Author Archives: Sydney Lazarus

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This morning in metals, the U.S. dollar index is up, while gold and silver prices are on a downward trend and oil prices dip slightly from Monday’s high. In addition, there’s a very intriguing potential source of renewable energy on the horizon.

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

A drop in U.S. oil inventories has helped oil prices stay more or less steady, Reuters reports. The biggest factor supporting oil prices has been Turkey’s threat to cut off oil exports from Kurdistan, and this past Monday, the price of oil came close to $60/barrel for the first time since June 2015.

U.S. Dollar Index Rises, Precious Metals Fall

Gold and silver prices fell to four-week lows as the U.S. dollar index climbed to a five-week high, fueled by the expectation that the Feds will hike up interest rates again, Reuters reports.

As Stuart Burns wrote earlier this morning, “Trump’s United Nations speech threatening annihilation on North Korea failed to support the gold price, as investors took a cue from central bank announcements that the Fed intends to start unwinding its multi-trillion dollar balance sheet in October.”

A New Renewable Energy Source?

Could 70% of U.S. energy come from plain old H2O? According to new research, energy from water evaporation could provide a staggering 325 gigawatts of power. Read more

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This morning in metals news, the International Trade Commission rules that imports of solar cells are hurting U.S. manufacturers, iron ore enters a bear market and the UN proposes that businesses take responsibility for environmental pollution.

A Bear Market for Iron Ore

The price of iron ore has undergone the biggest weekly fall in 16 months, Bloomberg reports. Having slipped into a bear market, the metal was trading at $63.56/ton on Friday, more than 20% lower than its August 21 high of $79.93/ton.

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

We may see this price slump to continue for the near future. Some expect the price of iron ore to drop to the $50s in the fourth quarter. If China’s steel production cuts do go into effect as planned this winter, the country’s steel output may decrease as much as 30 million tons, thus cutting iron consumption by 50 million tons.

End of the U.S. Solar Boom?

The U.S. International Trade Commission voted in a 4-0 decision on Friday that the U.S. solar energy industry is being hurt by foreign overcapacity and cheap solar cell imports, the Washington Post reports. However, the proposed 40-cent-per-watt tariff on solar cells would double the price of solar panels, putting pressure on the rest of the U.S. solar industry.
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“Where next for oil prices?” Stuart Burns had asked on Monday. In the short term, that would be downwards.

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

Yesterday the Organization of the Petroleum Exporting Countries (OPEC) met in Vienna and decided to extend supply cuts for another nine months, until March 2018. That is what was expected, but oil prices responded by dropping quite a bit, Reuters reported, by roughly 5%.

The price of oil has indications beyond, well, oil. “Oil prices are a proxy for energy prices, and a rising oil price can be supportive for energy intensive metals like aluminum,” Burns wrote. “A rising oil price is also taken as a proxy for rising industrial demand – a bullish indicator that global growth is strong. A falling price, on the other hand, should be good for consumer spending as it keeps more money in drivers’ pockets and lowers the cost of goods sold for companies far and wide.”

Where Next for the U.S. Dollar?

Another driver of metal prices is the dollar. This past week, Raul de Frutos looked at the movement of the U.S. dollar, which recently hit a seven-month low. What is the reason for this drop?

“First, the dollar had steadily risen for three consecutive months,” de Frutos wrote. “It’s not uncommon to see profit-taking after such an increase. But there are also some fundamental reasons behind this sell-off.” Read more

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This morning in metal news, a new report paints a positive picture for jobs in the renewables sector, Moody’s downgrades China’s credit rating, and the results of the OPEC meeting are in. The current supply cuts will be extended for another nine months, and oil prices tumbled on the news.

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

OPEC Agrees on 9-Month Extension of Supply Cuts

Let’s start with the big headline of the morning. As expected, the Organization of Petroleum Exporting Countries (OPEC) has agreed to extend supply cuts for another nine months, until March 2018.

After OPEC wrapped up its first meeting in Vienna around 3:30pm CEDT (8:30am CDT), oil prices responded over the next few hours by sliding 4.5% to $51.60 per barrel. Some industry analysts think OPEC should have agreed to deeper cuts. As The Guardian reported, OPEC is “sticking to the 1.8 [million] barrel a deal first agreed in late November.” Russia and other oil producing non-OPEC members are also expected to go along with the supply cuts.

