Articles in Category: Commodities

gui yong nian/Adobe Stock

This morning in metals news, Canada could respond to the U.S. steel tariff with a broad global tariff of its own, the governor of Texas says the metals tariffs could harm the oil and gas sectors, and India could be the recipient of a flood of redirected Chinese steel.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

Canada Weighs Broad Tariff Option

The Canadian government is considering slapping tariffs or quotas on some steel imports from all of its trading partners, the Wall Street Journal reported.

The measures would seek to protect the Canadian industry from materials flooding the market as a result of the U.S.’s 25% steel tariff and subsequent redirected supplies.

Texas Gov. Warns of Tariffs’ Impact on Oil, Gas

Texas Gov. Greg Abbott, in a letter to President Trump, argued the steel and aluminum tariff enacted by the current administration will negatively impact the oil and gas sectors, the Texas Tribune reported.

“Our country’s steel and aluminum workers are a vital part of the national workforce, and creating jobs in that industry must be a top priority,” he said in the letter, according to the report. “But attempting to protect these jobs through the new tariffs could jeopardize the livelihoods of hundreds of thousands of Texans and other Americans employed in the oil and gas industry.”

Tariff Fallout

The U.S. tariff on steel only discourages imports — of course, it doesn’t make those physical totally disappear into the ether.

With that in mind, one asks: where will steel products previously destined for America now go in this post-Section-232 world? Particularly, where will Chinese inventory go?

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

According to Bloomberg, India could be the destination for much of that supply. According to the report, as much as 80 million tons of steel (17% of global supply) could be diverted to other markets, including the fast-growing India.

The diverse drivers of expanding renewable energy and demand for liquefied natural gas (LNG) are in turn stimulating demand for stainless steels and aluminum.

Buying Aluminum in 2018? Download MetalMiner’s free annual price outlook

Perversely, the growing competitiveness of renewable energy is making the use of natural gas less economic for baseload power generation. However, according to a Bloomberg report, the rise of variable renewable energy sources is expanding LNG’s role in providing flexible power generation to balance the electricity grid in many major economies.

The use of LNG in the industrial and transport sectors is also pushing up gas demand, particularly in Asia where environmental concerns are finally having an impact on policy.

Markets like South Korea, Japan, Europe and particularly China are increasing LNG consumption as major new LNG facilities come on-stream and costs fall. According to global data, global LNG liquefaction capacity is set to expand by 117% over the next four years from 419 million tons per annum in 2018 to 907 million tons per annum by 2022. Not surprisingly, with its abundant natural gas supplies arising from the shale market, North America leads in terms of planned and announced capacity growth, contributing some 82% of the total, the news release reports.

Source: GlobalData

All this LNG requires both liquefaction and transport, driving demand for stainless steels, nickel alloys and aluminum. Indeed, the LNG market has proved one of the bright spots for stainless steel and nickel alloys badly hit by a collapse in investment in the oil industry following several years of declining crude oil prices.

The market now faces the prospect of renewed interest from the oil sector following substantial rises in the crude price over the last year and ongoing long-term investment in LNG facilities, both onshore and for marine transport.

Although there are likely to be ebbs and flows in LNG demand — and, therefore, investment over the coming decade — the consensus remains that the market will continue to grow as domestic production of natural gas in southeast Asia and Europe declines and import demand, therefore, rises.

Source: Bloomberg

Liquefaction facilities at the point of export and decompression facilities at the market of destination are contributing to demand for 5000 series aluminum alloys, particularly in the U.S., Australia and the Middle East.

While the construction of LNG carriers, which is dominated by the shipyards in South Korea and China, is creating demand for high-quality stainless steels and special nickel alloys, like Invar.

Want to a see Cold Rolled price forecast? Get two monthly reports for free!

LNG expansion has quietly played its part in the gradual rise in nickel prices over the last two years, despite most of the attention being taken by the electric vehicle battery market and renewables.

After a sharp run up from the middle last year, the oil price is hovering below U.S. $80 per barrel.  The market is finely balanced in terms of threats to supply and still has robust demand growth.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

Capacity cuts implemented by Russia, OPEC and a number of non-OPEC countries have successfully brought excess supply under control and reduced inventory. As a result, the oil price has risen with the expectation that the cartel will continue to restrict output into 2019.

So far, all significant producers appear on board with that position. The International Energy Agency (IEA) says the market is broadly balanced, with further price increases unlikely to be as significant as those of the previous 12 months.

The oil market still faces serious supply risks from the potential losses in Venezuela and Iran, the International Energy Agency (IEA) said in a new report, with only the U.S. continuing to add output. The IEA sees non-OPEC supply growing by 2 million barrels per day in 2018, followed by another jump of 1.7 million barrels per day in 2019, reports; the U.S. makes up three- fourths of both of those figures, despite severe pipeline restrictions in Texas hampering development.

