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This past week’s metals news covered everything from silver price movements to the copper price rise’s slowdown to the reimposition of tariffs on some Canadian aluminum.

We also broke down President Donald Trump’s recent proclamation with respect to reimposing the Section 232 tariff on some Canadian aluminum. MetalMiner’s Stuart Burns delved into the concern expressed by Ontario Premier Doug Ford: could Trump target Canadian steel next?

As our readers know well by now, Trump imposed Section 232 tariffs on imported steel and aluminum of 25% and 10%, respectively, in 2018. During the course of negotiations with Canada and Mexico over the United States-Mexico-Canada Agreement (USMCA) — the successor to NAFTA — the U.S. rescinded the tariffs in May 2019.

Now, at least for unalloyed aluminum from Canada, the tariff is back.

The Aluminum Association called the tariffs the “wrong approach.”

Furthermore, the tariff comes in a time when beverage makers are struggling with an aluminum can shortage.

For the buyers out there, if you are under pressure to generate cost savings in aluminum, steel or anything else, make sure you are following these five best practices.

But the tariff storyline is but one thread in the world of metals.

Before we head into the weekend, let’s take a look back at the week that was:

MetalMiner Week in Review, Aug. 10-14

• Stuart Burns took a look at the shipping industry and how rates are faring several months into the global pandemic.
• With an eye to the November presidential election, Burns also broke down Democratic presidential hopeful Joe Biden’s plan for net-zero electricity emissions.
• Copper prices trended sideways last month, Maria Rosa Gobitz explained.
• Could the U.S. slap tariffs on Canadian steel once again?
• China’s aluminum imports skyrocketed in June.
• The Department of Defense is moving forward with rare earths projects slated for locations in Texas and California.
• The silver price has skyrocketed since March but showed signs of slowing this week.
• Chinese demand and supply concerns in Brazil have supported the iron ore price.

Want more from MetalMiner? We offer exclusive analyst commentary in our weekly, monthly, or quarterly updates – all metals, no sales fluff. 

The Global Precious Monthly Metals Index (MMI) surged 9% for this month’s MMI value.

Surging gold price

The gold price recently soared to an all-time high.

The gold price is inversely correlated with the U.S. dollar. As such, it is worth noting the U.S. dollar recently fell to a two-year low.

The U.S. dollar fell to 93.23 as of Thursday afternoon.

Silver rises but could be headed for short-term weakness

Meanwhile, the silver price has also been on the rise longer term.

MetalMiner’s Stuart Burns has kept a close eye on the resurgent silver market in recent months.

“Early this year, the silver market was going through a tough time,” Burns wrote last month.

“Its reaction to the growing pandemic was in stark contrast to that of gold. The disconnect between the two metals rose to historic proportions, as gold rose on the back of deeply negative real interest rates and expectations, justified or otherwise, of rising inflation as a result of massive fiscal stimulus.”

Burns added the silver price could still have a ways to go.

“Silver’s case, apart from it underperforming its historic average, is the potential for it to be boosted by: the growing Chinese recovery driving demand for industrial consumption (particularly electronics and plating), its attractions as a safe-haven investment and supply constraints due to COVID-19 mining-related disruptions in Central and South America,” he added.

“One arbitrage doing the rounds these last few months was to sell gold and buy silver, largely on the historic disconnect between the two prices as gold soared and silver collapsed. But with economic activity improving and supply-side concerns not going away, silver’s continued rise has better prospects, regardless of the trajectory for gold or the fact the historic connection between the two has partially recovered.”

Silver slowdown?

However, the silver price could take a bit of a breather from its upward ascent.

In a followup post Wednesday, Burns explained why silver’s rise has slowed.

“Silver’s rise has been so dramatic over the last 30 days; a pullback is to be expected,” he wrote.

“In fact, silver bulls are said to be looking for short corrections to create more value to add to positions.

“Both gold and silver retrenched yesterday. Gold fell below $2,000/ounce, while silver dropped toward $27/ounce.

“But whether that will be enough to dampen spirits for a push higher in coming weeks will depend on the course of the dollar, indications on post-pandemic recovery and further action by the Fed regarding longer for lower interest rates.”

Palladium, platinum make gains

Gold and silver have made significant gains since the start of the pandemic: what about the rest of the precious metals complex?

