Articles in Category: Macroeconomics

The head of an Indian zinc company is using the surge in metal prices to the financial benefit of his shareholders in a major way.

According to a recent piece from Bloomberg, Anil Agarwal, the billionaire head of Hindustan Zinc Ltd., is parlaying metal price increases into a $4 billion dividend for shareholders in what is being called a record return for the company.

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The closest beneficiaries include Vedanta Ltd. (65% ownership) and the Indian government (30% ownership), Bloomberg stated. Hindustan Zinc is the largest zinc producer in India.

“Vedanta continues to be in a very good space given all its verticals are doing well and if they can reduce debt that would be a better ploy and would increase the returns for shareholders,” Sanjiv Bhasin, executive vice president at India Infoline Ltd., told the news source by phone. “Metals, as a proxy to global growth and given the stimulus announced in the U.S., have been the best asset class in the past one year, and it will continue to outperform.”

Zinc Price Rally Amps Up

Our own Raul de Frutos wrote earlier this week that zinc prices climbed the week prior and the metal is now trading near the milestone of $3,000 per metric ton, which is the last time prices have been at this point since September 2007.

de Frutos wrote: “Zinc has doubled in price since it hit bottom in January of last year. As prices climbed, many buyers probably made the mistake of thinking prices were too high, missing this spectacular rally. However, buyers that subscribe to our monthly outlook, didn’t miss this rally. We recommended buying forward starting in April of 2016. Ever since, prices have risen without looking back.”

How will zinc and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

Macro photo of a piece of lead ore

Lead prices grew 0.7% at the beginning of the week, reaching $2,290 per metric ton, while sister metal zinc rose 0.4% to $2,875 per mt.

This data, reported by Reuters, is trending in line with our own Raul de Frutos’ projections that lead prices will trade at $2,800/mt by the end of the year. The metal has fluctuated fairly wildly over the past several months following a significant run throughout most of 2016.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

de Frutos stated: “Prices are now back near new highs as bulls seem to be taking control again.”

He added that lead prices are currently holding well and could be ready for another rally, thus the anticipation for a $2,800/mt by the end of 2017.

Lead Prices Still Have a Ways to Go

“Lead treatment charges have plummeted over the past few months. They are currently below $20 per mt, from $80 just three months ago. In this respect, lead is playing catch-up with its cousin zinc, in which the deficit for refined metal is more obvious.”

How will lead and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

Tin cans. Cans are used for packing all sorts of goods – conserved food, chemical products such as paint, etc

Tin prices hit $20,459 a metric ton to begin the week, marking its highest point in nearly two months due in part to concern over shortages on the London Metal Exchange following cancelled warrants.

According to a report from Reuters, those shortages grew to nearly 50% of LME stocks.

Tin has been riding a high wave since January 2016 with global prices for the metal surging by nearly 40% since that time.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

According to a recent report from The Star Online, Malaysia Smelting Corp is anticipating better performance this year given the continued ascent of tin prices. MSC is the world’s second-biggest tin supplier and is counting on tin price growth, along with a strengthening of the U.S. dollar, to bring substantial improvement to the company’s profit over the course of the coming quarters.

“We will continue to make the necessary strategic decisions and adapt to the ever-changing marketplace,” CEO Datuk Dr. Patrick Yong told the Star.

How will tin and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

The U.S. dollar fell sharply last Wednesday against a basket of currencies as the Federal Reserve announced a rate increase of a quarter point.

US Dollar index: Source @stockcharts.com.

The move seems to contradict common economic wisdom. In theory, higher raters in the U.S. should make the dollar more attractive for yield-seeking investors when interest are rates are lower around the globe. Then, what caused the currency to weaken?

All About Expectations

A rate increase came as no surprise to U.S. markets. The real surprise came in the language that wrapped the announcement. Fed officials intend to keep raising rates, however they want to keep the economy from getting too hot… but also not too cold.

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

Investors were probably betting on an acceleration in the path of raising interest rates, not a warming down. Read more

We haven’t heard much of late about President Donald Trump’s border adjustment tax, but that doesn’t mean to say it has gone away.

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Indeed, the fact that it has a measure of support in the Republican Party suggests it could be on the agenda in the not-too-distant future. The idea is to transform the corporate tax landscape from a system that has prevailed for nearly 100 years, in which profits are taxed at the place of production, to a system in which profits are taxed at the place of sale.

A-destination based cash flow tax (DBCFT), as proposed by the House Republican tax plan, would include border adjustments that exempt exports but include imports in tax bills rather than raising federal income from a corporate income tax. As William Gale, a senior fellow in Economic Studies at the Brookings Institution explained in a recent article, all advanced countries except the U.S. already have a form of value-added tax (VAT), generally levied on top of corporate income taxes. All of those VAT systems are border adjusted, such that goods that are imported are taxed and those that are exported are not.

BAT or VAT

As part of the president’s pledge to bring jobs back to America, the border tax could have much to commend it. For example, if the U.S. introduces the system unilaterally, a factory in Ohio will pay no tax on the goods it exports to the E.U. while a factory in the E.U. will pay the border tax on its exports to the U.S. If you are a multinational corporation, suddenly it makes a ton more sense to have your new factory based in Ohio rather than some “lower cost” location. Read more

President Trump’s $1.1 trillion budget blueprint, released today, proposes dramatic cuts to the State Department and the Environmental Protection Agency, while seeking billions more for defense issues and $1.5 billion for the president’s proposed U.S.-Mexico border wall.

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

It proposes the previously reported $54 billion increase in defense spending and corresponding cuts to non-defense spending at the State Department, the Department of Housing and Urban Development, the Environmental Protection Agency and the wholesale elimination of other federal programs.

