Articles in Category: Commodities

Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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We should state from the outset that it’s not that energy costs are directly dependent on the oil price — very little electricity generation around the world, Saudi Arabia being an exception, is generated from crude oil.

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But with power making up to a third of the electricity cost structure, energy costs in general are taken as either bearish or bullish for the light metal depending on whether they are falling or rising strongly.

So the oil price slide — prices have lost around a quarter of their value since early October — is one of a couple of early indicators that support for aluminum price rises is waning.

Indeed, the corresponding strength in the dollar this year, coupled with recent oil price weakness, goes a long way toward explaining the aluminum price slide since the summer.

Source: Financial Times

Back to oil, according to Reuters, front-month Brent crude oil futures were trading at $65.88 per barrel yesterday, while U.S. West Texas Intermediate (WTI) crude futures were at $55.96 per barrel, both down about 0.5% from their previous close.

The reason isn’t hard to find.

Read more

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This morning in metals news, Chilean state copper agency Cochilco again trimmed its average copper price prediction for the year, China’s state-owned aluminum producer Chinalco is looking abroad and oil prices are up for the second straight day.

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Copper Price Prediction Falls

Chile’s state copper agency, Cochilco, lowered its average copper price prediction for the year, Reuters reported.

According to the report, it downgraded its prediction by $0.03 to $2.97/pound.

Chinalco Looks Abroad

Amid challenges at home, the state-run aluminum major Chinalco is looking elsewhere to buttress its business.

According to a Bloomberg report, the global aluminum market is set to swing from a deficit to a surplus in 2019, which will put pressure on the aluminum producer (in tandem with rising prices of raw materials).

Bloomberg cites Chinalco’s deputy general, Ao Hong, who said the firm is looking into an Indonesian alumina project.

Oil Prices Rise Again

The oil price made gains for the second straight day Thursday, Reuters reported.

After exceeding the $80/bbl mark in September — its highest level since 2014 — the price has come off in the last six weeks.

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

According to the report, OPEC is considering a cut of up to 1.4 million barrels per day next year to head off a further plunge in the price.

Alexander Chudaev/Adobe Stock

This morning in metals news, Novelis Inc. announced a $175 million investment in its aluminum recycling and production capabilities in aluminum, Chinese steel prices fell, and U.S. CRC and HDG prices dropped to start the week.

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Novelis Announces $175M Investment

Aluminum roller and recycler Novelis announced it is investing $150 million in its Brazilian aluminum rolling and recycling operations.

The investment will seek to expand its Pindamonhangaba facility.

“This investment in additional rolling and recycling capacity further strengthens our commitment to the South American region and better positions us to meet our customers’ needs,” President and CEO Steve Fisher said in a release. “Our focus on establishing another reliable water source also helps us further deliver on our purpose of shaping a sustainable world together.”

Chinese Steel Prices Drop

Prices of Chinese steel fell to multimonth lows, Reuters reported, as a result of concerns regarding demand in the country.

Rebar hit a 3 1/2-month low Monday but gained 0.3% Tuesday, according to the report.

MetalMiner’s Take: SHFE Chinese rebar prices this week fell back to April levels, when prices started to increase.

The pullback in prices is not only driven by a slower Chinese economy, but also by a slower demand. Chinese steel prices also started to decrease at this point of the year last year. Readers may want to study last year’s price levels and formulate a strategy based on them.

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

U.S. HDG, CRC Prices Fall

Prices of U.S. cold-rolled coil and hot-dipped galvanized steel sheet have continued to drop this week, S&P Global Platts reported.

The November Monthly Metals Index (MMI) report is in the books.

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This month’s report again saw a majority of the MMI subindexes post declines. Only the Global Precious and GOES MMIs increased, while the Rare Earths MMI held at the same level as the previous month.

Several highlights from this month’s report:

  • Sales were down for major automakers Ford and General Motors, but each reported higher average transaction prices.
  • U.S. construction spending in September was flat compared with August, but year-to-date spending continues to exceed 2017 levels.
  • Concerns about aluminum supply have eased following developments at Norsk Hydro’s Alunorte refinery and the U.S. Treasury’s second pushback of the sanctions deadline vis-a-vis Russian companies (including Russian aluminum giant Rusal).
  • The quest to win tariff waivers from the Department of Commerce continues to heat up, particularly as those requests receive pushback from domestic steel and aluminum producers.