Powered in part by recovering automotive sales, both platinum and palladium showed some life.

Palladium, for example, trended largely sideways from March through June. However, over July, the palladium bar price jumped over 5%.

It remains to be seen if the automotive market will continue in its recovery. As noted in the Automotive MMI report earlier this month, July automotive sales in the U.S. saw the recovery take a bit of a pause.

Automotive sales in China, meanwhile, have proved more consistently resilient.

According to China Association of Automobile Manufacturers (CAAM) data released July 13, June sales rose 11.6% year over year. The July sales figure marked the third consecutive month of year-over-year sales gains in China.

The three-month positive streak followed a March year-over-year decline of 43.3%.

Actual metals prices and trends

The U.S. silver price gained 34.5% month over month to $24.47/oz as of Aug. 1.

The U.S. platinum bar price gained 9.9% to $900/oz. Meanwhile, the palladium bar price jumped 5.3% to $1,973/oz.

The U.S. gold bullion price gained 11.0% to $1,976.10/oz. The Chinese gold bullion price jumped 8.5% to $61.39/gram.

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This morning in metals news: Thyssenkrupp’s steel unit is facing heavy losses this year; zinc prices have gained despite elevated stocks; and copper dipped Thursday.

Thyssenkrupp faces major losses

Thyssenkrupp, which last year left Germany’s DAX index, faces a potential 1 billion euros in losses this year, Reuters reported.

Earlier this year, the German firm spun off its profitable elevator unit for €17.2 billion.

The company said it expects a stabilization to occur in the fourth quarter of the current fiscal year after a difficult first nine months. Thyssenkrupp’s steel unit, in particular, has faced significant headwinds.

“The performance of Steel Europe was again characterized by the extremely challenging situation in the steel sector,” the company said Thursday. “Demand from the auto industry, which was already noticeably lower in March, slumped further in the course of the 3rd quarter, also due to declining order volumes from other industrial customers.”

Despite the general forecast of Q4 stabilization, steel could still struggle.

“Depending on the speed at which production is restarted by our customers, thyssenkrupp expects almost all businesses, with the possible exception of Steel Europe, to report a stable performance or a slight quarter-on quarter improvement in the 4th quarter,” the company said.

Whether you’re sourcing from Germany or elsewhere, make sure you are following the five best practices of sourcing steel. 

Zinc prices gains

Despite elevated stock levels on the LME, the zinc price has showed strength.

Stocks at LME warehouses have surged from just over 120,000 tons to over 200,000 tons over the last month. Opening stock on Thursday totaled 212,750 tons.

Despite this, zinc prices have gained 7.69% over the last month. The LME three-month zinc price closed Wednesday at $2,394/mt, per MetalMiner Insights data.

Copper price falls

Meanwhile, the copper price slipped Thursday, Reuters reported, based on weaker Chinese demand and an easing of supply concerns in South America.

LME three-month copper fell 1% to $6,373/mt on Thursday, Reuters reported.

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This morning in metals news: MetalMiner’s 2021 Forecasting Workshop is tomorrow; steel shipments from U.S. mills dropped 22% in June; and the European Steel Association outlined the impact of the COVID-19 pandemic on the European steel sector.

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Last chance to sign up for 2021 Forecasting Workshop

MetalMiner’s annual Forecasting Workshop is tomorrow — don’t miss your chance to participate.

This year’s workshop will take place virtually via Zoom and is scheduled to begin at 10 a.m. (CDT), Thursday, Aug. 13.

The workshop will offer invaluable insights for metals buyers, including short- and long-term forecasts, beta testing of MetalMiner “should-cost” models and much more.

Steel shipments drop 22%

The American Iron and Steel Institute reported U.S. steel shipments fell 22% in June on a year-over-year basis.

June shipments totaled 6.02 million net tons, which marked a 10.3% increase from the previous month.

COVID-19 pandemic hits European steel hard

The European Steel Association (EUROFER) recently outlined the impacts of the coronavirus pandemic on the continent’s steel sector.

“The coronavirus pandemic has cut the legs out from under the European steel industry, causing severe damage to the whole sector and its value chains,” said Axel Eggert, director general of the European Steel Association (EUROFER). “The data now available confirm that the downturn that had begun in 2019 has been compounded by the crisis – with the sector now in a state of emergency.”

