrial metal buying strategies based on these dynamics, take a look at our Monthly Metal Buying Outlooks.

Aluminum, copper and zinc have moved in a solid bullish manner. While nickel has joined these three base metals, tin and lead seems to be more reticent to join the bull party. 

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

Tin showed some weakness at the beginning of August, contrary to the other four base metals. In August, prices fell sharply. The tin price soon recovered, but still lacked the bullish sentiment. Trading volumes are not heavy, nor are prices breaking key resistance levels.

Source: MetalMiner analysis of FastMarkets

Lead has also showed some weaknesses during August, as prices fell with heavy selling volume. 

Source: MetalMiner analysis of FastMarkets

What Does This Mean for Buying Organizations?

For its forecast subscribers, MetalMiner defines different buying strategies for all of the base metals, as well as four forms of steel, depending on the price dynamics, together with trading volumes.

Even though the industrial metal outlook remains bullish, lead and tin seem to be behaving on their own terms. Buying organizations will want to pay careful attention to trading volumes in the coming month.

Free Download: The August 2017 MMI Report

Knowing when to buy forward and when to hold off on purchases can be a challenging activity for any procurement professional. MetalMiner’s Monthly Metal Buying Outlooks provide buying organizations with a clearer picture as to when to make purchasing decisions.

The bullish trend has become even stronger.

Copper and zinc prices have joined the bullish trend led by aluminum in the latest rally, which started at the beginning of August.

This new uptrend in these three metals is accompanied by heavy buying volume — signaling a a bull market.

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

As suggested in our article published Tuesday, aluminum prices have outperformed and broke out from their sideways trend.

Source: MetalMiner analysis of FastMarkets

Copper prices have decided to join in on the fun, and are also trending up again.

After the breathtaking rise that copper prices demonstrated at the end of July, prices are up again. A bullish sentiment has returned for copper.

Source: MetalMiner analysis of FastMarkets

Zinc prices have also hit their highest levels recorded since 2007, according to FastMarkets historical data, and point to a possible continuing uptrend. A rally in zinc prices occurred just after the sharp increase in aluminum prices. Buying trading volumes remain heavy, therefore the uptrend is underpinned by strong buying sentiment.

Overall Outlook

Although MetalMiner considers a variety of variables, indexes and data to analyze market sentiment, the most important variable is how metal prices behave.

Commodities have re-started a short-term uptrend after they lost steam at the beginning of the year. Meanwhile, industrial metals have moved from bullish (to nearly sideways/top, as we had even considered switching our industrial metal outlook to bearish but did not) to absolutely bullish again (mainly caused by these three metals rallies). The U.S. dollar has fallen relentlessly since the beginning of the year.

Free Sample Report: Our Annual Metal Buying Outlook

What This means for Buying Organizations

Buying organizations should watch metal prices closely to determine the best strategy to commit long- and short-term purchases.

For more insight into forward buys and hedging, subscribe to our monthly reports.

Gold prices rallied during the first three months of 2017 on the heels of the presidential election and a weaker U.S. dollar.

However, gold prices showed some weakness during March and have traded sideways since then, with an average price of $1,250/ounce.

Source: MetalMiner analysis of FastMarkets

Gold prices have not been able to surpass the resistance level of $1,300/ounce, which would ensure the metal retain its bull market status.

In July, however, gold prices increased together with other base metals and commodities.

The U.S. Dollar

The U.S. Dollar weakness in 2017. Source: MetalMiner analysis of TradingEconomics

Gold prices received a lift from a weaker U.S. dollar.

A bearish U.S. dollar contributes to rising gold prices. The U.S. dollar is currently at its lowest level in a year and is close to its support level.

Source: MetalMiner analysis of TradingEconomics

The U.S. dollar could rebound from this support level and recover — or it may continue its sharp downtrend and show weakness. Gold prices could remain supported by a weaker dollar.

Stock markets

The S&P 500 has continued its uptrend since 2016. The index has reached an all-time high. The rising stock market may have kept a lid on gold prices this year.

However, the increase in stock markets has shown low volatility.

Low volatility periods (calm periods) are commonly followed by high volatility periods (storm periods).

We may be in the calm before the storm.

