Articles in Category: Macroeconomics

Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner, including aluminum prices, rising power costs and much more:

Each month, MetalMiner hosts a webinar on a specific metals topic. Explore the upcoming webinars and sign up for each on the MetalMiner Events page.

Week of Oct. 11-15 (aluminum prices, power costs and more)

aluminum price

Grispb/Adobe Stock

MetalMiner should-cost models: Give your organization levers to pull for more price transparency, from service centers, producers and part suppliers. Explore the models now.

The Global Precious Monthly Metals Index (MMI) lost ground this month, dropping by 12.9% as the gold price declined and the dollar strengthened last month.

October 2021 Global Precious MMI

More MetalMiner is available on LinkedIn.

Gold slides, dollar gains

The U.S. gold bullion price fell in September, dropping from $1,814 per ounce as of Sept. 1 to $1,757 on Oct. 1, a 3.1% drop.

Meanwhile, gold historically correlates inversely with the U.S. dollar. Unsurprisingly, the U.S. dollar showed strength in September.

Last month, the Federal Reserve indicated it could soon finally begin tapering asset purchases, which is supportive for the dollar.

After closing Sept. 1 at 92.45, the U.S. dollar index closed Oct. 1 at 94.03.

Fed could begin tapering

As mentioned, the Federal Reserve last month indicated it could be set to begin tapering asset purchases.

Read more

This morning in metals news: job openings and new hires fell in August, the Census Bureau reported; steel producers in the U.K. are warning of an energy-related crisis; and, lastly, Liberty Steel received a £50 million boost that it says will preserve about 660 jobs.

Stay up to date on MetalMiner with weekly updates – without the sales pitch. Sign up now.

Job opening, hires slump in August

manufacturing worker

goodluz/Adobe Stock

Both job openings and hires declined in August, the Census Bureau reported today.

Job openings fell to 10.4 million as of the last business day of August. Meanwhile, hires decreased to 6.3 million.

U.K. steel sector sounds alarm over energy prices

As MetalMiner’s Stuart Burns covered in a series of posts last week, energy prices are a mounting concern all over the world.

The U.K. steel sector is warning that rising energy costs could become a crisis for the industry. Surging costs for natural gas and other commodities threaten the continuity of their operations, they argue.

“These extortionate prices are forcing some UK steelmakers to suspend their operations during periods when the cost of energy is quoted in the thousands per megawatt hour; last year, prices were roughly £50 per megawatt hour,” UK Steel Director General Gareth Stace said last month. “Even with the global steel market as buoyant as it is, these eye-watering prices are making it impossible to profitably make steel at certain times of the day and night.”

Reuters reported UK Steel is asking the British government for help, saying that without aid the consequences for the industry will be “dire.”

Liberty Steel says £50M will preserve 660 jobs

Lastly, sticking with the U.K., embattled steelmaker Liberty Steel says an infusion of £50 million will help preserve 660 jobs at Rotherham, the BBC reported.

The £50 million injection comes as part of parent group GFG Alliance’s restructuring following the collapse of its primary backer, Greensill Capital.

“GFG will inject £50 million of new funding into LIBERTY Steel UK (LSUK) to enable the restart of LSUK’s core Rotherham electric arc furnace,” GFG said in a release. “The provision of funding will set the platform to refinance LSUK operations in full, create a leading long-term GREENSTEEL hub, and support the RTC’s work of creating a profitable, restructured and focused business.”

Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.

The Copper Monthly Metals Index (MMI) fell 1.7%, as the copper demand picture could be set to weaken and the LME three-month and China primary cash prices fell month over month.

Want MetalMiner directly in your inbox? Sign up for weekly updates now.

The Fed effect and Congress delays

As the Federal Reserve prepares to scale down its pandemic strategy, copper prices dropped. The Fed reported it would hike rates and pare back the asset purchase program (i.e., quantitative easing).

This news benefited the U.S. dollar, which increased over the past month. This is particularly important to copper. The U.S. dollar and commodities have historically moved in a perfect inverse relationship.

Moreover, Congress’ decisions — or lack of them — could cause market turmoil and impact copper prices. The bipartisan infrastructure deal remains delayed in the House of Representatives.  Congress has not taken action on increasing the debt ceiling, adding to the potential market turmoil, though it does appear that Republicans have agreed to a short-term debt ceiling cover into December.

