Author Archives: Taras Berezowsky

No, we’re not talking about Eddie Murphy and Dan Aykroyd (although we do love that classic film).

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The Global Precious Monthly Metals Index (MMI) has just entered a two-month downtrend, with global trade uncertainties and other economic worries serving as a backdrop. Platinum and palladium are once again taking center stage.

The subindex tracking a basket of gold, silver, platinum and palladium prices from four different geographies decreased one point to 94 for the May reading — a 1.1% drop — driven by drops in U.S. gold, silver and platinum prices.

While both platinum and palladium prices dropped last month, in May only palladium began the month lower, while platinum bumped up a bit. This tangible — yet potentially insignificant — short-term reversal of fortune for those two platinum-group metals (PGMs) stands in stark contrast to the previous trend: a huge divide over the past year and a half or so in the platinum-palladium spread, with the latter metal holding a vast premium to the former, which continues today.

Based on MetalMiner IndX data, the U.S. palladium price fell 2.6%, down to $1,365 per ounce, for the month of May. Meanwhile, the U.S. platinum price rose 4.5%, clocking in at $886 per ounce.

Palladium still holds at nearly $100 per ounce higher than the gold price, which stood at $1,283 per ounce in the U.S. at the beginning of the month — down only a few dollars per ounce over the previous month.

Platinum and Palladium (and Gold and Silver) Perspectives

This one-month price trend reversal looks to align with the longer-term forecast as well, according to some analysts.

“Palladium will cost an average $485 an ounce more than platinum this year – a record breaking premium – but the gap will narrow in 2020 as the rally fizzles out and platinum recovers after an eight year downturn,” a Reuters poll showed, according to this article.

“The poll of 27 analysts and traders conducted this month returned a median forecast for palladium to average $1,350 this year – its highest annual average ever – and $1,275 in 2020,” the article stated. “That prediction is higher than a similar poll three months ago which forecast prices of $1,200 this year and $1,150 in 2020.”

Meanwhile, Goldman Sachs stated in a recent analyst report that “we think that lack of substitution by auto companies will lead palladium to continue to outperform platinum,” according to Kitco News.

The investment bank went on record as saying, “Palladium is also set to benefit more than platinum from tighter environmental restrictions in China,” and “as such we reopen our long palladium-versus-short platinum trade recommendation.”

Goldman is also bullish on gold and bearish on silver.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Their analysts “are trimming their [gold] forecasts to $1,300 an ounce for three months, $1,325 for six months and $1,375 for a year from now.” For silver, they listed “three-, six and 12-month silver forecasts of $14.50, $15 and $15.50 an ounce, down from $15.50, $15.50 and $16 previously,” according to the Kitco News article.

In the aftermath of the Section 232 tariffs on steel and aluminum going into effect in March 2018, we heard and read a lot about some of the largest American OEMs and their business challenges.

For example, Ford Motor Company’s claim that the tariffs cost the automaker $1 billion in profits last year.

But what’s not known or reported as much in the mainstream is what manufacturers have been doing to strategically mitigate tariff risk, or how their various business units and organizations put practices in place to hedge against that risk.

“We’re flexible, and we can move quickly now that we have started to qualify additional materials,” said Matt Marthinson, VP Supply Chain at JB Poindexter & Co., Inc. “So I like our chances much better than where we were just two years ago.”

A company like that has to be flexible — as a large-volume metals buyer, JB Poindexter is the largest truck manufacturer in the U.S. of Class 3 through Class 7 trucks, including the majority of UPS, FedEx, U.S. Postal Service, Penske and Ryder trucks across North America, according to Marthinson.

In a conversation with Lisa Reisman on our current podcast series, “The Maker-to-User Trend in the Time of Tariffs,” Marthinson lets listeners in on how an established transportation industry manufacturer with significant exposure to commodity risk views the tariff landscape, both now and into 2020.

Listen in!

According to his company bio, Matt Marthinson is the leader for the Supply Chain transformation initiative at JBPCO, which includes partnering with the business owners to consolidate and leverage spend across all business units. He has over 25 years of comprehensive business achievements and expertise in Lean Manufacturing Operations, Production Planning, Materials Management, Procurement, Transportation and Logistics, Sourcing and Supply Chain with Kaiser Aluminum, Honeywell, Alcoa and Hubbell Incorporated, most recently as vice president of strategic sourcing. Learn more here.