Forget Bringing Back Coal Jobs

The burgeoning renewable energy sector employed 9.8 million people in 2016, according to the latest annual report released by the International Renewable Energy Agency (IRENA). Global employment in the sector has been growing every year since 2013, and there may be as many as 24 million renewables workers worldwide by 2030. Read more

This morning in metals news, the strike at Freeport McRoRan’s Grasberg copper mine was extended for a second month, oil prices rose in expectation of supply cuts, and silver prices reached a three-week high.

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Freeport Indonesia Strike Extended

This past Saturday, the union representing thousands of workers at Freeport’s Grasberg copper mine in Papua, Indonesia announced that the ongoing strike will be extended beyond May 30, Reuters reported. As union industrial relations officer Tri Puspital told Reuters, “We will extend the strike for 30 more days.” Approximately 9,000 workers are participating in the strike.

Two-Month Trial: Metal Buying Outlook

The reason for the strike revolves around employment. Last month, Freeport laid off about 10% of its 32,000 workers to cut costs, which accrued to the tune of millions thanks to an ongoing dispute with the Indonesian government over rights to the Grasberg mine. “With this problematic combination of protests from workers and tensions with the Indonesian government,” wrote MetalMiner analyst Raul de Frutos earlier this month, “it’s no wonder that investors are concerned about further supply disruptions this year.” It looks like supply disruptions will continue.

A Key Week for Oil

One hopes that this will be the only time when news source after news source mentions Saudi Arabia and glowing orbs in the same headline. In more important news, Bloomberg reported yesterday that Saudi Arabia has received Iraq’s support to extend oil output cuts for nine months, after Saudi Minister of Energy Khalid Al-Falih flew to Baghdad to talk to Jabar al-Luaibi, his Iraqi counterpart. Read more

This doubtful week, a Stanford economist made the bold proclamation that electric vehicles will completely displace their petrol and diesel counterparts by 2025, and India’s plan to triple steel production by 2030 was met with more than a few raised eyebrows.

Grand Plans

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Speaking of India, its ascent as a promising market for renewable energy has been truly impressive. Consultancy EY recently published its 2017 Renewable Energy Country Attractiveness Index (RECAI), and India took the number two spot, beating out the U.S., which slipped to third place.

India had been number nine in 2013, before Narendra Modi, who views developing renewable energy to wean India off coal as a top priority, became prime minister. Modi aims to boost India’s renewables capacity to 175 GW by 2022 (currently capacity stands at 57 GW).

India has similarly high ambitions for steel, as Sohrab Darabshaw reported earlier this week. The country aims to triple its steel production capacity by 2030, which would mean adding 182 million tons of capacity. Read more

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This morning in metals news, we have the latest rankings of promising renewables markets from EY, a continued decline in U.S. oil supply, and a weaker U.S. dollar.

The Renewables Race

China and India took the top spots on consultancy EY’s 2017 Renewable Energy Country Attractiveness Index (RECAI), edging past the United States, which had fallen from first to third place. The downward shift for the U.S. is largely due to the expected demise of the Clean Power Plan.

Free Download: The May 2017 MMI Report

Since taking office in 2014, India’s prime minister Narendra Modi has been nothing but ambitious in his plans to reduce the country’s dependency on coal and ramp up renewable energy capacity. India’s current renewables capacity stands at 57 GW, and Modi’s plan is to reach 175 GW by 2022, including 100 GW of solar. Read more

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Now’s the time to buy those solar panels you’ve been saving up for. This week, Tesla announced that it is taking orders and deposits for solar roof tiles that look stunningly like… regular roof tiles. But therein lies the appeal, and the $42-per-square-foot cost isn’t so bad either, lower than what industry analysts expected, Bloomberg reported.

Keep Your Eye on Silver

This growing interest in solar energy has been supporting the demand for silver, according to the Silver Institute’s World Silver Survey 2017, which Taras Berezowsky covered on MetalMiner this week. As Berezowsky wrote, “According to the report, silver demand for photovoltaic applications shot up 34% to reach 76.6 million ounces. This growth was the strongest since 2010, and it was driven by a 49% increase in global solar panel installations.”