China looming over prices

Meanwhile, the second-largest economy in the world continues to show signs of volatility.

China is the biggest consumer and producer of refined copper. Its latest issue involves a power crisis that has impacted both copper production and also manufacturing. Both have experienced restrictions.

Read more

Exchange-traded funds, or ETFs, are sometimes punted as an alternative to direct investments on metals exchanges, like the LME or CME.

But in reality, it is a different kind of investor who buys ETFs, even if they are largely buying into the same metal story.

Stay up to date on MetalMiner with weekly updates – without the sales pitch. Sign up now.

ETF investors and looking ahead

ETF

iQoncept/Adobe Stock

ETF investors are often longer-term investors wanting to buy into a trend rather than take a short-term position. More retail or private investors buy ETFs, seeing themselves as investors rather than speculators (if that distinction is a fair one).

But as a recent article in the Financial Times suggests, ETF investors are facing a similar question to trade or hedge fund speculators in estimating how long this run in price rises has to go. Furthermore, they are also facing the question of whether it is part of a much longer-term supercycle or a shorter-term supply chain restocking – pandemic bounce-back recovery.

The supercycle narrative is based on the transition to a new clean energy landscape and the demand that new, low-emission technologies will generate for certain metals like cobalt, nickel, copper and aluminum.

A similar narrative is driving agricultural ETFs. Climate change will create more challenging conditions for farmers and increase the likelihood of poor harvests. In turn, that would usher in decades of higher prices for agricultural products.

Read more

Housing starts fell by 7.0% in July from the previous month, the U.S. Census Bureau reported Wednesday.

With volatile steel markets, knowing which strategy to execute and when can make all the difference between saving and losing money. See how MetalMiner looks at different market scenarios

Housing starts slide in July

housing starts

ungvar/Adobe Stock

According to the Census Bureau, U.S. housing starts reached a seasonally adjusted annual rate of 1,534,000 in July.

However, the July rate picked up by 2.5% from July 2020.

Meanwhile, single‐family housing completions reached a rate of 954,000, or up 3.6% from the June rate of 921,000. The July rate for units in buildings with five units or more reached 426,000.

Contractors face rising prices

Earlier this year, surging lumber prices commanded headlines, impacting construction projects across the country.

While lumber prices did eventually retrace after a torrid May, they remain at historically high levels.

Contractors are grappling with rising prices for all types of construction inputs, not just lumber.

“Extreme price increases continued in July for a wide range of goods and services used in construction, according to an analysis by the Associated General Contractors of America of government data released today,” the Associated General Contractors of America wrote. “Association officials urged President Biden to immediately end tariffs and quotas on steel, aluminum, lumber and other essential construction items to help stave off inflationary pressure in the construction industry.”

The Producer Price Index (PPI) for final demand jumped by 1.0% in July, the Bureau of Labor Statistics reported.

“On an unadjusted basis, the final demand index moved up 7.8 percent for the 12 months ended in July, the largest advance since 12-month data were first calculated in November 2010,” the BLS reported.

Prices have continued to surge for key construction metals, including steel and aluminum. The AGCA noted the PPI for steel mill products more than doubled from July 2020 to July 2021, gaining by 108.6%.

Meanwhile, the association’s officials called for the removal of existing tariffs on steel and aluminum.

“These tariffs and quotas are artificially inflating the cost of many key materials and doing more damage to the economy than help,” CEO Stephen E. Sandherr said. “Leaving these measures in place will undermine the broader benefits of the bipartisan new infrastructure measure the House should be passing.”

Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.

This morning in metals news: U.S. steel capacity utilization reached 85.0% for the week ending July 31; meanwhile, U.S. energy intensity has dropped by about half since 1983; and, lastly, compensation costs for U.S. civilian workers rose by 0.7% from March to June.

You want more MetalMiner on your terms. Sign up for weekly email updates here.

Steel capacity utilization continues to rise

steelmaking in an EAF

nikitos77/Adobe Stock

The U.S. steel capacity utilization rate continues to rise, reaching 85.0% for the week ending July 31, the American Iron and Steel Institute (AISI) reported Monday.