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

Read about all of the above and much more by downloading the November 2018 MMI Report below:

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This morning in metals news, the nickel price has plunged to its lowest level in 11 months, Canadian Prime Minister Justin Trudeau spoke with President Donald Trump over the weekend regarding the U.S.’s steel and aluminum tariffs, and two train derailments appear to have had little impact on Australia’s iron ore sector.

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Nickel Falls to 11-Month Low

The nickel price dropped to an 11-month low Monday, Reuters reported, based on worries of slowing Chinese steel demand.

LME nickel fell 1%, while the most-traded Shanghai nickel contract fell 2.4%, according to the report.

MetalMiner’s Take: While nickel falls to an 11-month low, the MetalMiner analyst team has a close eye on several key metals market price drivers.

Oil prices have begun to drop but remain above the $58/barrel level, which serves as the long-term bear/bull threshold. As oil prices currently remain above that level, the long-term trend remains bullish.

The other key price driver to watch is the U.S. dollar, which has increased. However, it remains below the key resistance level MetalMiner has set as the level at which the markets turn from bullish to bearish.

MetalMiner readers will note the dollar and commodities trade inversely, so a higher dollar results in lower commodity prices.

Metal-buying organizations will want to pay careful attention now to oil prices, the U.S. dollar and China demand. A change in any two of these three could signal a market shift.

Trudeau, Trump Talk Tariffs

As world leaders gathered in France this weekend for the 100th anniversary of Armistice Day, Canadian Prime Minister Justin Trudeau and President Donald Trump exchanged words over the weekend regarding the U.S.’s steel and aluminum tariffs, Reuters reported.

Canada’s temporary exemption to the U.S.’s Section 232 steel and aluminum tariffs expired June 1.

According to the report, Trudeau said he hoped to reach a resolution on the issue before this year’s G20 Summit, which kicks off Nov. 30 in Buenos Aires.

Australian Iron Ore

A pair of recent train derailments have had minimal impact on Australia’s substantial iron ore sector, according to a Bloomberg report.

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

According to the report, iron ore futures on the Dalian Commodity Exchange fell 1% Monday.

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This morning in metals news, Shanghai rebar has dropped to a one-month low, cobalt prices are set to rise after a mining halt at a Glencore location in the Democratic Republic of the Congo (DRC) and BHP says a train derailment will impact its iron ore exports from Australia.

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Shanghai Rebar Steel Futures Down

Shanghai rebar steel futures have dropped to a one-month low, Reuters reported.

MetalMiner’s Take: SHFE rebar prices have fallen recently, but this slight drop is coming together with a general decrease in Chinese steel prices.

As for the other forms in the Chinese steel sector, SHFE rebar prices have been in an uptrend since April 2018 and have just started to slow down. Steel demand does not appear to be softer yet, while supply keep increasing due to the winter cuts.

The Chinese steel sector could be harmed if the expected cuts are lower than expected, and prices could fall further.

However, readers may also remember that Chinese steel prices have historically decreased during the winter season. Therefore, some price patterns could just be repeating last year’s price movements.

Cobalt Prices Set to Rise

A stoppage at a Glencore-run cobalt mine in the DRC is expected to boost the price of the metal,  which is in high demand by the electric vehicle sector.

According to the Financial Times, operations at the cobalt mine ceased Tuesday after trace amounts of uranium were discovered.

MetalMiner’s Take: Cobalt takes a page from aluminum markets.

News of a cobalt mine stoppage due to radiation could provide price support for cobalt, not too dissimilar to the temporary threat of a stoppage at a key miner of the raw material used to make aluminum.

Cobalt, however, unlike aluminum, has a much more concentrated supply market, with the DRC maintaining over 60% of total global supply.

And as many pundits predict, the rise of electric vehicles (and cobalt as a key material used in those vehicles) in other words, the demand side of the equation looks strong for both the mid- and long-term.

Therefore, buying organizations relying on cobalt will want to adapt the same kind of purchasing strategies used for other volatile materials such as aluminum and nickel.

Train Derailment to Impact BHP’s Australian Iron Ore Exports

According to a Reuters report, mining giant BHP Billiton said it expects interruptions to its iron ore exports as a result of the forced derailment of a train containing the commodity this week.

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

According to the report, the miner said its reserves at Port Hedland are not expected to be able to cover the entire period of disruption.