E.U. steel consumption fell in the first quarter for the fifth consecutive quarter, dropping 12% year over year.

Keep up to date with news and trends from the world of metals by signing up for MetalMiner’s free e-newsletter, Gunpowder. 

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Silver’s rise has been meteoric since its low in mid-March.

The precious metal’s surge has been particularly notable over the last month.

Both gold and silver have benefited from cheap money, a weak dollar and stronger oil prices. The yield on the benchmark 10-year U.S. Treasury note is presently around 0.57%, while the oil price is holding around $42 per barrel.

Stay up to date on MetalMiner with weekly, monthly, or quarterly updates – without the sales pitch. 

Dollar’s slide drives commodities up

Driving all commodities higher, the U.S. dollar index has slipped nearly 7% in the last three-month period. Measured against six major currencies, the dollar is down nearly 9% from its March highs and is on track for its worst month since 2011, according to a Yahoo Finance report.

Other investment products, like Bitcoin, are also up sharply.

However, gold and silver have been stealing the headlines.

Investors are betting on gold going through $2,100/ounce shortly and silver to top $30/ounce.

Silver lining

Unlike gold, though, the fundamentals for silver have some decent legs.

The LME has operated the LMEprecious suite of exchange-traded contracts since 2017. In a recent update note, the LME reported industrial demand for silver last year topped 16,200 tons. Furthermore, demand is forecasted to increase thanks to its role as a component in antennae for the new 5G mobile network infrastructures being rolled out around the world.

Like gold, silver benefits from the jewelry market, which is expected to pick up as economies gradually recover from lockdowns. In addition, silver has a wide range of industrial applications, which are coming back fast — first in Asia, but now in Europe and the U.S.

Looking ahead at the silver price

Two weeks ago, analysts at Goldman Sachs lifted their 12-month forecast for silver to $30 per ounce by year’s end.

However, that prediction became within reach after just a fortnight.

The bank’s prediction was based largely on the back of an expected continuing weakness in the greenback. The analysts argued a further 5% decline is probable before the year’s end. On top of that, no end is in sight for rock-bottom interest rates.

Silver’s rise has been so dramatic over the last 30 days; a pullback is to be expected.

In fact, silver bulls are said to be looking for short corrections to create more value to add to positions.

Both gold and silver retrenched yesterday. Gold fell below $2,000/ounce, while silver dropped toward $27/ounce.

But whether that will be enough to dampen spirits for a push higher in coming weeks will depend on the course of the dollar, indications on post-pandemic recovery and further action by the Fed regarding longer for lower interest rates.

You’d be brave to bet against it.

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The Rare Earths Monthly Metals Index (MMI) posted no change from last month’s MMI reading.

Pentagon moves ahead with rare earths projects

After awarding Phase 1 contracts to Lynas Corporation and MP Materials in April, the Department of Defense (DoD) opted to freeze funding for the projects pending further review. However, the DoD last month agreed to resume funding and move forward with the projects, as Reuters recently reported.

The projects entail the building of heavy rare earth separation facilities by the two firms in Texas and California, respectively.

The U.S. has long sought to curb its dependence on China for critical rare earths. Rare earths, while not actually rare, are used in a variety of high-tech capacities, including military applications.

Lynas announced July 27 that the Department of Defense had signed a contract for the work on the project, which Lynas will develop with Texas-based Blue Line Corp.

“As noted in our ASX announcement on 22 April 2020, Phase I funding provided by the DoD will allow Lynas and our U.S. partner Blue Line to complete a detailed market and strategy study plus detailed planning and design work for the construction of a Heavy Rare Earth separation facility,” Lynas said in the release. “In line with DoD Phase I milestones, we expect this work to be completed in the 2021 financial year.”

The U.S. facility will process heavy rare earths sourced from Lynas’ Mt. Weld mine in Western Australia.

Breaking down the deals

Meanwhile, MetalMiner’s Stuart Burns weighed in on the developments in the U.S. rare earths scene.

“Lynas processes lanthanum (La), cerium (Ce), praseodymium (Pr) and neodymium (Nd) in Malaysia,” MetalMiner’s Stuart Burns explained. “It would be logical for Lynas to send the balance of its rare earths — otherwise known as SEG concentrate, short form for Samarium (Sm)/Europium (Eu)/ Gadolinium (Gd) concentrate — to the new facility it is building in San Antonio.

