Author Archives: Taras Berezowsky

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.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

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

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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 Movers and Shakers: Exact Prices

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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 forconstructionpros.com. 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

  • Interestingly, a longer-term ABI uptrend appears to be firmly in place — since 2012, the index looks to be achieving “higher highs” each time it peaks.
  • “As we enter the fourth quarter, there is enough design activity occurring that construction conditions should remain healthy moving through 2018,” said AIA chief economist Kermit Baker, Hon. AIA, in a press release, according to Architect Magazine.
  • MetalMiner analysts are generally bullish on both the industrial (especially base) metals complex and commodities overall, which can be seen directly in this month’s surges of our MMI sub-indexes such as Construction and Automotive.
  • Although prime contracting season usually starts in the November period and steel prices historically tend to rise this time of year, steel prices’ behavior has not shown enough strength to spur bullishness. Get more insight on that in our latest Monthly Outlook Report. (Free two-month trial here.)

Key Movers and Shakers: Exact Prices

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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

The Automotive MMI, tracking metals and raw materials used within the automotive industry, jumped 4.3% to a value of 97 for May.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Here’s What Happened

  • The U.S. HDG steel price tracked by the MetalMiner IndX jumped 11% to an 8-month high for December, last reaching its current level in April 2017. U.S. shredded scrap prices also spiked to an 8-month high, driving this sub-index higher.
  • Our Auto MMI has had a stalwart Q4, with sustained values in the 90s. In fact, the last time this sub-index reached 97 was in September 2014.

What’s Going On in the Background?

  • Auto sales in the U.S. were helped along by automaker and dealer incentives for consumers, with the return of the holiday shopping season — especially Black Friday, according to an AP report.
  • Edmunds.com predicted “November sales will rise 3.5 percent over last year to 1.4 million vehicles,” according to that report.
  • The historical picture, however, shows that while car sales are in a longer-term downtrend, light truck sales are in a longer-term uptrend, according to the WSJ.
  • As for the Chinese auto market, vehicle sales increased by 2% year-over-year in October, growing for the sixth consecutive month, according to MetalMiner’s monthly metal buying outlook report. New-energy vehicle sales also boomed this year, driven by government incentives to support the EV sector.

What Metal Buyers Should Look Out For

  • The state of how sales within the automotive market are structured could offer some hints as to what the future holds. Brandon Mason, a director at PwC’s automotive practice, told Reuters that, “a worrying trend for the industry was a rising number of deep subprime loans. He said subprime levels are at just over 20 percent of originations, against more than 30 percent prior to the Great Recession, but recent increases remain a concern.”
  • HDG prices, however, may be the biggest elephant in the room — not to mention often the single-biggest driver within our market basket of metals used in the auto industry. According to MetalMiner’s analysis in the monthly outlook, while 2016 saw a sizable increase in HDG prices, they’ve begun to level off to the point that real price strength is not yet evident. With slowing Chinese prices and pending circumvention cases, HDG prices may reverse this month’s uptrend just as quickly as it began.

Free Sample Report: Our Annual Metal Buying Outlook

Key Movers and Shakers: Actual Prices

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Over the past half-year or so, it seems as though the cannabis industry is putting out a new press release every other day. And due to relatively recent state-by-state legalization, cannabis’ economic boom and the growth of its supply chain seems legit enough to spawn this spate of news.

In fact, just before beginning to write this article, I received another release on the latest industry growth numbers. And news just broke that the county in which MetalMiner HQ is based may get legal marijuana on an advisory referendum next March. Salad days for the green goddess!

Why go into all of this? Cannabis may have a lot to learn from the industrial metals sector when it comes to commodity price volatility and risk.

Cannabis (vs. Other Commodity) Price Volatility

In their recent report shared with our sister site Spend Matters, Cannabis Benchmarks (in some ways the MetalMiner Benchmark for the green sector), we can see how volatile cannabis prices are compared with other agro commodities:

Courtesy of Cannabis Benchmarks

Not surprisingly, the report states that “market price volatility can be troublesome for all the participants in the value chain.” That is precisely why most supply chain players should begin thinking strategically about managing supply — and not just price — risk (more on that in the next section).

Also not surprisingly, while traditional supply and demand factors such as weather drive many agricultural markets, “significant price jumps in regional cannabis markets appear to still be driven largely by regulatory decisions,” which we’ve reported on in detail. With cannabis remaining illegal under federal law, this is a trend unlikely to change in the short term, according to the report.

The paper goes on to outline the basics of hedging for participants in the cannabis supply chain — including the 101 on spot versus forward buying and contracts, OTC markets and swaps — with some examples to lay out what’s possible for the buyers and sellers within the nascent market.

Managing commodity price volatility and risk requires beginning to think about it strategically. Lisa Reisman, executive editor of Spend Matters’ sister site MetalMiner, knows a thing or two about that.

3 Reasons for a Commodity Management Strategy

Here’s more on how to begin framing the need for hedging strategies from Reisman (read the full article for more detail and examples):

  • Cost
  • The notion of supply chain transparency. Knowing how each entity within the supply chain prices its products and services only helps the buying organization better understand total cost of ownership (TCO).
  • Margin risk. By leaving the burden of extending quote validity periods or holding current pricing for longer periods of time to suppliers, the buying organization cedes control of its own ability to manage margins.

Ultimately, the cannabis industry is such a nascent frontier that now is the time for participants can begin hashing out their own agreements, using benchmark indexes, specifications and the basics of hedging, according to the Cannabis Benchmark report.

“In other commodity markets, such contract standardization has been created by participant pools, cooperatives, federal entities, and international organizations,” the report states. “Given the projected volume of transactions and currently planned centralization of distribution, the first actively traded hedging markets for cannabis could conceivably occur in California within a year.”

“It is contingent upon the industry to come together and create the framework and standards for this potential to be realized.”

Read the original article over on Spend Matters here. Need more specific guidance around commodity price risk management strategy? Contact us!  

In case you missed it, just before President Trump went on his Asia tour (including a state visit with China’s President Xi Jinping), the U.S. finally went on record in ruling that China is still not a market economy for purposes of determining anti-dumping duties.

To folks inside the Beltway on the front lines of trade policy, this is a big deal.

In fact, it’s China’s single-biggest trade issue, said Tim Brightbill, partner at Wiley Rein LLP in Washington, D.C., in the second episode of our series, “Manufacturing Trade Policy Confidential.”

So what will this mean for the U.S.-China relationship?  What will happen if the U.S. slaps China with even bigger tariffs after the Section 232 investigation is completed? Will China retaliate? How?

Listen to the full episode!

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.