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This morning in metals news, copper prices made a bit of a comeback on Thursday, gold neared a 2017 high and a Japanese steel plate manufacturer is asking the U.S. Court of International Trade to reconsider the scope of anti-dumping and countervailing duties with respect to tool steel.

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Copper Bounces Back

After a downward trend for copper, the metal showed signs of recovery on Thursday, according to a Reuters report.

Reports of strong imports and exports in China for May helped give copper a boost after a three-week low this week.

However, analysts indicated that upside for the metal is limited. Given analysts’  expectations of a Chinese growth slowdown in the second half of 2017, among other factors, it would not surprise to see copper experience setbacks throughout the remainder of the calendar year.

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Our Raw Steels sub-index score dropped by 10% from March to April, partially a result of slumping prices in China.

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That score experienced a bit of a comeback for our June reading, rising to 68 from the May reading of 66.

This time around, Chinese steels posted price increases, providing a boost after a tepid April. Chinese slab steel prices rose by 20.1% and billet steel also experienced a major bump, rising by 15.2%.

In the U.S., shredded scrap steel prices stabilized after a 7.1% drop the previous month. Shredded scrap’s June price point is the metal’s second-highest of 2017.

U.S. Steel Prices: Going Up or Down?

As we’ve previously reported, Chinese and U.S. steel price divergences usually mean one will have to move to close the gap.

So, what does that mean for U.S. steel prices?

As we noted previously, U.S. steel prices rose as Chinese prices dropped by 20%, leaving a widening price spread. Ultimately, the former may have to pull back price momentum.

And, given data in 2017 to date, a price drop for U.S. hot-rolled coil (HRC) and shredded scrap would not be surprising. The former has posted price drops every month this year, while the latter has shifted back and forth on either side of a $300/short ton baseline.

President Donald Trump and his administration’s ongoing national security probe into U.S. steel imports will continue to be something to monitor. The administration’s actions with respect to the investigation, if any, would have effects on steel prices and the interplay between U.S. and Chinese prices, in particular.

Actual Metal Prices

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This morning in metals news, a new firm is looking to challenge the London Metal Exchange (LME), copper prices took a fall and sluggish demand also knocked down other base metals.

NFEx Eyes Early 2018 For Launch of New Trading Platform

The LME, founded 140 years ago, might have some competition in the near future.

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NFEx Markets announced Monday it plans to open its own trading platform for base metals in the first quarter of 2018, according to a Reuters report.

NFEx has offices in London’s financial district — the new company, incorporated in March, aims to attract physical trade.

“Contracts and trade dates will match established physical industry practice,” the company said in a release. “This new trading platform will not replace or disturb current trading models but will be complementary to them.”

Copper Prices Dip

Like other metals, copper prices fell on Monday, according to a Reuters report.

Copper inventories monitored by the Shanghai Futures Exchange grew for a third consecutive week, as demand seems to have declined. Many expect China to have slower growth in the second half of 2017.

Nickel, Lead, Zinc Also Down

Similarly, nickel, lead and zinc futures were down in India, the Economic Times reported.

The declines were the result of low demand, according to the report.

Lead futures were down by 0.40%, while nickel and zinc futures were each down by 0.24%.

Free Download: The May 2017 MMI Report

It is something of an unholy alliance, but Russia and Saudi Arabia are becoming ever closer allies in a graphic example of realpolitik.

The two would probably be implacable enemies if their contrarian positions in Syria were any gauge – Russia closely aligned with Iran in their support of Bashar al Assad, yet Iran is Saudi Arabia’s public enemy number one and only major rival in the Middle East.

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But economics trumps almost all, and the two’s interests are certainly aligned in trying to reverse the damage done by Saudi Arabia’s failed bid to squeeze U.S. shale drillers out of the market and the corresponding glut of supply forcing prices to painfully low levels – painful at least for oil producers.

As the FT observed in quoting RBC Capital Markets as saying, “Saudi Arabia and Russia are essentially now co-pilots of this operation (of restricting output to boost prices) and they’ve made it clear there will be no going back to chasing market share.” The article goes on to quote: “It’s a huge change from two years ago when Russia would not co-operate with OPEC and even questioned its relevance in the age of shale.”

The two agreed last week to not only extend but deepen production cuts for a further nine months into 2018.

But not all agree with the International Energy Agency’s prediction that the cuts will be enough to balance supply and demand later this year.

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The Automotive MMI, our sub-index of industrial metals and materials used by the automotive sector, dropped by one point for a June reading of 86. The Automotive MMI has not seen an increase since early this year, when the figure accelerated from a January reading of 82 to 92 in February.

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Overall, consumers seemed to pass on auto purchases in May, continuing the slowdown from January-April. Car and light truck sales — checking in at a total of 1.52 million in May — were down for the third month in a row. Automakers reported a 1% drop in sales from the previous year, according to a Reuters report.

While Ford Motor Company’s sales are down by 3.5% in the calendar year to date compared with the same point in 2016, it had a good May, edging out GM and others, according to data from Autodata Corp.

Ford sold 240,250 vehicles in May, a 2.3% increase from its May 2016 total sales.

GM, meanwhile, sold 237,156 vehicles in May 2017, a 1.4% drop from May 2016.

As for Chinese auto sales, those are down, too, despite a strong first quarter. Reuters reported a 2.2% drop in April sales after a 5% rise in March. The decline was the largest in China since August 2015, according to the report.

So how does that related to the metals side of the story?

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This morning in metal news, the European Union urges the United States to focus the scope of its national security probe — launched by President Donald Trump’s administration in April — into steel imports; nickel prices continue to tumble amid concern about global oversupply; and China’s attempt to tackle its debt could impact metal markets throughout the second half of 2017.

