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On Monday, our Irene Martinez Canorea wrote about copper prices, which have been on a bullish run. Today, Stuart Burns writes about investors’ copper positions. 

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Reuters reported last week that the LME copper price reached a three-month high after a surprise rise in China’s Purchasing Managers Index (PMI).

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

Investors jumped into copper after the official Chinese PMI rose for an 11th consecutive month, to 51.7 in June. Hedge funds and other investors increased long positions by 9,531 contracts to 58,816. Reuters reported that net long copper positions are now nearly double the 29,787 contracts reported back at the beginning of May and a dramatic reversal from the net short position of 47,109 contracts just a year ago.

The jump in the LME price was short-lived, dropping back as the dollar strengthened and LME data showed copper stocks gaining, but the Reuters report went on to question whether the current bullish run for copper is likely part of a longer-term recovery or a short-term case of overexuberance.

Although Chinese PMI numbers are not an exact measure of copper demand, they have been a good indicator over time. But after nearly 12 months of positive PMI numbers, many analysts are said to be expecting weaker readings in the second half of the year.

Chinese stimulus measures have boosted growth for longer than most had expected, but cracks are beginning to show in the housing market and Beijing’s tightening of credit is impacting small- to medium-size enterprises. The performance of those enterprises are not reflected in the official PMI figures, which are focused more on the large corporate sector.

Smaller businesses are measured by the Caixin PMI, which fell to its lowest level this year in June and is now hovering around the break-even point between contraction and expansion.

With the impact of stimulus measures beginning to decline and global stocks of copper remaining plentiful, it’s hard to see a case for copper’s continued strength in the second half of the year, despite the bullish bets indicated by the increasing long positions.

Free Sample Report: Our Annual Metal Buying Outlook

If Reuters’ analysis is correct, we can probably expect an easing of copper prices, if not during the summer then into the fall.

So far, June is busting out all over, but not in the way metals producers would like.

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

Market observers may actually observe a possible change in trend (note: the current bull market, which began in May 2016, appears to have run out of steam).

First, the Fed hiked interest rates by 0.25% last Thursday. Though expected, it will most likely not impact markets in an abrupt way.

Let’s take a look at some of the key indicators:

Dollar Up

Source: TradingEconomics.com

The most recent Fed rate hike breathed a little life into the dollar, which has fallen for most of this year.

We believe this could have a direct impact on the metals industry — namely, causing prices to fall.

Read more

Before we head into the weekend, let’s take a look back at a few of this week’s stories:

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

A Surprise in the U.K.

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Our Stuart Burns wrote about the U.K. parliamentary elections, which surprised many and saw Labour outperform expectations against Prime Minister Theresa May’s Conservative Party.

What does the election result mean for business? Well, that will partially be determined by which path to Brexit the U.K. ultimately takes. Burns writes there is likely to be compromise and a search for alternate solutions — that is, a softer Brexit.

The 411 on 232

White House spokesman Sean Spicer announced Monday the findings of the administration’s Section 232 investigation into steel imports could be released as early this week.

Although the findings have yet to be released, our Lisa Reisman laid out the potential outcomes and impacts of the investigation on Wednesday.

How will the recommendations affect steel prices domestically? No one knows for sure, of course, but Reisman wrote we shouldn’t jump to conclusions about potential price increases.

“Some have speculated that the forthcoming recommendations would force prices higher, however, we would not necessarily rush to that same conclusion,” Reisman wrote.

Markets showing pessimistic side

Burns also wrote this week about commodities markets — and not just metals, but oil, too — which have seen a drop in optimism of late.

What’s the downtrend all about? Many reasons, Burns argues, including: oversupply, the Chinese government “squeezing investors by increasing shadow banking borrowing costs,” and waning optimism with respect to the Trump administration delivering on campaign promises regarding massive infrastructure projects.

But not to send you into your weekend on a down note — it’s not all cloudy skies.