Two-Month Trial: Metal Buying Outlook

In addition, “automotive will be an interesting sector to watch,” Berezowsky wrote. Silver demand could be driven up further as the world moves towards electric vehicles — whose engines and circuit boards require silver — however slowly, as Stuart Burns noted earlier this morning.

Bearish Times

“If you are a metal buyer, it doesn’t matter if you buy aluminum, copper, steel or tin,” Raul de Frutos wrote in his commodities outlook this week. “The information in this article is important for you.” Commodities may have enjoyed a bull market in early 2016, but things appear to have shifted to the bear-ish. “Commodities not only have struggled to make new headway,” de Frutos wrote. “In the past few days they have weakened significantly. Recent moves in China have caused a significant shift of sentiment in financial markets.” Read more

This morning in metals news, we’ve seen prices for copper and gold reach three-week highs and lows, respectively.

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Threat of Supply Disruption Has Driven Up Copper Prices

Copper prices reached a three-week high today, Reuters reported, driven by potential supply disruptions. This news comes after yesterday’s rally near the Grasberg copper mine in Indonesia. Thousands of workers from the Indonesian unit of Freeport McMoRan Inc. took part, protesting against layoffs that resulted from the company’s contract dispute with the government.

Freeport had laid off 10% of its workforce, with potentially more layoffs to come. As a response, the union representing the workers has threatened to strike for the month of May.

A Three-Week Low for Gold Prices

In contrast, gold prices fell on Monday as the threat of a U.S. government shutdown faded and the U.S. dollar edged slightly higher. The metal has dropped to $1,255.50 per ounce, the lowest gold prices have been since April 10, according to FactSet data. Political tensions in Europe had kept gold prices up so far this year, but that trend seems to have been reversed.

In related news, S&P Global Platts reported that gold production in China, the world’s top gold producer as well as consumer, fell significantly in Q1 2017. In this past quarter, China produced 101.2 tons of gold, which is a 9.3% drop compared with 111.6 tons in Q1 2016.

Bernanke Argues in Favor of a Border Adjustment Tax

Former Federal Reserve Chair Ben Bernanke came out in support of the proposed border adjustment tax (BAT), suggesting to CNBC that the GOP had not presented the idea well. Bernanke argued that a stronger dollar would negate any negative effects of the BAT – which would tax imports and exempt exports – by increasing U.S. companies’ purchasing power and lowering the cost of overseas manufacturing.

First, some good news. Congress approved a week-long spending measure today, narrowly preventing a government shutdown from occurring tomorrow, which also happens to be President Donald Trump’s 100th day in office. Phew.

And talking about nail-biters, this week kicked off with the first round of French presidential elections. Advancing to the May 7 runoff are independent centrist Emmanuel Macron, who had come out on top with 23.75% of the votes, and controversial far-right candidate Marine Le Pen, who won 21.53%.

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

The results “may not have matched Britain’s Brexit referendum of last year or the United States of America’s presidential election of Donald Trump in upsetting the pollsters,” wrote MetalMiner co-founder Stuart Burns, “but it does say a lot about the mind set of French voters all the same.”

Over in the U.S., this week the Trump administration announced plans to slash individual and business income tax rates. The proposal will have businesses, big or small, paying 15% (the current corporate tax is 35%). As for a border adjustment tax on imports, the latest news reports are saying Trump has abandoned the idea. This past week, Jeff Yoders spoke with Americans for Prosperity and Freedom Partners on this very topic of a BAT.

“AFP sees the BAT as very similar to a VAT and [AFP thinks] that its overall impact would be similar,” Yoders wrote. “I, myself, have been known to a be a VAT conscientious objector, as well. I do think, though, that the idea of a BAT, while it certainly has VAT similarities, is intriguing in that it uses the corporate income tax to encourage manufacturing in the U.S.”

Free Sample Report: Our Annual Metal Buying Outlook

To send off our (erstwhile) colleague Jeff Yoders, let’s end this Week-in-Review with another article from him. This week, he published the final part of an interview with Dean A. Pinkert, former International Trade Commission vice chair, on issues facing metals producers and manufacturers; the Trump administration; and tax policy. Don’t miss it!