EU Officials Express Concern About US Steel Import Probe

On the heels of President Donald Trump’s first round of overseas visits, there remains uncertainty about the president’s stance on several issues, including whether or not Trump will pull the U.S. out of the 195-member Paris climate accord (the president is expected to make an announcement on that subject this afternoon). In addition, EU officials are concerned about the scope of the Trump administration’s national security probe into U.S. steel imports, Reuters reported.

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The probe would have negative effects on both U.S. steel producers and manufacturers which use steel, a written statement from the European Commission to the U.S. Department of Commerce argued. The EU is also hoping the probe will zero in on issues of national security and won’t broadly impact exporters around the world, should the Trump administration decide to adjust steel import policy.

Nickel Continues to Roll Downhill

The price of nickel continues to fall, this time to an 11-month low on Thursday, Reuters reported.

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“Where next for oil prices?” Stuart Burns had asked on Monday. In the short term, that would be downwards.

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Yesterday the Organization of the Petroleum Exporting Countries (OPEC) met in Vienna and decided to extend supply cuts for another nine months, until March 2018. That is what was expected, but oil prices responded by dropping quite a bit, Reuters reported, by roughly 5%.

The price of oil has indications beyond, well, oil. “Oil prices are a proxy for energy prices, and a rising oil price can be supportive for energy intensive metals like aluminum,” Burns wrote. “A rising oil price is also taken as a proxy for rising industrial demand – a bullish indicator that global growth is strong. A falling price, on the other hand, should be good for consumer spending as it keeps more money in drivers’ pockets and lowers the cost of goods sold for companies far and wide.”

Where Next for the U.S. Dollar?

Another driver of metal prices is the dollar. This past week, Raul de Frutos looked at the movement of the U.S. dollar, which recently hit a seven-month low. What is the reason for this drop?

“First, the dollar had steadily risen for three consecutive months,” de Frutos wrote. “It’s not uncommon to see profit-taking after such an increase. But there are also some fundamental reasons behind this sell-off.” Read more

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This morning in metal news, a new report paints a positive picture for jobs in the renewables sector, Moody’s downgrades China’s credit rating, and the results of the OPEC meeting are in. The current supply cuts will be extended for another nine months, and oil prices tumbled on the news.

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

OPEC Agrees on 9-Month Extension of Supply Cuts

Let’s start with the big headline of the morning. As expected, the Organization of Petroleum Exporting Countries (OPEC) has agreed to extend supply cuts for another nine months, until March 2018.

After OPEC wrapped up its first meeting in Vienna around 3:30pm CEDT (8:30am CDT), oil prices responded over the next few hours by sliding 4.5% to $51.60 per barrel. Some industry analysts think OPEC should have agreed to deeper cuts. As The Guardian reported, OPEC is “sticking to the 1.8 [million] barrel a deal first agreed in late November.” Russia and other oil producing non-OPEC members are also expected to go along with the supply cuts.

Forget Bringing Back Coal Jobs

The burgeoning renewable energy sector employed 9.8 million people in 2016, according to the latest annual report released by the International Renewable Energy Agency (IRENA). Global employment in the sector has been growing every year since 2013, and there may be as many as 24 million renewables workers worldwide by 2030. Read more

The U.S. dollar got a boost after the presidential election as markets were encouraged by prospects of lower taxes, fiscal stimulus and deregulation that would accelerate growth of the American economy.

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

But this month, the dollar has fallen sharply, hitting a seven-month low. A weaker dollar gave some relief to depressing commodity markets.

Commodity index (in black) rises as Dollar index (in green) falls. Source: MetalMiner analysis of stockcharts.com

Why then is the dollar losing its luster now?

First, the dollar had steadily risen for three consecutive months. It’s not uncommon to see profit-taking after such an increase. But there are also some fundamental reasons behind this sell-off.

Selling intensified after the recent political turmoil around President Donald Trump as investors worry over political stability in the U.S. Investors also worry that under these political turbulences, the Trump administration will struggle to implement the pro-growth initiatives that markets had taken for granted. Finally, the euro appreciated against the dollar as political risks in Europe eased following the French elections.

Can This Decline Be Reversed?

US Dollar Index could bounce back up soon. Source: MetalMiner analysis of stockcharts.com data

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This morning in metals news, the strike at Freeport McRoRan’s Grasberg copper mine was extended for a second month, oil prices rose in expectation of supply cuts, and silver prices reached a three-week high.

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Freeport Indonesia Strike Extended

This past Saturday, the union representing thousands of workers at Freeport’s Grasberg copper mine in Papua, Indonesia announced that the ongoing strike will be extended beyond May 30, Reuters reported. As union industrial relations officer Tri Puspital told Reuters, “We will extend the strike for 30 more days.” Approximately 9,000 workers are participating in the strike.

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The reason for the strike revolves around employment. Last month, Freeport laid off about 10% of its 32,000 workers to cut costs, which accrued to the tune of millions thanks to an ongoing dispute with the Indonesian government over rights to the Grasberg mine. “With this problematic combination of protests from workers and tensions with the Indonesian government,” wrote MetalMiner analyst Raul de Frutos earlier this month, “it’s no wonder that investors are concerned about further supply disruptions this year.” It looks like supply disruptions will continue.

A Key Week for Oil

One hopes that this will be the only time when news source after news source mentions Saudi Arabia and glowing orbs in the same headline. In more important news, Bloomberg reported yesterday that Saudi Arabia has received Iraq’s support to extend oil output cuts for nine months, after Saudi Minister of Energy Khalid Al-Falih flew to Baghdad to talk to Jabar al-Luaibi, his Iraqi counterpart. Read more