Author Archives: Taras Berezowsky

Last month, in our headline for the monthly update article on the Global Precious MMI, we called out the fact that platinum and palladium prices had dropped. Then we asked: “Will it continue?”

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Well folks, if our Magic 8-Ball were to answer, it’d say — signs point to yes.

At least for this month’s index reading.

With losses in U.S. platinum and palladium pricing leading the way, our Global Precious Monthly Metals Index (MMI), tracking a basket of precious metals from across the globe, floated down yet again for April — dropping 1.1% and settling into a two-month downtrend.

(Last month, we had initially reported that before March’s drop, the index had been in a two-month uptrend. Correction: it had in fact been in a four-month uptrend at that point.)

Both stock markets and commodities markets have been in a bit of turmoil lately, with President Trump implementing tariffs on steel, aluminum and potentially 1,300 categories’ worth of additional Chinese imports mid-last month, and China coming back with retaliatory tariffs on a number of non-metal U.S. commodity exports.

It wouldn’t be a stretch to say that knock-on effects are being seen in the precious metals markets.

PGMs Lead the Way

Gold prices in the U.S., China and India were slightly up on the month (with the Japan price holding relatively steady), and even silver prices in China and India increased.

Yet platinum and palladium prices told a different story.

Both platinum and palladium bar prices dropped across all geographies (U.S., Japan, China) — the U.S. platinum bar price sunk 3.5% and the U.S. palladium bar price fell 3.2%.

The longer-term picture for platinum as a crucial component of industrial manufacturing continues to get murkier.

According to a Reuters interview with Bart Biebuyck, executive director of the European Commission’s fuel cell and hydrogen joint undertaking, “the volume of platinum used in fuel cell-powered cars could be cut to ‘micro levels’ within three years and eradicated altogether in a decade’s time, making these environmentally-friendly vehicles much cheaper to buy.”

He said the amount of platinum in the next generation of fuel cell cars had already been cut to levels similar to that used in the catalytic converters of diesel vehicles, which industry estimates put at 3-7 grams, according to Reuters.

With the automotive industry — which accounts for about 40% of platinum demand — looking to cut costs, that 3-to-7-gram range for diesel vehicles may steadily but surely decrease in coming years. That’s because, as we reported last month, the gradual but very real retirement of diesel engines across the European continent continued.

A German court ruled that cities have the right to ban diesel cars from driving the roads in certain areas. Of course, the Volkswagen scandal and its aftermath proved to be a big blow for diesel cars, as well.

If more diesel engines go extinct, with them will go corresponding PGM consumption for catalytic converters.

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Key Price Movers and Shakers

  • The U.S. palladium bar price dropped 3.2% over last month to end up at $949 per ounce.
  • The U.S. platinum bar price also dropped, by 3.5%, ending up at $930 per ounce.
  • Gold and silver prices across several geographies increased, likely due to the continuing uncertainty in stock and commodities markets precipitated by what could become an outright U.S.-China trade war.

This afternoon, President Trump signed a proclamation to impose the 25% tariff on imported steel and 10% tariff on imported aluminum products, both of which were announced on March 1. The tariffs will go into effect in 15 days, and will exclude Canada and Mexico for the moment, until NAFTA negotiations finish, according to several news sources.

Other countries such as China, South Korea, Japan, Germany and Brazil may be hit by these tariffs, according to the New York Times. However, the President claimed they would be flexible when imposing the tariffs, which were implemented in the wake of the Commerce Department’s Section 232 investigation.

We’re going to be very flexible,” Mr. Trump said. “At the same time, we have some friends and some enemies where we have been tremendously taken advantage of over the years.”

The President also said that the tariff order may exclude some additional countries and would give him the authority to raise or lower levies on a country-by-country basis and add or take countries off the list as he deems fit.

President Trump extolled the benefits of the tariff order and the relevance of the U.S. as a primary metal producer. The recent announcements of steel mill openings made since the President’s first comments about the tariffs on March 1 were also highlighted at the White House event.

He mentioned the United States’ current relationship with China, characterizing it as a “great” one, but noting that “something has to be done about the trade deficit,” according to the Guardian. The China question has been at the center of the tariff debate from the beginning, with that country’s metal production overcapacity and questionable trade practices spurring President Trump’s campaign promise.

Not surprisingly, organizations representing upstream steel and aluminum industries saw the results differently than those representing downstream players.