Production during the week totaled 1.88 million net tons. Meanwhile, output rose by 0.4% from the previous week, when the rate touched 84.6%.

For the year to date, output totaled 54.6 million net tons, up 19.1% year over year.

US energy intensity down by half since 1983

U.S. energy intensity has declined by half since 1983, the Energy Information Administration reported.

Read more

This morning in metals news: the union representing workers at the Escondida copper mine rejected BHP’s latest contract offer; meanwhile, U.S. construction spending ticked up in June; and, lastly, productivity increased in a majority of wholesale and retail trade industries last year.

You want more MetalMiner on your terms. Sign up for weekly email updates here.

Escondida workers reject contract offer

strike

iQconcept/Adobe Stock

Union workers at BHP’s Escondida copper mine in Chile, the world’s largest copper mine, rejected the latest contract offer from BHP over the weekend, Reuters reported.

Workers at the mine engaged in a 44-day strike in 2017.

Copper prices cooled after surging to an all-time high May 10. However, if the union and BHP cannot reach a deal, the copper price will receive additional support.

US construction spending up in June

U.S. construction spending reached a seasonally adjusted annual rate of $1,215.2 billion in June, the Census Bureau reported today.

The June rate marked an increase of 0.1% from the previous month. Meanwhile, the June rate increased by 8.2% from June 2020.

Read more

This morning in metals news: China opted to increase export tariffs on some steel products; meanwhile, Glencore released its first-half production results; and, lastly, U.S. personal income increased slightly in June.

Want MetalMiner directly in your inbox? Sign up for weekly updates now.

China boosts steel export tariffs

steel tariff

Moab Republic/Adobe Stock

China has raised export tariffs for some steel products and will remove export tax rebates for 23 steel products, effective Aug. 1, Reuters reported.

Reuters cited the country’s Ministry of Finance, which said it aims to promote the “upgrade and high-quality development” of the country’s steel sector.

The move also comes as China aims to meet climate targets and reduce emissions (of which the sector is a major producer). China’s steel production in June fell by 5.6% from the previous month, according to World Steel Association data.

Glencore releases half-year production results

Miner Glencore reported first-half production gains in copper, cobalt and zinc.

Read more

This morning in metals news: according to the Bureau of Economic Analysis, U.S. gross domestic product rose by an estimated 6.5% in the second quarter; meanwhile, the American Iron and Steel Institute (AISI) commented on the Biden administration’s infrastructure deal; and, lastly, copper prices have found some support this week.

MetalMiner should-cost models: Give your organization levers to pull for more price transparency, from service centers, producers and part suppliers. Explore the models now.

US GDP rises by 6.5% in Q2

US GDP

alexlmx/Adobe Stock

The Bureau of Economic Analysis released its advanced estimate for U.S. GDP this morning, reporting a jump of 6.5% in Q2 2021.

U.S. GDP had jumped by 6.3% in Q1 2021.

“The increase in second quarter GDP reflected the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic,” the BEA reported. “In the second quarter, government assistance payments in the form of loans to businesses and grants to state and local governments increased, while social benefits to households, such as the direct economic impact payments, declined.”

In addition, the price index for gross domestic purchases rose by 5.7% in Q2. Meanwhile, current-dollar personal income decreased by $1.32 trillion in Q2, or 22%.

AISI applauds infrastructure deal

The American Iron and Steel Institute (AISI) yesterday applauded the news of the Biden administration’s infrastructure deal with a bipartisan group of senators.

“This is a key development in the process to fix America’s deteriorating roads and bridges – and to use American steel to do so,” AISI President and CEO Kevin Dempsey said. “We also applaud the bill’s provisions to ensure that the steel products for water infrastructure projects be made in the U.S. This package ensures that American steel —which is the cleanest in the world — will be used to build back America. We urge the Congress to pass this critical legislation as soon as possible.”

Copper price gets support

After retracing from an all-time high May 10 and then trending sideways for several weeks, the LME copper price has shown some strength this week.

The LME three-month copper price closed Wednesday at $9,719 per metric ton. The price had fallen to $9,245 per metric ton a week ago.

More MetalMiner is available on LinkedIn.

1 2 3 171