Maker-to-User in the Time of Tariffs: Background

After the U.S. Commerce Department’s Section 232 findings in early 2018, President Donald Trump took action — and the rest is history.

This new podcast series takes a closer look at the U.S. manufacturing landscape in our present time of trade tariffs, and how manufacturers themselves are affected by the tariffs (winners and losers).

For example, just over 90% of manufacturing industry respondents in a recent, informal MetalMiner poll indicated that the Trump tariffs have hurt their respective businesses, via increased material costs, inventory woes and longer lead times, among other effects.

However, other manufacturers — for example, Honda — have posted healthy profits over the last year.

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Ultimately, we’re interested in what all of this means for the “maker-to-user” trend that we’ve seen gain steam the past several years.

For an excellent primer on the “maker-to-user” movement and trends, download our free white paper on the topic here.

Listen to more episodes and follow the MetalMiner Podcast here.

After a scorching six-month uptrend, the Global Precious Monthly Metals Index (MMI) couldn’t get any hotter even as spring officially came around the corner, finally succumbing to a cooldown in April.

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The subindex tracking a basket of gold, silver, platinum and palladium prices from four different geographies dropped three points to 95 for the April reading — a 3.1% decrease — driven by a drop in palladium and platinum prices.

Even though the U.S. palladium price has cooled off a bit to begin the month of April, this marks the third month in a row it has traded higher than the gold price (even though the spread is a bit tighter).

As tracked by the MetalMiner IndX, the U.S. palladium bar price stood at $1,401 per ounce on April 1, an 8% drop from March 1.

In fact, every single constituent metal price comprising the Global Precious MMI basket — 14 in all — fell this month.

The Latest Palladium Price Outlook

According to a recent Kitco News report, BMO Capital Markets has “hiked their forecast for palladium sharply, looking for it to remain underpinned by a tight supply-demand picture and maintain a large price premium over sister metal platinum for the foreseeable future.”

The report states BMO “upped its average price forecast for palladium by 45% to $1,612.50 an ounce this year and upped its 2020 outlook by 11.3% to $1,112.50.

“As the premium over platinum continues to hit new records, there can be no doubt palladium is in a heavy market deficit at present amid stagnant supply and higher catalyst loadings for gasoline vehicles,” said BMO, as quoted by Allen Sykora of Kitco News. “And with substitution being a slow burn rather than an immediate fix, there remains decent potential for further upside. Qualifying a new catalyst is an expensive and time-consuming process, and we would expect this to occur only when the next range of vehicle models emerges.”

Sykora goes on to report “the bank figures that substitution to platinum will eventually occur, thus 2019 will be the peak for palladium prices.”

How tight is the supply market for palladium? Still as tight as we reported last month.

“‘The market is still fundamentally tight,” said Philip Newman, of the Metals Focus consultancy, as quoted by Reuters. In addition, the consultancy forecasts a 789,000-ounce shortfall this year in the 10 million ounce-a-year palladium market — and deficits of a similar size for several years after that, Reuters reported.

“Once the dust settles [on this latest downward blip for palladium], prices will start to recover,” he is quoted as saying.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

What This Means for Metal Buyers

Expect palladium prices to be relatively well-supported in the long term (over the next 6-12 months or so), if this supply strain continues.

If you’re in the midwestern U.S., chances are your March has gotten off to a more-frigid-than-normal start.

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Not so for the Global Precious Monthly Metals Index (MMI), which has gotten even hotter.

The subindex tracking a basket of gold, silver, platinum and palladium prices from four different geographies shot up four more points to hit 98 for the March reading — a 4.3% increase — driven by a still-scorching palladium price that began its second month in a row higher than the gold price.

In fact, the U.S. palladium bar price, as tracked by the MetalMiner IndX, hit $1,522 per ounce on March 1. That level has never been seen in the history of the MMI series, which began in January 2012.

Forget your road salt or other de-icer — just throw some palladium on your slippery sidewalk, it should melt the ice in no time!

All of this is to say that the Global Precious MMI is now in a six-month uptrend.

Meanwhile, the U.S. platinum bar price rose slightly, but not nearly enough to eat into the spread with its sister platinum-group metal (PGM). The U.S. gold price faltered a bit, beginning the month at $1,312 per ounce (about $8 per ounce lower than last month). Silver prices also dropped across the four tracked geographies.