“The president’s commitment to addressing the steel crisis is already producing benefits in Granite City, Ill., where U.S. Steel will be restarting one of the blast furnaces that has been idle since December 2015 due to global excess steel capacity and unfairly traded steel imports,” said Tom Gibson, president and CEO of AISI, in a statement. “With the signing today, the steel industry can be on track to maintain our essential contributions to national security and critical infrastructure like transportation, public health and safety, energy and the power grid – all of which rely heavily on steel.”

Other sectors of the aluminum industry were opposed. For example, the Beer Institute, on behalf of U.S. brewers, implored the President to exempt aluminum can-sheet imports, making an argument based on job loss and overall economic loss, in a press release.

“We have not yet seen the order formalizing these tariffs,” said the Institute’s president and CEO Jim McGreevy, in the statement. “If possible, the Beer Institute will work with our member companies to file an exclusion request with the Department of Commerce. It is critical that if the president and his administration choose to impose any tariffs, they be carefully targeted only to protect America’s national security interests.”

For more in-depth scenario-based analysis, including buying strategies, check out MetalMiner’s report, “Section 232 Impact by Scenario on Aluminum, Stainless Steel and Steel Prices.

Our Global Precious Monthly Metals Index (MMI), tracking a basket of precious metals from across the globe, floated back down 3.3% after a two-month uptrend.

Section 232 buying strategies – grab your copy of MetalMiner’s Section 232 Investigation Impact Report for only $74.99!

Last month, as my colleague Fouad Egbaria wrote, the platinum-palladium relationship began to reflect its traditional historical dynamic. This month, that trend continues for the two platinum-group metals (PGMs), with U.S. platinum falling 3.6% and U.S. palladium falling 4.2% — below $1,000 per ounce to start the month for the first time since November 2017.

The backdrop of President Trump announcing tariffs on steel and aluminum imports late last week — with more specifics yet to come, continuing an uncertain climate — has forced a broader commodity selloff, which has swept precious metals such as gold into its current, according to Michael Kosares, founder of gold broker USAGOLD, as quoted in a MarketWatch article.

“Once we get through the initial reaction, gold’s appeal as an inflation hedge will likely reassert itself,” he is quoted as saying.

Concerns arose over whether other industrial metals also would get hit as a result of the steel and aluminum tariffs announcement, including precious-metal workhorses platinum and palladium.

“The announcement raised fears there could be retaliation and hit the price of stocks and all industrial metals,” said Phil Flynn, senior market analyst at Price Futures Group, as quoted in the MarketWatch article. There’s also “fear that higher costs for cars could reduce demand” for the metals, according to the article.

So, where will the platinum-palladium trend go from here?

PGM Spotlight

Although both platinum and palladium may see a slightly extended cooldown in the near term, the longer term could see more price increases — especially for the latter metal.

Broader supply-demand market fundamentals look to underpin the two metals’ movements into the next year and beyond. According to Johnson Matthey, as reported by Reuters, platinum looks to be headed for another surplus in 2018. (Last year’s oversupply clocked in at 110,000 ounces.)

“Before accounting for investment, we expect global platinum consumption to rise slightly,” Reuters quoted Johnson Matthey as saying. “However, this will be matched by a modest increase in combined primary and secondary supplies, mainly due to rising recoveries from autocatalyst scrap,” it said. “Assuming that investment demand in 2018 is similar to last year, the market is likely to remain in modest surplus,” the firm added, according to Reuters.

On the palladium front, the market was expected to remain in deficit, Johnson Matthey said.

“Automotive demand, which rose 6 percent last year to 8.424 million ounces, was expected to hit another record high next year, in line with a rise in gasoline vehicle output,” according to the Reuters piece. “Supply, which declined 2 percent last year, was expected to rise slightly, but the market was set to remain in deficit after recording a shortfall of 629,000 ounces last year.”

The gradual but very real retirement of diesel engines across the European continent continued as well. A German court ruled that cities have the right to ban diesel cars from driving the roads in certain areas. If more diesel engines go extinct, with them will go corresponding PGM consumption for catalytic converters.

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Key Price Movers and Shakers

  • The U.S. palladium bar price dropped 4.2% over last month to end up at $980 per ounce, its first dip under the $1,000 threshold since November 2017.
  • The U.S gold bullion price dropped 2.1%, leaving it at $1,317 per ounce.
  • The Japanese gold, silver, platinum and palladium prices all increased, likely due to the dollar-yen exchange rate, perhaps providing an arbitrage opportunity for buyers.