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This morning in metals news, Russian aluminum giant Rusal had a big third quarter, Vale announced an iron ore supply deal with Emirates Steel and British Steel is potentially looking to make an acquisition in the U.S.

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Rusal 3Q Earnings Up 42%

Russian aluminum giant Rusal reported its third-quarter earnings were up 42%, according to a Reuters report.

The firm also announced it had appointed a new CEO.

MetalMiner’s Take: It can’t come as a surprise to see strong financial performance by Rusal.

The company has benefitted from the extension of a sanctions deadline that would have made Rusal the pariah of the aluminum industry. Aluminum prices have held firm, raw materials remain in tight supply (particularly alumina) and the North American market has a real semi-finished material shortfall. It also appears as though Rusal has undergone enough restructuring to place Oleg Deripaska at an arm’s length position from the company, which underpinned the sanctions.

MetalMiner does not expect Rusal to be subject to sanctions come Dec. 12.

Vale, Emirates Steel Ink Deal

Brazilian miner Vale and U.A.E.’s Emirates Steel have signed a four-year deal in which the Brazilian firm would supply iron ore pellets for Emirates’ steel operations, according to Mining.com.

“The agreement with Vale comes in line with Emirates Steel strategy, which aims to secure flexible source of iron ore at competitive, stable and long term prices. This new partnership plays a vital role to further strengthening the growth of our steel production in Abu Dhabi, as well as realizing our vision of being a world class steel manufacturer providing the highest quality products, services and solutions to our customers and maximizing returns to our shareholders,” Emirates Steel CEO Saeed Ghumran Al Remeithi said in a prepared statement.

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

British Steel Coming to the U.S.?

According to the Financial Times, British Steel is considering a bid for the U.S. carbon and alloy wire producer Johnstown Wire Technologies.

The U.S. firm is based in Johnstown, Pennsylvania, 65 miles east of Pittsburgh.

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

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

Zerophoto/Adobe Stock

This morning in metals news, two prominent Chinese economists have been publicly critical of China’s economic model, the U.S. Department of Commerce has launched an audit of tariff waivers received by companies, China’s steel demand appears to be a boon for the Indian iron ore sector and U.S. Steel shares dipped after hours Thursday following the firm’s third-quarter earnings release.

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China Critique

As reported by the Financial Times this week, two Chinese economists were publicly critical of China’s economic model, arguing that China is to blame for the current trade crisis.

Zhang Weiying, a professor at Peking University’s National School of Development, delivered a speech in which he outlined his criticism.

“In the eyes of westerners, the so-called ‘China model’ is ‘state capitalism’, which is incompatible with fair trade and world peace and must not be allowed to advance triumphantly without impediment,” Zhang was quoted as saying.

Commerce Department Launches Audit of Tariff Waivers

The Section 232 tariff exclusion request process has been rife with complaints since it began in June, as companies sought exclusions in order to import products they argued are not made in the necessary quantity or quality within the U.S.

This week, CNBC reported that the Department of Commerce has launched an audit of the tariff waivers.

According to the report, the Department of Commerce has received nearly 50,000 tariff exemption requests.

MetalMiner’s TakeThe process in which buying organizations request exclusions from the Department of Commerce has indeed come under much criticism.

The criticism appears to be justified.

The sheer number of exclusion requests and the time necessary to evaluate the requests could take many months at a minimum and, second, the fact that the exclusions granted to date appear to get awarded to only those who do not have a mill or producer arguing against the request.

In other words, if the request goes unopposed, the exclusion request has a higher likelihood of being granted. MetalMiner is not aware of any exclusion request being granted in which a mill or producer has opposed the request.

The audit process should provide clarity around the provisioning of exemptions when mills/producers object to the request. But buying organizations should not expect any quick answers or resolution to their requests — audits take time to conduct and any recommended process changes will take time to implement.

Chinese Steel and Indian Iron Ore

According to a Bloomberg report, China’s steel mills have been searching for higher quality iron ore, part of the country’s battle against pollution.

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

As a result, the Indian iron ore sector has sought to ramp up its capacity to meet that demand, particularly in the form of iron ore pellets.

U.S. Steel Shares Fall

Shares of U.S. Steel fell Thursday after the firm’s Q3 2018 earnings release, MarketWatch reported.

Shares fell 1.6% after hours Thursday, according to the report. U.S. Steel reported third-quarter net earnings of $291 million, up from $147 million in 3Q 2017.