Palladium Market News and Notes

Last month, we reported that the global palladium supply shortage is still the top driver, with a shortfall of more than 1 million ounces this year and next as estimated by researchers Refinitiv GFMS, according to Reuters.

It looks as though Norilsk Nickel is getting on that forecast bandwagon as well.

Norilsk (also known as Nornickel), which produces 40% of the world’s nickel, said “in 2019 the global palladium market deficit is forecast at 800,000 ounces compared with 600,000 ounces in 2018, with consumption up by 500,000 ounces to 11.2 million ounces due to strong demand from autocatalyst producers,” according to a recent Reuters report.

“(The) spot palladium market practically dried out” in 2018, Nornickel is quoted as saying. According to the Reuters report, the company said the “supply tightness was partly eased by the release of stocks from palladium ETFs (exchange-traded funds), which fell below 1 million ounces for the first time since 2009, and from Nornickel’s Global Palladium Fund.”

Meanwhile, the World Platinum Investment Council said the global platinum market will see a surplus of 680,000 ounces in 2019 (after a surplus of 645,000 ounces in 2018), resulting from supply growth of 5%, which exceeds demand growth, according to a press release.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

All of this conspires to keep the platinum-palladium spread wider than ever.

Joel 420/Adobe Stock

This morning in metals, we’re getting up to speed on where the tin market could be in a decade, what U.S. and Chinese trade negotiators are continuing to discuss, and where the EU car market seems to be heading (hint: it’s not good news).

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Tin Metal Use Expected to Boom Due to Batteries

The International Tin Association (ITA) recently said that tin could experience “a surge of new demand from lithium-ion batteries for electric vehicles and energy storage of up to 60,000 tonnes a year by 2030,” according to Reuters.

According to that report, the ITA did not forecast any numbers of overall tin consumption in 2030, but “it has seen rising interest in the metal for energy materials and technologies.” Last fall, the group went on record forecasting a global tin market surplus of 500 metric tons in 2018 mainly due to weaker demand in China, according to Reuters.

U.S.-China Trade Talks Mention Big Semiconductor Moves

Among the things trade negotiators for both countries discussed at the table recently, according to the WSJ (paywall), were a proposal to increase U.S. semiconductor sales to China to a total over six years of $200 billion (although “that increase would be generated in part by moving assembly operations of U.S. semiconductors from third countries like Mexico and Malaysia to China, allowing those products to be counted as U.S. exports rather than those of other countries”…so much for reshoring).

The Chinese also offered “to eliminate a national vehicle-procurement policy that has given consumers subsidies to buy domestically made new-energy, small-engine and other types of cars,” according to the WSJ.

E.U. Car Market Looking Dim

Speaking of vehicles, while carmakers like Ford are worried about what a hard Brexit may mean for their plants, they may have bigger, more systemic issues when it comes to the E.U. and U.K. car markets.

“European car sales declined for a fifth straight month in January,” and “passenger car registrations dropped 4.6 percent compared with last year to 1.23 million vehicles in the European Union and European Free Trade Association, according to the European Automobile Manufacturers Association,” as reported by Bloomberg.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Of course, all eyes on on China and its auto market to see if glimmers of hope are on the horizon.

Last month, we wrote that winter was apparently “just heating up” for the Global Precious Monthly Metals Index (MMI).

Turns out we were right.

 

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The subindex tracking a basket of gold, silver, platinum and palladium prices from four different geographies shot up four points to hit 94 for the February reading — a 4.4% increase — driven by a scorching palladium price that began the month higher than the gold price (both above $1,300 per ounce).

But that wasn’t the only driver.

The U.S. silver price, as tracked by our MetalMiner IndX, bumped above $16 per ounce, the first time it reached that level since July 2018.

Gold began the month sitting pretty at $1,320 per ounce. Meanwhile, the U.S. platinum price rebounded for the February reading after its January dip, ending up at $820 per ounce.

Let’s take a moment to take that in: platinum at $820, while palladium broke the $1,300 barrier to start February at $1,325 per ounce. That represents the most massive platinum-palladium spread ($505 separating the two) in favor of palladium in the history of MetalMiner’s Monthly Metals Index, which dates back to January 2012.

It’s also the 16th straight month of palladium holding a premium over platinum.

A palladium price correction? Nowhere to be seen so far.