Here’s What Happened

  • Our Global Precious Monthly Metals Index (MMI), tracking a basket of precious metals from across the globe, rose yet another three points to 90 for the January reading, a 3.4% increase.
  • We’re officially in a three-month rising trend for our precious metal sub-index. The last time we saw this buildup was back in Q3 2017, after which the index retreated. If that pattern holds, we could see a drop-off, perhaps as early as February — although seasonality and the global political and economic atmosphere in Q4 both likely had a lot to do with the outcome, which may not be replicated here in Q1 2018.
  • Palladium officially busted through the $1,000 per ounce ceiling in December, and there were no signs of a turnaround for the January reading — the PGM per-ounce held above that level for the second straight month. (More on palladium below.)
  • Meanwhile, it appears as though platinum will need to take advantage of a “Dry January.” The metal came out of the holidays very sluggish, recording only a $2 per ounce increase and beginning the new year in a rather flat state of malaise.
  • “We’ve (still) got a trend, folks!” — this is the fourth straight month in which palladium is priced at a premium to platinum, which has not been the historical norm.
  • And then there’s gold. After breaking and holding above the $1,300 per ounce threshold at the beginning of September for the first time since October 2016, the U.S. gold price is back above that benchmark after a few months off.

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What’s Going On in the Background?

  • Can palladium keep rising? That all depends. On the one hand, the supply market is pretty tight, and it has been for a while. In fact, the palladium market has been in deficit for the last six of seven years in which data is available, according to a good Reuters piece published just after the new year. On the other hand, the primary thing driving palladium demand, and therefore prices, is mainly Chinese automotive demand. Caveat: if that slows down or even goes in reverse (car puns are just the best, aren’t they?), palladium could go with it. As we reported earlier this week, a Wall Street Journal story pointed out Chinese consumers are now starting to get into used car sales even more, which could portend the end of unmitigated new car sales growth — much like China’s GDP cooldown over the last few years. To wit, here’s a sweet graphic showing the relationship between palladium and China’s automotive sales:

Source: Thomson Reuters

  • Germans buying up some gold. Regarding that $1,300/ounce threshold we mentioned earlier that gold prices have been hovering above for a couple months straight? That has helped spot gold prices gain about 14% during 2017. Now, at least one nation — going by its recent investment activity — is hoping that upward trend continues. According to another Reuters article, Deutsche Boerse said its Xetra-Gold notes rose in demand to a record 175 tons of gold, a nearly 50% increase over 2016. Safe haven, here we come! (Ja?)

What Metal Buyers Should Look Out For

  • PGMs. While ETF Securities, an investment and intelligence firm, which we used to cover quite regularly, expects precious metals (including PGMs) to remain pretty stable for the course of 2018 in its Outlook 2018 report, as we noted last month, keep a close eye on All Things China. This is especially important as it pertains to automotive partnerships between U.S. OEMs and China and the resulting innovation, as my colleague Fouad Egbaria reported earlier this week in our Automotive Monthly Metals Index (MMI).
  • ICYMI, our own Irene Martinez Canorea drilled down into the gold markets before the end of 2017 from an analytical perspective, ultimately unlocking the reason why industrial metal buyers (especially those buying copper) should pay attention to gold.

Free Sample Report: Our Annual Metal Buying Outlook

Key Price Movers and Shakers

  • The U.S. palladium bar price gained 60% since January 2017 and 8.5% over last month to end up at $1,086 per ounce.
  • The U.S gold bullion price broke back above $1,300 to $1,317.10 per ounce for January.
  • Silver prices all increased, following on the heels of gold, with the U.S. price showing an increase to $17.15 per ounce.

This morning in metals, a major player in domestic steel announced when its full-year earnings call will drop, China looks to be giving used cars some love, and Australia’s government appears a bit bearish on iron ore in the next couple years.

Two-Month Trial: Metal Buying Outlook

Iron Ore Price Forecast for 2018-2019

Australia’s Department of Industry, Innovation and Science noted in recent commodities report that it expects iron ore prices to drop 20% in 2018 over this past year’s level, and continue that trend into 2019, according to Reuters.

A demand slowdown in China is much to blame, according to the department’s resource and energy analyst David Thurtell, as quoted by the news agency.