Growing U.S. output, though, is barely making up for declines in Venezuela, which the report describes as “catastrophic,” and potential loss of Iranian supply if sanctions are reimposed further (thus tightening the market).

So far, Russia and Saudi Arabia are not willing to increase output to dampen price rises. President Trump’s tweets this week about the oil price already being too high should be seen as an attempt to pressure OPEC to increase output to cap prices.

Interestingly, The New York Times sees the current failure of the oil price to break through $80 as evidence that the U.S., Russia and Saudi Arabia are already working behind the scenes to increase output and cap further rises. Whether that is true is unclear — judging by the president’s tweets, it’s probably not being done in any concerted or coordinated manner.

President Trump’s comments over the oil price aren’t altruistic concern for consumers; rising oil prices have added to inflationary pressures in the U.S. The Wall Street Journal reports oil price rises have contributed to a number of factors forcing up consumer prices and encouraging the Fed to consider four rate hikes this year. Even though the WTI $10 discount to Brent leaves U.S. consumers at an advantage to the rest of the world, costs are still rising this year.

The president not unreasonably does not see any need for further oil price rises. While the demand market is growing, there is plenty of capacity to meet it if producers allow it; but for various reasons, OPEC is keen to see higher prices. For Saudi Arabia, it’s because of budget deficits and maximizing the value of the upcoming Aramco float. For most other OPEC members, it’s to make up state budgets requiring close on $100 per barrel to balance the books.

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

At under $80, there is clearly more incentive for producers to continue restrictions and push for higher prices. However, unexpected supply-side disruption excepted, the probability is they will be disappointed — at least in the short term — as prices show little inclination to drive higher.

phonlamaiphoto/Adobe Stock

President Donald Trump has signaled his displeasure at aspirations expressed by Saudi Arabia at a recent OPEC meeting with respect to an extension in the current supply deal between OPEC and non-OPEC members for continued supply constraints with a view to higher prices.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

Saudi Arabia is rumored to be looking for prices in excess of $100 per barrel, partly to support the upcoming $2 trillion IPO of Saudi Aramco and partly to stem dwindling reserves caused by a haemorrhaging budget deficit.

According to The Telegraph, the kingdom’s massive foreign cash reserves have dwindled from a peak of $737 billion in 2014 to $488 billion today. Some oil experts think that break-even for Saudi Arabia is somewhere close to $85 a barrel.

President Trump’s comments caused a sharp retraction in oil prices, but it is not clear if the fall will be sustained.

Read more

tanantornanutra/Adobe Stock

Happy Friday, MetalMiner readers! Here’s a look back at this week’s top stories.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

  • A number of aluminum associations around the world wrote a joint letter urging G20 leaders to hold a forum on global aluminum overcapacity at this year’s G20 Summit, scheduled to take place from Nov. 30 to Dec. 1 in Buenos Aires.
  • After a steady downward trend, LME aluminum prices recovered, rising more than 13% in a week.
  • The U.S. International Trade Commission will advise the U.S. Trade Representative on proposed modifications to the U.S. Korea Free Trade Agreement (KORUS).
  • The EU is demanding compensation at the WTO for the U.S.’s Section 232 tariffs on steel and aluminum, arguing that the tariffs were imposed to protect U.S. industry. What is behind the U.S.’s national security argument?
  • Irene Martinez Canorea’s mid-month metals analysis shows aluminum as April’s top performer so far. Prices for copper and nickel have also risen, while other base metals have fallen.
  • U.S. and India have announced a joint task force on natural gas.

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

Numerous factors weigh heavily on the base metals and commodity complex: the Chinese copper scrap ban, the Section 232 proclamation on aluminum and steel combined with country-specific exemptions set to expire on May 1, the Section 301 investigation, and multiple strikes at copper and nickel mines to boot. After the turmoil of the first few months of 2018, MetalMiner reviews how base metals and commodities performed during Q1.

Aluminum, copper and nickel on the rise

Aluminum, copper and nickel prices started 2018 weaker than at the end of 2017. The end of 2017 showed a sharp rally for these base metals, following the bullish uptrend that began in the summer of 2017.

Need buying strategies for aluminum? Try two free months of MetalMiner’s Outlook

The short-term downtrend sounded alarms as prices dropped significantly, not finding a floor. However, LME prices started to climb at the beginning of April, leaving the downtrend behind.

Read more

Sergiy Serdyuk/Adobe Stock

This morning in metal news, Chinese iron ore futures rebound from a 10-month low, Saudi Arabia emerges as OPEC’s leading supporter for further reducing oil supply, and researchers discover a major supply of rare earth minerals in the seabed near a remote Japanese island.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

Chinese Iron Ore Rebounds from 10-Month Low

After dropping to a 10-month low on Tuesday, Chinese iron ore has rebounded somewhat, Reuters reported.