Latest Palladium Price Outlook

Reuters polled 29 analysts and traders just before the beginning of this month on the palladium and platinum outlook, and while the former’s prices may stagnate in 2020, these next 11 months look to be the metal’s best ever.

“The median forecast was for prices to average $1,200 an ounce this year and $1,150 in 2020 – up from $1,027 last year and only $612 in 2016, but beneath current prices around $1,350 and the record high of $1,434.50 reached earlier this month,” according to the article.

What is Driving PGM Prices?

The global palladium supply shortage is still the top driver, with a shortfall of more than 1 million ounces this year and next estimated by researchers Refinitiv GFMS, according to Reuters.

However — automotive metaphor alert — the driver that could stall the palladium price craze is a marked slowdown in major global car markets.

Automotive sales in China fell last year for the first time in three decades, and the U.S. and E.U. automotive markets are bracing for more potential slowdowns amid economic growth concerns.

Will that happen in 2019? Much remains to be seen.

For now, it seems that if buyers are buying on the spot market and could stand to somehow substitute platinum for palladium in their industrial applications, it wouldn’t hurt to look into it.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Key Price Movers and Shakers

The U.S. silver price bumped up 3.6% to sit above $16 per ounce.

Gold began the month at $1,320 per ounce, a 5.8% increase over its Jan. 1 level.

The U.S. platinum price rebounded for the February reading after its January dip, rising 3.3% and ending up at $820 per ounce.

Late last week, a CMO of a B2B mobile technology company published a lightly scathing take on the mainstream media’s characterization of the current “trade war” (a “farce,” according to the headline), by making the case for, among other things, reshoring.

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Ostensibly reporting from the World Economic Forum in Davos, Switzerland, where representatives from participating countries such as Vietnam are worried about high-skilled manufacturing jobs skipping over them en route from China back to the Western world, the author writes that “we’ve really missed the point giving the trade war so many column inches.”

“While the cost of aluminum may sting now if you are importing,” he writes, “it’s an effect of the death throes of a model of production from the end of the last century,” going on to conclude that the future will belong to manufacturers who reshore their operations.

The article cites stats coming from the Reshoring Initiative, a firm that we at MetalMiner have had on our radar since roughly near the end of the Great Recession, and whose founder has been a key source for us in keeping our finger on the pulse of reshoring trends over the last several years.

That founder, Harry Moser, joins us as the first guest in conversation with Lisa Reisman on our new podcast series, “The Maker-to-User Trend in the Time of Tariffs.”

Maker-to-User in the Time of Tariffs: Background

After the U.S. Commerce Department’s Section 232 findings in early 2018, President Trump took action — and the rest is history.

This new podcast series takes a closer look at the U.S. manufacturing landscape in our present time of trade tariffs, and how manufacturers themselves are affected by the tariffs (winners and losers).

For example, just over 90% of manufacturing industry respondents in a recent, informal MetalMiner poll indicated that the Trump tariffs have hurt their respective businesses, via increased material costs, inventory woes and longer lead times, among other effects.

However, other manufacturers — for example, Honda — have posted healthy profits over the last year.

Want to a see Cold Rolled price forecast? Get two monthly reports for free!

Ultimately, we’re interested in what all of this means for the “maker-to-user” trend that we’ve seen gain steam the past several years.

For an excellent primer on the “maker-to-user” movement and trends, download our free white paper on the topic here.

Listen to more episodes and follow the MetalMiner Podcast here.

This morning in metals, we’re tracking the following stories.

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  • Global aluminum value chain under fire from China. The OECD has released a report titled “Measuring distortions in international markets: the aluminum value chain,” in which the organization places particular emphasis on unfairly subsidized aluminum in China, according to a release by the Aluminum Association. “Looking across the whole value chain … shows subsidies upstream to confer significant support to downstream activities, such as the production of semi-fabricated products of aluminum,” the report’s opening reads. “Total government support for [17 aluminum firms] reached up to USD $70 billion over the 2013-17 period, depending on how financial support (i.e. concessional loans) is estimated,” the report continued. “Although all 17 firms received some form of support, it is highly concentrated: the top 5 recipients receive 85% of all support, most of it at the smelting stage of the value chain.”
  • Nucor Corp. breaking ground in the Midwest. Reuters reports that Nucor is planning to build a plate mill for $1.35 billion in Sedalia, Missouri, to be fully operational in 2022. The new mill would produce 1.2 million tons a year of plate products and create about 400 full-time jobs, according to the company’s release. “Tax reform, continued improvements to our regulatory approach and strong trade enforcement are giving businesses like ours the confidence to make long-term capital investments here in the United States,” Reuters quoted Chief Executive Officer John Ferriola as saying in a statement.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

