Author Archives: Taras Berezowsky

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.”

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

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!) 

This morning in metals, we’re tracking the practical effect of the steel tariffs, what China’s recent overall manufacturing slowdown could portend, and a positive outlook for oil and natural gas pipe demand.

Steel Tariff Exceptions Being Granted, But Still Confusing Buyers

  • The Wall Street Journal reports that even though “the Commerce Department as of Dec. 17 granted about 75% of the 19,000 requests it processed to exclude products from tariffs on foreign steel that took effect in March … manufacturers and other importers say some of their exclusion requests are still being rejected for reasons that aren’t fully explained to them.” For example, according to the WSJ, a stainless pipe importer claims that exclusions granted to their competitor were nearly identical to those they themselves requested. MetalMiner has gotten the sense first-hand from many manufacturers that there are still many uncertainties in the exception-and-exclusion process. It goes without saying that domestic steel producers aren’t exactly happy about the exceptions granted for steel imports, according to the article.

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OCTG Realm Looking Rosy in the Future?

  • According to a press release from the Freedonia Group, a Cleveland-based industrial research firm, their recent report ([hefty] paywall) states that “demand for oil and natural gas pipe is forecast to grow 11% annually to $15.4 billion in 2022.” This trend would reverse course from the period between 2012-2017, which suffered from declines. “Increased well completion in key fields like the Permian Basin is supporting gains for OCTG,” the release states, “while bottlenecks in such productive areas are encouraging pipeline construction.”

Trouble Brewing in the World’s Second-Largest Economy?

  • “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 — the Apple iPhone sales drop (paywall), as just one example.

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

This morning in metals, here are a couple news items that piqued our interest:

  • China giving the U.S. a break in trade “war” by lifting the tariff on cars… According to a story originally reported by Bloomberg today, China will lift the 25% retaliatory duty on cars for three months (thanks, China!) in an effort to defuse trade tensions with the U.S. The tariff “will be scrapped starting Jan. 1, China’s finance ministry said Friday, ” according to the article. “The temporary tax reduction for U.S. car imports comes as China heads for its very first annual vehicle sales decline in 28 years amid the trade war and an economic slowdown that’s undermining consumption momentum.” Full article here.

 

  • …And here’s why: China’s economy is sputtering across the board. According to the WSJ, many economic and industrial indicators in China are causing worry. “Weakness was seen across the industrial sector,” the paper reports (paywall). “Automobile production shrank 3.2% last month from a year earlier, extending a 0.7% contraction in October. Chemical materials and products rose 1.9%, decelerating from 4.4% growth. Retail sales rose 8.1% in November from a year earlier, slowing from an 8.6% year-over-year gain in October.” Full article here.

 

  • Cuba’s nickel production expected to top 50,000 tons in 2018. Nickel mining is a primary source of export revenue for the Communist country, according to a Reuters article, which has foundered in recent years. However, earnings from nickel are up over last year for Cuba, the 10th largest nickel producer globally (who knew!), so things are looking up for the island nation…at least in regards to nickel production. Full article here.

Need buying strategies for nickel and other base metals? Request your two-month free trial of MetalMiner’s Outlook
 

The Week That Was

ysbrandcosijn/Adobe Stock

To review what MetalMiner covered over the past week, check out my colleague JP Morris’ excellent rundown here over at our sister site Spend Matters — we couldn’t have written it better ourselves!

A hint of the highlights:

Here’s to a happy and relaxing weekend.

This morning in metals (and commodities), a few news bits we’re following:

  • OPEC forecasts fall in demand for cartel’s crude next year. “OPEC estimates the world will need 31.4m barrels a day of the cartel’s crude next year, 2.1m b/d less than demand from 2017, as production from US shale fields continues to swell,” according to the Financial Times (paywall). “The figure underscores the dilemma facing big producer countries which have ramped up output in recent months, but seen oil prices fall by 30 per cent since October.” Full article here.
  • Aluminum sector doing just fine with tariffs, according to one study…The Economic Policy Institute (EPI) “released a new economic study on the impact the aluminum tariffs have had on the aluminum industry, which shows conclusively that the tariffs are helping boost aluminum production and create jobs,” according to the Hellenic Shipping News. “The EPI study points out that as a result of the aluminum tariffs twenty-two new and expansion projects have been announced in downstream aluminum industries producing extruded (rod and bar, pipe and tube and extruded shapes) and rolled (sheet and plate) products.” Full article here.
  • …but according to another study by Business Forward, “tariffs are destroying demand for products manufactured in U.S.” As Industry Week writes, “American manufacturers are paying 17.2% more than their foreign competitors for hot- and cold-rolled steel, according to a new study, from Business Forward released on Dec. 12.” MetalMiner’s old friend Josh Spoores, now Principal Steel Analyst for CRU, is quoted as saying, “Multiple U.S. manufacturers (that are able to) are planning to shift production elsewhere and import a good with steel rather than manufacture stuff in the U.S.” Full article here. 