China Pivots to Used Cars

Speaking of demand slowdowns, China’s consumers may also be to blame for current — and future — automotive metals demand in Asia (and globally).

Read more

Now that the New Year has begun, we’re getting ever closer (hopefully) to the Commerce Department’s final recommendations on the Section 232 investigation.

Today we continue our podcast series that we’re calling “Manufacturing Trade Policy Confidential,” in which we turn our focus to the aluminum industry. Our guest is Heidi Brock, the president and CEO of the Aluminum Association, whom we spoke with just before the winter holidays. She works tirelessly on behalf of the association’s members, which span the entire value chain. Heidi does find moments, however, to take a step back and see the bigger picture.

Recently, she got to see the newly commissioned USS Gabrielle Giffords, a warship named after the former Arizona congresswoman, and it left her with a sense of awe. “I just can’t tell you what an amazing experience it was,” she said.

To hear more on what a strong domestic aluminum sector has to do with national security, and how the aluminum sector views other hot trade issues of the moment and why, listen in to Lisa Reisman’s conversation with Heidi Brock.

Here’s Heidi in front of the U.S. Navy littoral combat ship USS Gabrielle Giffords:

Courtesy of Heidi Brock

For an additional sense of scale, here’s an “aerial view of the ship during its launch sequence at the Austal USA shipyard, Mobile, Alabama,” according to Wikipedia, from a photo provided by the U.S. Navy:

Source: U.S. Navy/Wikipedia

Manufacturing Trade Policy Confidential: Background

With everything that’s been happening on the international trade policy front over the past year, we wanted to give metal buying organizations more insight into the issues they may not be reading or hearing enough about — or at all — in the mainstream B2C media.

What better way to do so than go straight to the source — or sources — and interview some key movers and shakers on the manufacturing and policy fronts? So we’ve started a brand-new series called “Manufacturing Trade Policy Confidential.”

If you’ve visited MetalMiner’s digital pages over the past several months, you’re no stranger to the phrase “Section 232” — shorthand for the U.S. Department of Commerce investigation into whether certain steel imports constitute a national security risk, under the namesake section of the U.S. Trade Expansion Act of 1962.

The outcome of the investigation (findings from which were slated to come down last summer but have been delayed) could have significant effects on upstream and downstream manufacturing organizations, ranging from metal producers to buying organizations – even the mom-and-pops.

But Section 232 is only one small part. Trade circumvention, China’s non-market economy status, domestic uncertainty amidst proposed tax plans and many other issues have pushed us to start this new podcast series.

We’ll be publishing several more interviews in the coming weeks and months – stay tuned!

Listen to more episodes and follow the MetalMiner Podcast on SoundCloud.

The Renewables MMI dropped 2.5% for the month of December, ending at a value of 78.

Here’s What Happened

  • Since our recalibration of this index back in May 2017 to better take into account cobalt price fluctuations, the Renewables MMI has been slowly but surely gaining ground the latter half of 2017, hitting a high of 84 in September.
  • Within this basket of metals and materials used in the renewable energy industry, the Big Heavy is the U.S. steel plate price. Yet from November to December, that price point only dropped a single dollar per short ton.
  • The China steel plate price, however, did move much more – increasing 4.3% on the month.

What’s Going On in the Background?

  • The biggest news for the renewables industry has been the controversial tax plan put forth by legislators and still awaiting final House/Senate reconciliation – mainly, the fact that the Base Erosion Anti-Abuse Tax (BEAT) has been kept intact in the latest version of the Senate bill.
  • As Sydney Lazarus wrote in MetalMiner last week, currently, “many companies have large multinational corporations finance wind or solar energy projects, and in return, give the latter the renewable energy credit that the government provides.” But the BEAT tax, which is meant to discourage multinationals from moving profits abroad — and which the Senate bill kept intact — would make the crucial solar investment tax credit (ITC) and wind production tax credit (PTC) “unusable for multinational banks and other corporations who have low tax rates,” according to this article.
  • It’s unclear if this move was intentional or not, but regardless, it injects huge uncertainty into the renewable energy industry as the bill hurtles toward law. (Some, such as American Wind Energy Association’s Peter L. Kelley, say it “could put an end to more than half of the country’s wind projects,” as reported by Lazarus.

