Author Archives: Taras Berezowsky

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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.

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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.

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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.

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.

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  • 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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This morning in metals, we’re tracking a travel advisory for China issued yesterday by the U.S. Department of State — which could impact manufacturers and suppliers who have individuals traveling to and from China for business.

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“Exercise Increased Caution”

  • Issued yesterday, the travel advisory cautions U.S. travelers to “exercise increased caution in China due to arbitrary enforcement of local laws as well as special restrictions on dual U.S.-Chinese nationals.” Some of that arbitrary enforcement is taking the shape of “exit bans,” which effectively means that Chinese authorities are preventing travelers from leaving the country on very shaky grounds, and in certain cases not allowing them access to consular services, not disclosing how long the traveler may be detained, and/or not allowing them to leave for years.
  • For manufacturing organizations or their suppliers, individuals traveling in and out of China may be affected by these exit bans. Speculation as to why Chinese authorities have stepped up their arbitrary enforcement of travel regulations abounds, including retaliatory action vis-a-vis recent trade disputes with the U.S. and a Huawei executive being detained in Canada, but MetalMiner will follow up on this story as more details or insight become available.

In Other Metals News

  • European carmakers still need steel imports to remain competitive. That’s what the ACEA, an association representing EU automakers, said recently, in response to the European Commission’s decision to propose definitive steel safeguards, according to Argus Media. “Motor vehicle manufacturing has increased by 5mn units per year since 2014, and some increase in steel imports has been necessary to meet this higher demand,” ACEA secretary general Erik Jonnaert is quoted as saying.
  • According to the article, “hot-rolled coil (HRC) will remain a global quota under the definitive safeguard, but cold-rolled coil and hot-dip galvanized coil — both of which are used by carmakers — have country-by-country and quarterly quotas that could have a greater impact on supply.”

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The Automotive Monthly Metals Index (MMI) fell 3.2% to a value of 92 this month, its lowest level in 17 months.

After riding high during mid-2017, above the baseline of 100, the Automotive MMI sub-index — tracking a basket of industrial metals and materials crucial to the automotive sector — has been in a continued overall downtrend since mid-summer of last year.

With both the commodities and base metals sectors ending 2018 on sustained downtrends, and a weak U.S. dollar, there don’t appear to be any immediate signs of the Auto MMI’s slide letting up.

Actual Metal Prices and Trends

The sub-index’s overall descent, however, hasn’t stopped palladium’s scorching rise. Platinum’s ‘little brother’ is in a solid two-month uptrend, beginning the new year at $1,252 per ounce, by far the best single-metal performer.

All other constituent price points that comprise the Automotive MMI — including U.S. HDG steel, LME copper, and the Korea price of 5052 coil premium over 1050 aluminum — fell over the past month.

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Auto Sales Trends

G.M. recently named Mark Reuss, the company’s former “product development guru,” as its new president, but that was couched in a near-simultaneous release of Q4 2018 sales figures — which weren’t great, according to an article in Industry Week.

The U.S. automaker announced that fourth quarter sales were down 2.7% from the same time last year, the article stated. Ford and Toyota also lost ground in December, while Fiat Chrysler posted a double-digit percentage gain for last month.

Overall, preliminary expectations put the overall 2018 U.S auto sales number at about 17.2 million vehicles, according to the WSJ (paywall), which would be about even with 2017’s total and “marks the fourth straight year of at least 17 million vehicles sold, a resilient showing for an industry prone to boom-and-bust cycles.”

However, in China, the latest available data show that “a total of 2.55 million vehicles were sold in November, down 13.9 percent year-on-year, according to the China Association of Automobile Manufacturers (CAAM),” cited in China Daily — which, as Reuters reported, is the steepest plunge since 2012.

Automotive Demand Outlook: 2019 and Beyond

So where does this leave the future of automotive demand?

Certain industry watchers, such as former Reuters European automotive correspondent Neil Winton, expect 2019 to be the year that the growing interest and investment in the EV market squeeze traditional automakers and the sales of their product.

Writing in Forbes, Winton notes that Morgan Stanley “expects global auto sales to slip 0.3% in 2019 to 82.1 million. The Center for Automotive Research in Duisberg-Essen, Germany, puts 2019 sales slightly higher at 82.9 million. Fitch Solutions does still expect some growth in sales – a [minuscule] 2.0%.”

