Author Archives: Taras Berezowsky

MetalMiner’s Global Precious Monthly Metals Index (MMI), tracking a basket of precious metals from across the globe, held steady for the June reading and remained at an index value of 88 for an unprecedented third straight month.

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The dog days of summer have begun early, much as they did during the summer of 2017.

While this subindex fluctuated within a narrow band of only two index-value points between March and August 2017, there was a stretch of two months (May-June) when the Precious MMI sat at 84.

The U.S. gold price increase after June 1 last year had turned some heads. As my colleague (and, at the time, brand new) MetalMiner Editor Fouad Egbaria had reported, “the rise comes in a climate of political uncertainty, with an election in the United Kingdom, former FBI Director James Comey’s testimony before the Senate Intelligence Committee on Thursday and a European Central Bank meeting this week.” (That rise didn’t do much to spur the Precious MMI the following month — it dropped to 83 in July 2017.)

A year later, while we have no shortage of economic and political issues, gold has gone the opposite way, dropping below $1,300 per ounce to start the month for the first time since last December.

Meanwhile, the platinum-palladium price spread widened over the past month. The spread ($58 per ounce last month) widened to $77 per ounce for the U.S. bar prices of those respective metals. Palladium is on a record run of its own: it remains at a premium to platinum for the eighth straight month.

The U.S. silver price rose slightly for the June reading, yet the uptick couldn’t help break the subindex from achieving its first three-month trend of flatlining.

What’s Driving Palladium?

Employing an irresistible pun related to automotive-industry metals is always good for a chuckle. We’d imagine the analysts at Metals Focus would undoubtedly agree.

“Even with the lacklust[er] performance of both the Chinese and US auto markets, automotive palladium demand will almost certainly rise again this year, the result of growth in Europe and elsewhere, as well as tightening emissions legislation driving increases in PGM loadings,” analysts at the research group, following the release of a recent report, are quoted as saying by Reuters.

So, quite literally, cars are driving palladium (prices), at least in part.

Metals Focus analysts keep up the punny work when it comes to platinum as well:

“Global demand appears lacklust[er] and we have yet to see the full effects of the fallout from accelerating losses in the light-duty diesel sector,” they said, as quoted by Reuters. (Italics are ours.)

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This commentary follows the PGM report released by Metals Focus, in which the group foresees a 1-million-ounce deficit due to increased auto demand and falling mine production, while platinum should continue its surplus.

MetalMiner’s Global Precious Monthly Metals Index (MMI), tracking a basket of precious metals from across the globe, held steady for April and remained at an index value of 88 for the second straight month.

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Ultimately, all else being equal, we can attribute the subindex’s stasis to the divergence in platinum and palladium price movement.

While the U.S. palladium price bounced back from last month, gaining 1.2%, the U.S. platinum price dropped for the third straight month, according to the MetalMiner IndX. (The U.S. gold price, meanwhile, contributed to the stasis by dropping to its lowest price of 2018, and U.S. silver hardly budged from April to May.)

Palladium remains at a premium to platinum for the seventh month in a row.

Palladium and Platinum Forecast

The U.S. bar prices of both platinum-group metals (PGMs) held above $900 per ounce for the May 1 MMI reading, which is directly in line with analysts’ views on the palladium’s outlook as of a few weeks ago.

In mid-April, Stephanie Aymes, head of technical analysis at Societe General, told Reuters, “Palladium should find support at $900.”

“The short-term ongoing rebound could fetch the 200-day moving average at $973/980, and this will decide on the extension (or not) of the recovery,” she told the news service.

In a more recent Reuters survey that polled 28 analysts and traders, the consensus outlook appears a bit higher for the metal. The average palladium price view for 2018 was $1,039 per ounce, and $1,040 per ounce for 2019.

“We forecast demand growth in palladium to moderate in 2018 after two years of strong growth driven by autocatalyst demand,” Deutsche Bank analyst Nicholas Snowdon was quoted as saying. “While we forecast autocat growth to continue, other elements of industrial demand are likely to decline in response to higher prices.”

“We expect that 2018 could be the year of peak palladium prices in the foreseeable future as market deficits begin to decline,” he continued, as quoted by Reuters.