Mick Mulvaney, Trump’s director of the Office of Management and Budget, described the proposal as a “hard power budget” in a Wednesday briefing with reporters, meaning the Trump administration will prioritize defense spending over diplomacy and foreign aid. It significantly cuts funding to global institutions such as the World Bank and the United Nations, too.

While the budget notes that plans and costs for the border wall are not yet completed, according to Mulvaney, the budget will include a request for $1.5 billion as the first installment payment for the promised wall and then another installment of $2.26 billion in 2018.

Steel Shipments Up in January

The American Iron and Steel Institute recently reported that for the month of January 2017, U.S. steel mills shipped 7,708,416 net tons, a 7.5% increase from the 7,173,245 nt shipped in the previous month and a 9.6% increase from the 7,031,307 nt shipped in January 2016.

Two-Month Trial: Metal Buying Outlook

A comparison of January 2017 shipments to the previous month of December 2016 shows the following changes: hot-dipped galvanized sheets, up 14%, cold rolled sheets, up 13% and hot-rolled sheets, up 4%.

Set of copper pipes of different diameter lying in one heap

The newly opened Cobre Panama mine in Central America could begin copper production as early as 2018 and reach full throttle by the end of 2019, which would be a much needed supply boost for a copper market that is set for its first deficit in six years and could be in shortage through 2020.

According to a recent post from Bloomberg, mine disruptions led to copper prices growing roughly 25% over the past six months. Demand in China and a boost in U.S. infrastructure have made copper the biggest gainer in Bloomberg’s Commodity Index.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

“Good copper projects are scarce at these prices,” First Quantum President Clive Newall told Bloomberg in a phone interview Monday from London. “There is an incentive price to build new greenfield sites, which is significantly above the current price.”

A Citigroup report added that copper prices need to rise another 15% to about $6,700 a ton before mining companies commit to new greenfield projects, which translates to the industry not likely boosting capital spending until 2019.

Copper Prices Drop this Week

Hit by a supply overload, multiple sources are reporting that copper prices fell to a two-month low this week.

Wrote Leia Toovey for the Economic Calendar:

“Factors adding pressure to copper include a higher U.S. dollar, disappointing import data from China and a pile-up of LME-tracked inventories. Also, on Thursday BHP Billiton said it was considering bringing in temporary workers to bring some copper production back online that has been impacted by the strike at its Escondida copper mine.”

How will copper and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

With aluminum premiums on the rise in the U.S. and Europe, and Japanese inventories falling amid growing demand, producers are upping the ante by charging the Pacific Rim a higher premium for the second quarter in a row.

According to a recent report from Reuters, three global aluminum producers offered buyers in Japan a premium of $135 per metric ton for shipments of the metal in Q2. This would mark an increase of 42% quarter-over-quarter.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

“The producers claimed that the rise mainly reflected higher premiums in the U.S. market, but we think $135 is too high as we don’t feel much supply tightness here,” a source at an end-user told the news source, adding that his company would aim for premiums at around $120-125/mt.

Aluminum Leads the Charge in February

Our own Raul de Frutos wrote this week that of all the industrial metals, aluminum performed the best in February with prices on the London Metal Exchange growing above $1,9000 per metric ton. This marks the first time since May 2015 prices have been this high for the metal.

Wrote de Frutos: “In February, China finally approved its Air Pollution Control regulations, which came into effect on the March 1.The world’s largest nation-producer of the metal will force about a third of aluminum capacity in the provinces of Shandong, Henan, Hebei and Shanxi to be shut down over the winter season, which runs from the middle of November through the middle of March.”

How will aluminum and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

 

February drew to a close with steel prices in the midst of a rally, following a slight reduction the week prior, with traders honing their focus on steel production cuts.

According to a recent piece from the Economic Calendar, Leia Toovey writes that China rebar futures grew 4% earlier in the week due to said cuts, but also due to seasonal demand.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

Citing a recent report from Reuters, Toovey added that steel producers in China have been tasked with scaling back production to reduce pollution in time for the start of the China’s National People’s Congress.

Toovey writes: “The cutback in production ahead of the Congress was anticipated, but it also brings back to the forefront the fact that the country is serious when it comes to reducing pollution. Previously, the country announced that it would crack down on industries that were heavy polluters in order to reduce emissions.”

A Cool February for Steel Prices

Our own Raul de Frutos wrote of the cool down in steel prices for February. He maintains that the slow down was just temporary and that, raw material prices, in addition to other factors are in full support of the ongoing steel price rally.

De Frutos concluded: “Steel prices have increased for three-consecutive months. The right time to buy steel was in November, now prices might need some time to digest last year’s gains. Steel buyers need to keep a close eye on China’s production, President Trump’s new policies and raw material price trends in order to identify new opportunities to buy steel in 2017.”

How will steel and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

President Donald Trump’s address to Congress this week included a defense department budget request which it claimed was historic.

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“I am sending Congress a budget that rebuilds the military, eliminates the defense sequester and calls for one of the largest increases in national defense spending in American history,” he is quoted by the New York Times is saying.

What’s a Few Hundred Billion?

While claims that the proposed increase to the defense budget is historic might be stretching the truth, Trump’s proposal to add $54 billion to the Pentagon’s budget is said to amount to a 10% increase, a significant rise — If it was true. Unfortunately, the New York Times is not alone in questioning numbers. We have little interest here in making claims about fake news, but we’re more concerned about those communities and industries that rely on military spending for their livelihoods.

You want F-35 fighter jets with those carriers? Better add about $500 billion to that budget. Source: Adobe Stock/Spacekris.

Questions have been raised in recent years about the readiness of today’s U.S. military. After fighting two major wars in Afghanistan and Iraq, troops are said to be exhausted and supplies depleted. Even so, the U.S. spends more money on its military than the next seven countries combined. Read more