“With that said, that doesn’t mean the U.S. or global economies are about to tank,” Burns writes. “European growth has been much better this year and Japan is expected to improve further, while the World Bank is predicting an unchanged 2.7% global growth this year in its latest report.”

June MMI Report Released This Week

In case you missed it, our monthly MMI Report was released this week; as always, it’s jam-packed with information.

The report covers markets trends in our 10 sub-indexes: Automotive, Aluminum, Construction, Copper, Global Precious, GOES (grain-oriented electrical steel), Rare Earths, Raw Steel, Renewables and Stainless Steel.

Want to know what’s happening in any of these categories? Get yourself up to speed by checking out the June report, which you can access by visiting the link below.

Free Download: The June 2017 MMI Report

The market for biomedical metals — like the ones used in orthopedic implants — is expected to reach $34.9 billion by 2025, according to a recent market research report. Sandor Kacso/Adobe Stock

This morning in metals news, a recent report predicts the global biomedical metal market will reach $34.9 billion by 2025, palladium continues to stand strong and metal makers are looking for new markets for their products.

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

Market for Biomedical Metals to Only Get Bigger

The market for biomedical metals is large — to put a number on it, it is expected to be valued at $34.9 million by 2025, according to a recent report from Accuray Research LLP.

According to the report, the biomedical metal market is expected to grow by a compound annual growth rate of 7.8% over the next decade.

Among the factors underpinning the expected growth are: increased demand for orthopedic implants; new developments in titanium-based alloys; and recent technical developments in biomedical metal.

Palladium Defies Analysts’ Expectations on Strong Run

At around $900 per ounce, palladium is trading at 16-year highs, according to a Platts report.

Analysts told Platts they saw no justification for palladium’s strength, especially considering a struggling Chinese automotive market (palladium is an important autocatalyst ingredient in gas-powered engines).

One Japanese analyst told Platts the current state of the palladium market was a “once every decade” situation.

Is a reversal in palladium prices on the way? Only time will tell.

New Markets for Metals

According to an article Wednesday in Bloomberg, makers of metals are looking for new commercial uses for their products, particularly as a boom in Chinese demand for raw materials has tempered. In general, China’s intent to crack down on credit — particularly on the heels of May’s Moody’s downgrade — has led many to believe a negative impact for metals markets will follow.

To make up for the loss of Chinese demand, producers of metals are looking for new markets for their products.

What uses do producers have in mind?

According to Bloomberg, a few uses include fertilizer, salmon cages, electric-car batteries and household cleaning products, among others.

Free Sample Report: Our Annual Metal Buying Outlook

Many expect growth to slow in China through the remainder of the year. As such, producers will have to get creative in finding new uses for their products, from cars to fertilizer and everything in between.

Our June MMI Report is in the books, and there’s a lot to unpack.

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

Out of 10 MMI sub-indexes, four posted no movement from our May MMIs. That wasn’t true for all, though, as the report shows promising signs for construction (compared with last year). Like the Construction MMI, growth in the automotive sector slowed a bit, but still performed better than at the same time last year.

In terms of policy, several things happening around the world will have macroscopic effects on these industries.

Domestically, the Trump administration’s ongoing Section 232 investigation into steel imports will have ripple effects at home and abroad (namely in the Chinese steel market).

In the U.K., the recent shocker of a parliamentary election leaves question marks regarding the way forward — is it going to be a “hard” or “soft” Brexit? Does Theresa May have the political capital to make a hard Brexit happen? It seems unlikely now, but that situation continues to develop. In terms of business and metal markets, whichever iteration of Brexit takes hold will have effects on the ways in which British companies do business with Europe.

In China, many analysts expect growth to slow in the second half of 2017 as the government aims to put the squeeze on credit growth. (Moody’s recently downgraded China’s credit rating for the first time since 1989.)

While several MMI sub-indexes did not go up or down this past month, there was still quite a bit going on in each sector. You can fill yourself in by downloading our June MMI Report, which offers all of the storylines and trends for our 10 MMI sub-indexes, presented in one convenient place.