S&P 500. Source: MetalMiner analysis of TradingEconomics

What this means for metal buyers

Gold prices have lost steam and have traded sideways since March (with the exception of July’s bullish move).

A stronger U.S. dollar could drive gold prices down again. The opposite also remains a real possibility.

Buying organizations may want to watch the U.S. dollar closely.

stockquest/Adobe Stock

For three months, MetalMiner has claimed a sideways trend for aluminum. This sideways trend could both signal a market top or a price consolidation, and a continuation pattern of the bullish market that started last year.

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

The price increase in aluminum has coincided  with heavy trading volume, signaling a breakout of a price consolidation. Thus, we could see a bullish uptrend for aluminum, which means increasing aluminum prices.

Source: MetalMiner analysis of FastMarkets

As previously explained by MetalMiner, buying in a bullish market means buying organizations will want to identify opportunities to buy forward (hedge).

This new price increase, together with other strength in LME base metals (such as copper), may be the start of a new uptrend for aluminum.

The U.S. dollar has also continued to show weaknesses this year, providing a lift to base-metal prices. The CRB index is still in a long-term downtrend, but has shown a slight recovery in the short-term trend. The DBB index is currently in an uptrend, both for the long- and short-term.

Free Sample Report: Our Annual Metal Buying Outlook

Buying organizations may want to buy forward given aluminum price dynamics, together with trading volume.

For more insight into forward buys and hedging, subscribe to our Monthly Metal Buying Outlooks.

The Raw Steel MMI jumped up four points this month to 75, increasing by 5.6% and returning  to 2015 levels, along with copper.

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

Increasing Chinese steel prices have driven domestic steel prices this month. Both Chinese hot-rolled coil (HRC) and cold-rolled coil (CRC) prices have experienced an uptrend since the end of 2015. Chinese HRC prices increased 10.7% this month.

Source: MetalMiner data from MetalMiner index

Even though the degree of movement in U.S. steel prices as great as those seen in China, U.S. prices have continued to increase. While Chinese steel prices continue to increase, domestic prices may continue the same uptrend.

The Spread

Considering both U.S. domestic and Chinese HRC prices, the spread has continued to decrease this month. We would expect a drop in imports if the spread continues to decline. This would lend support to U.S. domestic HRC prices.

Source: MetalMiner data from MetalMiner index

Domestic Scrap

Meanwhile, U.S. shredded scrap prices declined 2.4% this month.

Falling  scrap prices could push domestic buyers toward scrap instead of other raw materials, and domestic steel prices could face downward price pressure.

However, the long-term trend in scrap signals rising, not falling, prices.

Source: MetalMiner data from MetalMiner index

Raw Materials

Both iron ore and coking coal prices have rallied during July.

Increasing raw material prices may create upward pressure in steel prices as production costs increase.

What This Means for Industrial Buyers

Steel momentum appears to have shifted upwards.

Buying organizations should watch commodities to analyze the signals for both the short- and long-term trends.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Raw Steel Prices and Trends

For full access to this MetalMiner membership content:
Log In |

The Copper MMI jumped five points to 78 for our August reading, a high not seen in more than two years (the sub-index hit 79 in January 2015).

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

Copper has outperformed all the other base metals this month. LME copper prices increased by 7.8% in July.

The sharp increase in copper prices came after an announcement of a possible ban of copper scrap in China by the end of the year. The increase in copper prices was accompanied by heavy volume, which may signal a stronger uptrend.

However, volumes declined during the final days of July and the beginning of August.

Source: MetalMiner analysis of FastMarkets

The U.S. dollar has shown weakness since the start of 2017. The fall of the dollar during July coincided with an increase in copper prices. A weaker dollar commonly drives non-U.S. investment into commodities that are dollar-dominated (as copper is).

The U.S. dollar remains in a strong downtrend, touching lows not seen since May 2016.

Source: MetalMiner analysis of Trading Economics

What This Means for Industrial Buyers

Even though copper prices have increased sharply this month, a price retracement could occur  some time in August or September.

Copper price dynamics, together with volumes, will provide the signals to read the short- and long-term trend correctly.

Our Monthly Metal Buying Outlook informs buyers of the precise support/resistance levels (signals) to help decide when to shift buying strategy.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Copper Prices and Trends

For full access to this MetalMiner membership content:
Log In |