Author Archives: Taras Berezowsky

MetalMiner’s precious metals index, tracking a basket of platinum, palladium, gold and silver prices in several geographies across the globe, bounced back in October after several months of declines.

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The Global Precious Monthly Metals Index (MMI) registered a value of 83 for its October 2018 reading, up 2.5% from 81 last month, stanching the bleeding — last month’s level had not been seen since January 2017.

The U.S. platinum bar price had its own bounceback after having dropped last month. Platinum rose to $814 per ounce, up from $777 per ounce in September. However, U.S. palladium bar built up a two-month upward price trend by breaking the $1,000 per ounce level for the first time in eight months, rising to $1,070 per ounce.

This extends palladium’s historic premium to platinum for yet another month.

Palladium Bubble?

John Dizard, writing in the Financial Times, contends that platinum’s once-cheaper cousin is ripe for the bubble it seems to be creating.

“The best investment bubble propositions incorporate the familiar and the incomprehensible,” he writes.

The largest single application for palladium, as MetalMiner readers well know by now, is to help convert toxic gases within catalytic converters. “Therefore, we have something familiar to investors (cars) and something incomprehensible (the physical chemistry of catalytic converters) — perfect conditions for a bubble,” Dizard concludes.

Much of the bubble conditions can be explained by “Dieselgate” — read about it in the full article (paywall) — but speaking of palladium bar prices, as we were just a bit ago, those aren’t what auto buyers should really be tracking: sponge is where it’s at.

“Could it be that the automakers will run into a supply squeeze and be forced to buy palladium bars of the sort represented by Nymex futures? Not exactly,” Dizard writes. “The automakers actually buy a semi-manufactured product called ‘sponge’, which is palladium (or platinum) particles used to coat a ceramic matrix inside the emissions system. There is a separate, over-the-counter market for palladium sponge.”

Ultimately, “if you follow the quotes for palladium sponge, you can see whether the ‘sponge premium’ over the price of bar metal indicates a real shortage of the industrial product,” according to Dizard.

Gold Supply Chain in South America: Treacherous

We recently came across a recent white paper entitled Illegal mining in South America and financial risk – Taking the shine off gold, co-authored by Jesse Spiro and Brian Huerbsch.

Evidently, the promise of huge profits based on higher gold prices – and fueled by rampant corruption — have created a continentwide supply chain problem. According to the authors, the issue plagues Colombia, Peru, Bolivia, Brazil, Ecuador and Venezuela.

The core of the problem is a major risk for gold-buying organizations — the ongoing threat of murky supply chain traceability.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

You’ll be able to read more about it, including our breakdown of what gold-buying companies should do to mitigate risk, later this week on our sister site, Spend Matters.

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MetalMiner’s Global Precious Monthly Metals Index (MMI) — tracking a basket of platinum, palladium, gold and silver prices in several geographies across the globe — continues its trek downward.

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The Global Precious MMI clocked a value of 81 for its September 2018 reading, down 1.2% from 82 last month — and reaching a low not seen since January 2017.

Here’s What Happened

Both U.S. platinum and U.S. gold took sizable hits this month.

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Last month we noted that record-low prices characterized the Global Precious Monthly Metals Index (MMI) monthly reading and posed the question: will there be more price drops to come?

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From the looks of it, the short answer to that is … yes.

Here’s What Happened

Going by the August 2018 reading of MetalMiner’s Global Precious MMI, which tracks a basket of precious metals from across the globe, the subindex suffered a loss of 2.4%, falling to a value of 82.

The last time we saw the Global Precious MMI at that level was February 2017.

Platinum and palladium seemed to drive the loss this month, yet all major forms of precious metals across geographies ended up lower this month.

For example, the U.S. platinum bar price dropped 1.8% to $837 per ounce. Palladium is still transacting at a premium to platinum in the U.S. market, but not in the China or Japan markets (although exchange rates may ultimately be affecting that relationship). The U.S. palladium bar price dropped for August as well, down 2.1% to $928 per ounce.

Yet the U.S. silver price ended up lower than $16 per ounce to begin the month for the first time since January 2017, clocking in at $15.50 on Aug. 1. The gold price dropped as well, with U.S. gold bullion taking a 2.3% hit to end up at $1,223.40 per ounce.

All of these metals appear to be in a long-term downtrend since the tail end of 2017 and first couple months of 2018.

What Buyers Should Consider

  • A strong dollar still keeping the platinum price low. Along with supply surplus and the ever-looming threat of a global trade war, the dollar’s strength is a strong indicator of platinum’s fortunes for the rest of 2018. A recent Reuters poll of 29 analysts and traders showed that the platinum price looks to remain historically depressed for the balance of the year, with a slight rebound in 2019. “The diesel scandal remains a drag on demand … Meanwhile, currency weakness provides a lifeline to the South African platinum industry, cutting dollar-denominated costs and reducing the risk of mine closures,” said Carsten Menke, analyst for Julius Baer, as quoted by Reuters.
  • Palladium to remain at a premium? “We expect a rebound in palladium prices [in 2019] amid a growing market share of gasoline vehicles and healthy demand growth in emerging markets. Fundamentals are tight amid a widening deficit,” Intesa Sanpaolo analyst Daniela Corsini told Reuters.
  • Your latest preferred supplier — Sears? In the current economic climate that retailer finds itself in, it’s strange to hear that the company has added several brand lines sold by third-party sellers to “bolster its online marketplace,” according to a press release. Additions include “gold, silver, platinum and palladium bars, rounds and coins, as well as premium bullion products,” the release stated. So if you’re looking outside the box to source your precious metal volumes for industrial applications, take note: “Sears.com and Shop Your Way® are currently offering a $20 CASHBACK in Points when members spend $100 or more on APMEX [the online retailer of the metals] products until August 11.”

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Here’s What Happened

MetalMiner’s Global Precious Monthly Metals Index (MMI), tracking a basket of precious metals from across the globe, dropped four points (a loss of 4.5%) for the June reading after holding flat for three straight months.

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Incidentally, the July 2018 MMI value hit its lowest point since exactly one year ago, when it last clocked in at 84.

Individual price points within this precious metals basket hit some historic lows as well.

The U.S. silver price hit $16.09 per ounce for the July 1 reading, the lowest since January 2017 (when it took an anomalous dip down to $15.80 for one month before bouncing back up). U.S. gold bullion has languished back down to the mid-$1,200s, a one-year low.

And both platinum and palladium have come off considerably, with the U.S. bar price of the former dipping below $900 per ounce for the first time since February 2016.

What Buyers Should Consider

  • Keep an eye on the U.S. dollar. A stronger dollar of late, which had gotten a bump from recent better-than-expected U.S. manufacturing data at the beginning of the month, pressures platinum prices because “it makes greenback-priced precious metals more expensive for holders of other currencies,” according to Reuters.
  • Gold is also in the crosshairs of a stronger dollar. In fact, that has become “the biggest obstacle” for gold prices in the near and long term, according to a recent JP Morgan price forecast report cited by Kitco.
  • The threat of auto tariffs has also burned platinum pricing. Due to the pricey PGM’s use in diesel engines, “the threat of protectionist policies has fueled bets that slower trade activity will disrupt the global economy, reducing commodity consumption” — including that of platinum in cars, according to the Wall Street Journal (paywall).

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And Now For Some Mid-Summer Metal Fun

While the product contains trace amounts, at best, of gold’s shiny, less expensive cousin — not to mention that it’s fake — Alexa Silver is still pretty hilarious.

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.

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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.