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This morning in metals news, a French bank has sued a metals broker for $32 million over alleged fraudulent receipts; aluminum, copper and lead take a fall in India; and copper hit a five-week high on the London Metal Exchange (LME) as a result of constrained supply from Chile and strong demand in China.

Alleged Fraudulent Receipts at Heart of French Lawsuit

French bank Natixis has filed a lawsuit against metals broker Marex Spectron over alleged fraudulent receipts, Reuters reports.

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

According to a court filing, the $32 million lawsuit is over fraudulent receipts for nickel stored at warehouses in Asia run by a unit of commodities giant Glencore, Reuters reported.

Marex Spectron contested the claim in a statement. Natixis seeks damages because it alleges it provided finance based on fake receipts in a deal arranged by Marex Spectron.

Base Metals Take a Tumble in India

A trio of metals took a fall as a result of “muted demand,” according to the Economic Times.

Aluminum, copper and lead fell in India as a result of speculators offloading positions, according to analysts in the Economic Times report.

Copper Prices Move Up on LME

While copper was down in India, prices were up elsewhere, according to Reuters.

According to the report, copper hit a five-week high on the LME, “helped by concerns over supply from Chile, recent data pointing to robust import demand in China and falling stocks of the metal.”

Three-month copper on the London Metal Exchange (LME) hit its highest price since early May.

Free Download: The May 2017 MMI Report

After a 17-point leap in our Renewables MMI from April to May, the sub-index — which tracks metals and materials going into the renewable energy industry — posted no movement for our June reading, standing at 71.

(A quick note: Last month, the sub-index rose to 71 after a recalibration of our index to better account for cobalt price fluctuations.)

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

But that doesn’t mean there were not big swings within the sector — far from it.

U.S. steel plate, the heavy hitter of this group, posted a 4.8% drop last month — but that quickly reversed itself.

This time around, U.S. steel plate bounced back, posting a 2.7% increase. The bounceback followed a trend of exclusive growth for U.S. steel plate in 2017, as the 4.8% drop reflected by the May 1 price marked the only month-to-month drop of the year thus far.

Unlike steel plate, U.S. grain-oriented electrical steel (GOES) went in the other direction, posting a price drop that nearly erased previous the April-May price increase. This month, GOES dropped 6.2%, one month after prices rose by 9.1%. (More on how GOES does/doesn’t trend along with broader steel markets in the section below.)

Abroad, steel plate also had good months in China and Japan. Chinese steel plate rose by 2.8%, while Japanese steel plate got a 0.7% boost.

What’s the Deal With GOES?

As MetalMiner’s Executive Editor Lisa Reisman wrote Thursday, GOES prices have been on a “roller coaster ride” so far this year.

“GOES prices do not tend to follow general steel price trends, nor does simple fundamental (supply and demand) analysis help explain price trends,” Reisman wrote.

Globally, however, GOES prices are on the rise. Why? That has been driven by an increased demand for electric cars and GOES producers in the U.S., Korea and Japan securing tonnage at a $400-500/metric ton increase over previously contracted prices.

Domestically, while prices for GOES — metals used in electrical transformers — went down this month, Reisman predicted that likely won’t become a trend throughout the remainder of the year.

“It’s hard to see any outcome not resulting in rising U.S. GOES prices for the second half of the year,” she wrote.

Again, looking to the global picture, good news for this sector is the growth of the renewable energy industry overall.

Free Download: The May 2017 MMI Report

The BBC reported the U.K. has set renewable energy production records this year. In the U.S., CNBC reported even in states like Kansas — which two years ago repealed a renewable energy mandate that called for 20% of the state’s electrical power to come from renewable sources by 2020 — have ramped up renewable energy production.

Actual Metal Prices

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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.

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

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.

Read more

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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.

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

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.

Two-Month Trial: Metal Buying Outlook

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