The price of iron ore had dropped nearly 15% this year as a result of oversupply, with stocks totaling 161 million tons. As the Wall Street Journal’s Rhiannon Hoyle wrote, “there’s enough iron ore sitting at Chinese ports right now to produce more than 100 million automobiles, in theory.” However, experts say that most of the iron ore is likely of low-quality.

A $100/Barrel Oil Price

Saudi Arabia wants to see the price of crude to rise to $80 to $100 per barrel. Reuters reported that these were the figures discussed by senior Saudi officials in recent closed meetings.

In January 2017, OPEC, Russia and other producers had agreed to reduce supply, a pact that extends until December 2018. Although the original goal of the pact is in sight, with oil prices currently at $73 a barrel, Saudi Arabia is emerging as the OPEC’s leading supporter for further supply cuts.

Off the Coast of Japan, a Rare Earths Find

A team of Japanese researchers recently discovered a treasure trove of rare earth minerals in the Pacific Ocean seabed near Minamitori Island, a small Japanese island about 1,150 miles from Tokyo, CNN reported. Read more

ronniechua/Adobe Stock

This morning in metals news, oil and gold prices opened slightly lower despite the missile attacks on Syria that took place early Saturday morning local time. NAFTA renegotiation talks speed up in face of Mexico’s upcoming presidential election.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

Oil, Gold Traded Lower Following Syria Strikes

Oil and gold prices have not yet spiked following the missile attacks that the United States, Britain and France launched on Syria over the weekend, instead trading slightly lower when markets reopened, according to Reuters.

“Gold has benefited in recent days as a safe-haven asset amid a U.S.-China trade dispute and the escalating conflict in Syria, which also pushed oil above $70 a barrel because of concerns about a spike in Middle Eastern tensions,” Reuters’ Jan Harvey and Jessica Resnick-Ault wrote.

The LME’s Aluminum Woes

The London Metal Exchange’s decision to no longer accept aluminum from Russian producer Rusal has led to a scramble to withdraw non-Russian metal from the LME’s warehouses, the Financial Times reported. Buyers have also been in a bind to find alternative sources of aluminum. Read more

michal812/Adobe Stock

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

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

  • Joseph Kabila, president of the Democratic Republic of Congo, is looking to rip up a 2002 mining charter in order to secure a larger piece of the revenue from the country’s vast natural resources.
  • Copper prices have been trending down since a December surge (when the LME copper price reached $7,215/mt).
  • There’s a battle going on between two rival manufacturers of the famous London black cab.
  • Hong Kong’s housing market is overstretched, MetalMiner’s Stuart Burns writes.
  • In case you missed it, it’s Monthly Metals Index (MMI) Week! We kicked our off monthly round of subindex reports this week, which are available at the following links: Construction, Rare Earths, Renewables, and Automotive. Look for the remaining six MMI reports next week.
  • India is among the list of countries still lobbying for exemptions from the U.S.’s Section 232 tariffs on steel and aluminum imports.

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

I guess you can’t blame countries like the Democratic Republic of Congo (DRC) for looking to acquire a bigger piece of the wealth from their own supplies of natural resources.

Need buying strategies for steel in 2018? MetalMiner’s Annual Outlook has what you need

The Telegraph reports that President Joseph Kabila is ripping up the 2002 mining charter, looking to boost royalties from 2% to 3.5% on base metals, with an additional levy of 10% on what it calls strategic minerals.

While at the time of writing it was not clear if copper and cobalt would be hit by the higher tax, both metals certainly come under the broad definition of strategic and are two of the DRC’s biggest earners.

Other reports suggest the premium for strategic metals could be just 5% and 6% on precious stones, of which the DRC is also a major producer.

The grab for a bigger share of royalties probably predates news that Glencore has struck a deal to sell one-third of its DRC cobalt production to Chinese battery recycler GEM Co. in a three-year deal, said in a Times article to cover 52,800 tons of cobalt hydroxide between 2018 and 2020. With cobalt prices at record levels, the deal is already worth between $4 and $5 billion (assuming prices don’t rise even further).

Needless to say, mining companies are lobbying hard for a reduction in any additional royalties, arguing for delays to implementation, and special exemptions. The government’s position is that the previous code, now some 15 years old, was created to make the DRC attractive for investors at a time when it was suffering the second Congo War from 1998-2003. The government argues that in the intervening period, the situation has become much more stable and mining companies can operate in a better domestic security environment (and therefore at lower cost and lower risk).

Under such circumstances, they suggest a fairer distribution of the spoils is overdue.

Perceptions of domestic security are relative. The DRC remains one of the most difficult places in the world to do business and there remains a significant risk premium that Western mining companies will demand to invest in that troubled country.

But the fact remains that the DRC has huge reserves of critical raw materials that will be needed in the years to come for a wide variety of technologies and applications.

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

If the state takes a little more of the pie, it will probably be reflected in prices. But with limited alternatives for products like cobalt, it is unlikely to dent mining companies’ enthusiasm for investing in the DRC.