What Metal Buyers Should Look Out For

  • Keep an eye out on steel plate’s raw material inputs — iron ore prices increased over the past month, as we reported in our December Monthly Buying Outlook, while coal prices decreased. Although steel plate prices appear a bit sluggish at the moment, China’s demand is something worthy of paying attention.

Key Price Movers and Shakers

  • The steel plate price in the U.S. rose from $692 to $693 per short ton for December.
  • Steel plate prices from China rose 4.3% to $685.10 per metric ton, while the Korean plate price dropped.
  • While we’re still waiting for the final GOES coil price this month, the neodymium price dropped considerably, doing its part to drive the overall index reading down for the month.

This morning in metals, some big news on the international trade and steel imports front.

The U.S. Department of Commerce yesterday announced preliminary affirmative rulings that corrosion-resistant steel (CORE) and certain cold-rolled steel flat products (cold-rolled steel) imported from Vietnam “produced from substrate originating in…China are circumventing existing antidumping and countervailing duty (AD/CVD) orders on CORE and cold-rolled steel imported from China,” according to their news release.

The Details on Duties

“The Commerce department has directed the United States’ customs and border protection agency (CBP) to collect anti-dumping (AD) and Countervailing Duty (CVD) cash deposits from importers of CORE produced in Vietnam using Chinese-origin substrate at rates of 199.43 percent and 39.05 percent, respectively,” according to this article, writing from the release. “CBP has also been directed to collect AD and CVD cash deposits on imports of cold-rolled steel produced in Vietnam using Chinese-origin substrate at rates of 265.79 percent and 256.44 percent, respectively.”

What This Means for Metal Buyers

Many in the steel manufacturing are hailing the decision as a victory as far as solidifying the case against China when it comes to proving that country’s circumvention and “substantial transformation” tactics.

The decision on CORE and cold-rolled products may open the door for the steel pipe and tube industry to file or follow up on similar cases.

Learn more on Trade Circumvention here, including a free white paper download on the topic.

Listen to our MetalMiner Podcast series, “Manufacturing Trade Policy Confidential,” for more discussion around circumvention and other trade topics that matter to metal buyers.

The Construction MMI, tracking metals and raw materials used within the construction industry, surged 5.5% to a value of 95 for December.

Here’s What Happened

  • Every single price point comprising the Construction MMI — including ferrous, non-ferrous and scrap components from the U.S., Europe and China — rose as of Dec. 1, with the exception of U.S. steel bar fuel surcharges.
  • The biggest mover appeared to be the Chinese rebar price, spiking 17.7% from November to December.
  • We’ve breached new territory with this month’s reading. Not since May of 2012 has the Construction MMI performed this strongly.

What’s Going On in the Background?

  • Here’s what we wrote back in May: “We’re in the salad days for the U.S. construction sector, at least as far as 2017 is concerned.” According to the Associated General Contractors’ analysis, construction spending was at record levels for the second straight month in March,” as quoted by Well, after a bit of a summer slowdown, it’s looking even better this month to round out 2017 as a pretty great year for the sector.
  • The Commerce Department said last week “that construction spending increased 1.4 percent to a record high $1.24 trillion, the swiftest advance in five months,” according to Reuters, exceeding analysts’ expectations and driven by state, local and especially federal government spending.
  • To boot, the AIA announced mid-last month that “the monthly Architecture Billings Index (ABI) came in at a score of 51.7 in October, up 2.6 points from September’s score of 49.1.” The ABI is a leading economic indicator of U.S. construction activity, and “reflects a nine- to 12-month lead time between architecture billings and construction spending nationally, and regionally, as well as by project type,” according to the article linked above.

What Metal Buyers Should Look Out For

Read more

Media coverage of the Section 232 investigations — which could potentially curb imports of steel, stainless steel and aluminum into the U.S. — have spooked importers, consumer groups and some manufacturing industries.

These fears are misplaced, according to Barry Zekelman, executive chairman and chief executive officer of Zekelman Industries. “Steel has been the most abused product on the planet,” he says.

What makes Zekelman’s point of view on trade so fascinating?

The fact that he is not a steel producer! (That, and his ever-colorful examples…our headline above is a case in point.) Take a listen to our conversation:

The Rise of Zekelman Industries

His story sounds like the American dream – a tale of how Zekelman and his brothers were thrust into their father’s fledgling business after their father’s sudden passing. He left college as a freshman to help save the pipe manufacturer.

Read more

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