However, the tiny slips could give way to bigger sea changes down the line. The days of healthy profitability for the makers of traditional gas-powered cars are numbered, he writes. “Demand for autos is at a dangerous tipping point, according to Morgan Stanley, as buyers put off purchases waiting for the new technology in the form of electric cars to take the stage,” writes Winton.

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

The Construction Monthly Metals Index (MMI) stemmed last month’s seven-point loss by leveling out for the January 2019 reading.

Our Construction MMI sub-index — tracking a basket of industrial metals, materials and other indicators crucial to the construction sector — stayed at a value of 82, holding steady from December’s reading.

The constituent metal and material price changes, like the overall reading, held relatively steady over the month. Tracked by our MetalMiner IndX, the U.S. shredded scrap price dropped only a few dollars this month ending up at $353 per short ton, while the China H-beam steel price lost about the same ground per metric ton. Chinese rebar, on the other hand, rose by about $12, reaching nearly $557 per metric ton.

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Latest Construction Spending Data Is…Still TBA

Perhaps the biggest story of the moment — the U.S. government shutdown, a result of the stalemate between President Donald Trump and Congressional Democrats — turns out to have a construction angle, as well as a direct effect on construction-sector data delays.

The sticking point keeping President Trump from capitulating to re-opening government business is his steadfast demand for about $5 billion in funding for the U.S.-Mexico border wall that he promised during his campaign. First indicated to be constructed of concrete, Trump has since pivoted to a steel-slat design, and most recently, a setup of “see-through” materials.

All of which is to say, the U.S. Census Bureau, which reports the monthly construction spending data, is not reporting updates during the shutdown. We will update this story, or publish a separate post, with the January data when it becomes available.

Architecture Billings Forthcoming As Well, But Last Reading Looked Strong

The next ABI reading is scheduled to arrive on January 23, but the last available numbers from November indicate growth and confidence in the sector.

Billings increased to a reading of healthy 54.7 in November — the highest since last January — up from 50.4 the previous month. (A reading over 50, like the ISM PMI, indicates positive expansion.)

Top Business Concerns for 2019

Industry folks also voiced their top business concerns for 2019 to the AIA via a survey.

“The largest share (30 percent) reported that identifying new qualified staff with appropriate technical and project management skills was one of their top three concerns for 2019, surpassing concerns about firm profitability for the first time in three years,” according to the November ABI release page. “Increasing firm profitability was still selected as one of the top concerns by the second largest share of respondents (26 percent) but that share was well below the 31 percent that selected it as a top concern last year.”

“Coping with an unpredictable economy had the largest increase from 2018 to 2019: 25 percent of firm leaders reported it as a top concern for 2019, compared to just 15 percent that reported the same for 2018,” according to the release.

About That Economy…China May Have Something to Say About That

“The slump in China’s Purchasing Managers’ Index (PMI) is likely to prove an unwelcome New Year’s gift to the world’s major exporters of bulk commodities such as iron ore and coal,” according to Reuters’ daily newsletter, referring to a column by Clyde Russell. “The manufacturing gauge compiled by Beijing’s National Bureau of Statistics dropped to 49.4 in December, dropping below the 50-level that demarcates growth from contraction, for the first time since July 2016.”

The Caixin Manufacturing PMI also dropped on the month, leading to worries over consumption slowdowns in China.

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

MetalMiner has just released its January 2019 edition of the Monthly Metal Buying Outlook, in which we explore how the fall in commodities — namely crude oil prices — and the continued weakness of the greenback are driving industrial metals prices.

What Happened Over the Last Month?

According to the report,

  • Both commodities and base metals sectors have been in downtrends over the past month.
  • Crude oil prices fell below the $50/barrel level, signaling a bearish outlook for crude oil. OPEC has tried to shore up oil prices by establishing output cuts and quotas for its members and allies, including Russia.
  • The Institute for Supply Management (ISM) PMI reading for December rose, while the Caixin China Manufacturing PMI fell for the month.

What Does it Mean for Metals in the Near-Term Future?

In the detailed sections of the report, get the drill-down analysis behind trends for base metals and several forms of steel:

  • Read about why aluminum buyers should watch the U.S. Midwest premium.
  • Find out how decreasing stocks on the SHFE may be a key driver of tin prices.
  • Learn the buying strategies that come out of the analyzing the trends — from aluminum all the way down to HRC, CRC, HDG and plate steel.

Read the January report today — Request your two-month free trial (and see a sample report here!)