  • Small business owners’ confidence in economy, outlook on business conditions weakens yet again. The Wall Street Journal reports (paywall) that the National Federation of Independent Business’ optimism index has fallen for the fourth straight month. “Over the past few months, owners’ expectations for the future have tempered, while reporting continued solid economic activity,” the NFIB said in its report, based on responses from 621 small-business owners, according to the WSJ. “The Index remains at historically high levels but can’t be expected to improve every month.” As the WSJ article noted, “the survey results mirror those from the Conference Board, whose December survey suggested growing economic-growth concerns.”

It looks as though the winter is just heating up for the Global Precious Monthly Metals Index (MMI).

The sub-index tracking a basket of gold, silver, platinum and palladium prices from four different geographies rose three points to hit 90 for the January reading — a 3.4% increase — driven by a still-hot palladium price.

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The U.S. palladium bar price broke the 1,200-per-ounce barrier to start the month, ending at $1,252 per ounce to begin 2019. That represents a three-month uptrend. Meanwhile, the gold price reclaimed its premium over palladium, settling at $1,282 per ounce to begin the month.

U.S. silver also rose, while platinum dropped in the U.S. and Japan.

Palladium Outlook Looking Even Better With Hybrid Vehicle Demand

As we wrote last month, while supply from major producers including Russia and South Africa is not growing, global automotive palladium demand is expected to achieve a new record high in 2018 of around 8.5 million ounces, according to precious metals consultancy Metals Focus as reported by Reuters.

That conspires for the high price bubble of the formerly junior PGM of late. However, that may not last.

“This increases the potential for correction,” Commerzbank is quoted as stating in a recent outlook report. “We expect a price correction [for palladium] to begin in the course of the first quarter of 2019.”

After correcting, the bank expects the price should to “resume its upswing,” forecasting a price of $1,100 per troy ounce by the end of 2019, it is quoted as saying.

Other analysts agree with that general take, but that doesn’t mean that the longer-term demand outlook isn’t still strong.

According to Anton Berlin, head of analysis and market development at Norilsk Nickel PJSC, as quoted by Bloomberg, “combined palladium use in hybrid and plug-in hybrid — or rechargeable — vehicles next year will be nearly triple that of 2016.”

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Analysts at JPMorgan Chase & Co. agree. “Hybrids are forecast to grow from just 3 percent of global market share in 2016 to 23 percent of sales by 2025,” stated a late-2018 report by the bank, according to Bloomberg.

The Rare Earths Monthly Metals Index (MMI) fell 5.5% to land at 17, just one point shy of its all-time historical low (16).

Certain constituent metal prices rose, such as cerium oxide and europium oxide.

However, several others fell, including neodymium oxide (falling 0.6% to $45,649 per metric ton) and terbium metal (falling 0.7% to $566 per kilogram).

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The China Front

China is doubling down on illegal mining and traceability of rare earth metals and minerals, according to new guidelines published by the country’s Ministry of Industry and Information Technology (MIIT) late last week, as reported by Reuters.

As readers know, China’s been attempting to clean up its rare earths production sector for about a decade already, and it’s made strides toward its goals, but there’s still a way to go.

Even after launching a crackdown on the rare earths sector in 2009 and being forced by the WTO to get rid of export controls in 2014, “illegal mining and production continued to disrupt ‘market order’ and damage the interests of legitimate enterprises,” the ministry stated in their notice, according to Reuters.

The ministry is also committed to establishing a traceability system to prevent buyers from snapping up illegal material and will suspend licenses of companies that break the law, according to the news service.

Meanwhile, In Korea…

Across the Yellow Sea, patent applications for uses of rare earths have been going strong.

According to the Korean Intellectual Property Office (KIPO) on Dec. 30, as reported by BusinessKorea, “the number of patent applications related to the use of rare earth materials for permanent magnets and batteries totaled 2,356 over the past five years from 2011 to 2016.”

High-tech heavyweights Samsung led the way, with Hyundai and LG not far behind.

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