For platinum, the polled analysts expect the metal’s price to continue its “historically unusual discount” to palladium through 2019. For the balance of this year, platinum is forecast to see an average price of $983 an ounce.

“Platinum continues to face headwinds from the diesel emission scandal,” Julius Baer, analyst at Carsten Menke, is quoted by Reuters as saying. “The share of newly sold diesel cars in Europe’s five biggest markets kept on falling during the first quarter.”

Platinum’s other demand source — the jewelry market — has also taken a hit, especially in China.

Gold Price at Its Lowest for 2018

Global gold demand for Q1 2018 appeared to be the lowest quarterly reading since 2008, according to the World Gold Council. Mainly driven by waning investor interest in gold bars and gold-backed ETFs, the price followed suit.

The U.S. gold price ended up at $1,314.90 per ounce for the May 1 MMI reading, its lowest this calendar year.

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On the supply side, the money that exploration firms are spending to discover new ounces of gold — to the tune of $54.3 billion allocated over the next decade, according to S&P Global Market Intelligence — has not resulted in more new discoveries over the last decade, compared to the previous 18 years.

As my colleague Sydney Lazarus reported yesterday, even though the European Union has a temporary exemption from the U.S.’s Section 232 tariffs on steel and aluminum, it is demanding compensation at the World Trade Organization as shown in a filing by that trade body two days ago, according to Reuters.

The EU is arguing that the U.S. tariffs were imposed only to protect U.S. industry, rather than for security measures.

MetalMiner Executive Editor Lisa Reisman took readers through how the U.S. Department of Commerce did its homework on the Section 232 steel investigation, in a top-read post originally published Feb. 23, 2018. Read the full text of Lisa’s article below.

By now most MetalMiner steel producers and steel buying organizations have pored over the Section 232 steel report published by the Department of Commerce. In case you missed it, here is a link to the full report.

At its core, the Section 232 investigations represent the only public policy solution put forward by any major government to address the fundamental crisis involving extensive and pervasive global overcapacity for steel, stainless steel and aluminum.

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This overcapacity, the Department of Commerce believes, threatens U.S. national security interests because unfairly traded imports have caused substantial financial harm to U.S. producers.

Before you scream “protectionism!”, read on.

Read more

This morning in metals, we look at a few key stories circulating in the metals news mill that buyers should have an eye on.

EU ETS Reform to Increase Aluminium Smelting Costs

According to CRU Group (paywall), the free carbon permit allowances for EU aluminum smelters that have always been in place are about to be reduced.

And that amounts to a cost hike.

Due to the reforms of the EU Emissions Trading Scheme (ETS) for the years 2021-2030, we can expect higher carbon prices and rising aluminum smelting costs. Buyers take note: this “will raise smelting costs for the average smelter by $10-$25/ton of aluminum, depending on the final EU policy decision,” according to CRU. “The increasing permit price will also drive indirect carbon costs higher, but the effect varies greatly from smelter to smelter,” according to the firm.

U.S. Aluminum Scrap Exporters Screwed By China?

The Wall Street Journal reports that “prices for mixed aluminum scrap dropped by about 15% over the past month, crumbling profit margins for processors and brokers that sell the material to China,” according today’s WSJ supply chain and and logistics newsletter.

“Analysts say Chinese companies may end up buying more scrap aluminum from cheaper sources in Europe. In the U.S., some worry that trash collectors may simply toss recyclables in landfills if they can’t find other buyers,” writes Jennifer Smith. Check the full story out here (paywall).

Tariffs? What Tariffs?

Meanwhile, “China’s aluminum exports hit their highest in nine months in March as strong international prices led the world’s biggest producer to sell more abroad, despite a growing trade spat with the United States,” reports Reuters.

Unwrought aluminum and aluminum product exports increased 10.2% from a year ago to 452,000 metric tons last month, according to the news service, quoting General Administration of Customs statistics.

Analysts and traders downplayed the impact of Trump’s recent import tariff since it only took effect from March 23, while the U.S.-Rusal dust-up regarding sanctions — and subsequent disruption of trade flows — could mean China’s exports have further to rise in coming months, according to Reuters.