Are you a metal buying organization with thoughts on the above? Leave a comment below!

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MetalMiner’s precious metals index, tracking a basket of platinum, palladium, gold and silver prices in several geographies across the globe, is now officially in a three-month uptrend this December after several months of declines.

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The Global Precious Monthly Metals Index (MMI) came in at a value of 87 for its December 2018 reading, up 2.4% from 85 last month, continuing a steady upswing. To wit, this past September’s value — 81 — was the sub-index’s lowest point since January 2017.

The U.S. palladium bar price, as tracked by the MetalMiner IndX, keeps steamrolling higher. Itself in a four-month uptrend, that price clocked in at $1,192 per ounce at the beginning of the month, with reports that during the past 30 days, palladium actually outpriced gold for the first time in 16 years.

Meanwhile, platinum reversed its uptrend from last month, landing lower at $806 per ounce. This widens the platinum-palladium spread even further, forcing many analysts to wonder what will happen in 2019.

2019 PGM Outlook

The World Platinum Investment Council (WPIC)’s latest quarterly report contained some bad news for platinum producers — but potentially good news for buyers.

Read more

Here’s what we’re tracking this morning in metals:

  • U.S. steel shipments are up in October. AISI has reported that U.S. steel mills shipped close to 8.2 million net tons in October, a 4.6% rise over the month of September — and a 6% increase from the 7.7 million net tons shipped in October 2017.
  • In a weekly briefing from Shanghai Metals Market released today, the near-term outlook appears to be weak for copper, aluminum and lead, according to the publication.
    • “Copper prices across Chinese markets are likely to hover in a wide range in the short term as supply growth slows and as demand improves,” the briefing stated. “China’s fixed-asset investment in the power sector rebounded for two consecutive months to -7.6% in October.”
    • Poor supply and demand in the aluminum market in China is likely to continue in December, according to SMM. Primary aluminum inventories across eight consumption areas in China are down by nearly 3% over the week ending Nov. 29, while 6063 billet stocks rose 3% across five major consumption areas, according to SMM data.
    • “China’s actual consumption of refined lead is estimated to decline 0.7% to 411,000 mt in December as demand weakens,” the briefing stated.

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  • Finally, in the non-news news, the U.S. Commerce Department released Secretary Wilbur Ross’ comments on the recent unanimous decision for the ITC’s final affirmative injury determinations in the antidumping duty and countervailing duty investigations involving Chinese imports of common alloy aluminum sheet (which came down Nov. 7): “The Department of Commerce will not stand idly by while products are illicitly forced upon U.S. markets,” said Ross. “I applaud the International Trade Commission for this determination in holding bad actors accountable for their actions on the international stage.”

This morning in metals news, zinc is undergoing some tight times, according to Reuters’ Andy Home, and oil price volatility is still top of mind as we go into the Thanksgiving holiday in the U.S.

Oil Prices Tumbled, Look to Stay Volatile

As I filled my tank earlier this morning before heading to my mother-in-law’s for Thanksgiving, I noticed the effects of Tuesday’s 6% percent drop in oil prices at the pump.

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Among heavy trading volumes, the recent drop in oil prices — as well as major losses on the Dow — have some investors and market watchers worried.

Goldman Sachs put out a note today saying the bank expects oil markets to “remain highly volatile in the coming weeks,” according to Reuters.

As OPEC pushes its producers to cut output to the tune of 1 million to 1.4 million bpd, the investment bank is quoted as saying “the renewed price collapse reflected ‘concerns over excess supply in 2019 … (and) a broader cross-commodity and cross-asset sell-off as growth concerns continue to mount.”

Quite a Stink Over Zinc

Reuters’ Andy Home is calling this moment “zinc’s period of peak tightness,” due to skimpier metal availability from mine capacity crunches and closures and the greater influence of investor dollars driving the zinc price over the past decade.

Indeed, the ILZSG is confirming the zinc market deficit, as reported by my colleague and MetalMiner Editor Fouad Egbaria — check out the full article, published today.

“The single most important zinc market trend is that of falling refined metal production in China, itself a product of months of deteriorating mine concentrates availability,” Home writes.

“None of which means that the zinc price is going to go on the sort of super nova rally seen last decade,” he continued, “at least not unless the [investment] fund herd drastically rethinks its views on both zinc and the bigger trade picture.”

MetalMiner’s Take: According to our most recent monthly outlook report, the key drivers of the zinc prices to keep an eye on include the overall zinc deficit this year and into 2019, rising zinc premiums (which have reached the highest level in six years), and smelting capacity constraints.

For more efficient zinc buying strategies, take a free trial of MetalMiner’s Monthly Outlook!