“The real value here is in the terbium (Tb) and dysprosium (Dy) content, along with the gadolinium (Gd), according to this post in Investor Intel.

“Currently, the only market for the SEG is China.”

Lynas’ Kalgoorlie project moves forward

In other Lynas news, the Australian firm took another step toward commencing operations at its new Kalgoorlie rare earths processing facility.

Lynas awarded a kiln contract worth U.S. $15 million to Metso Outotec. The kiln will be 110 meters long and weigh approximately 1,500 tonnes.

Furthermore, Metso Outotec will manufacture the kiln to “Lynas’ own design,” which “improves on the design of the four 60 metre kilns currently in operation at the Lynas Malaysia plant.”

“The new kiln will provide increased efficiency and reliability,” Lynas said.

MP Materials announces merger

As for MP Materials, it announced July 15 it will merge with Fortress Value Acquisition Corp (FVAC).

MP Materials is the owner and operator of the Mountain Pass mine in California.

Drew McKnight, CEO of FVAC, stressed the need to “find a reliable and resilient source for rare earths,” calling it “crucial for the U.S. and global supply chain.”

Actual metals prices and trends

The Chinese yttrium price rose 1.3% month over month to $32.25/kg as of Aug. 1. Terbium oxide gained 0.3% to $662.83/kg.

Neodymium oxide jumped 6.7% to $45,574.28/mt.

Dysprosium oxide fell 1.6% to $265.85/kg.

Alexander Chudaev/Adobe Stock

The Aluminum Monthly Metals Index (MMI) increased by 5% for this month’s MMI value.

SHFE prices stronger than LME prices

LME and SHFE aluminum prices continued to trade up.

The LME price reached $1,783/mt on Aug. 10, a six-month high. Meanwhile, the SHFE price reached CNY 14,820/mt on Aug. 3, a year-to-date high.

However, the SHFE aluminum price has continued to diverge from LME aluminum prices since April, with the SHFE being higher than the LME.

As a consequence, LME warehouse stocks have remained above 1.6 million tons since mid-June. These are the highest levels seen since May 2017.

The elevated stock level is due to a combination of low raw material prices and the high cost of shutting down primary smelters. This is in line with the estimated market surplus for January to May of 908,000 tons, as reported by the World Bureau of Metal Statistics.

Record imports amid strong Chinese aluminum demand

The price arbitrage between the LME and the SHFE, along with the strong Chinese demand, have incentivized traders to purchase aluminum at the discounted price overseas.

As a consequence, China imported 816,592 metric tons of aluminum, up 219.2% year on year for the first half of the 2020. In June alone, China imported 490% more than a year ago, reaching an 11-year high.

Reuters reported that Antaike, the China Nonferrous Metal Industry Association’s research department, revised its 2020 aluminum consumption by 1.7%. Antaike’s new estimate is 36 million tons, compared to the previous estimate of 36.6 million tons.

Since China’s demand for aluminum does not seem to be declining, it is set to be a net importer of primary aluminum this year, closing at 400,000 tons.

Last year, China was a net exporter at 1,000 tons.

Trump reinstates tariff on some Canadian aluminum

On Aug. 6, President Donald Trump reimposed a 10% tariff on some Canadian aluminum products to protect U.S. industry from excessive imports. The tariff applies to raw, unalloyed aluminum produced at smelters. The tariffs do not apply to downstream aluminum products.

However, data released Aug. 5 by the U.S. Census Bureau showed overall primary aluminum imports from the U.S. to Canada declined about 2.6% from May to June. In short, that means imports are below levels seen as recently as 2017.

As a result, the U.S. market might see an increase in the MW premium, which will feed through to higher semi-finished prices. The MW aluminum premium is currently $0.12/lb.

After the tariff announcement, Canada pledged to impose retaliatory tariffs on C$3.6 billion (U.S. $2.7 billion) worth of U.S. aluminum products. During a news conference, Deputy Prime Minister Chrystia Freeland said the countermeasures would be put in place by Sept. 16 to allow for consultations with industry.

Are rising MW premiums causing concern? See how service centers take advantage of that. 

Actual metals prices and trends

The Chinese aluminum scrap price rose 7.6% month over month to $1,963.42/mt as of Aug. 1. LME primary three-month aluminum rose 6.2% to $1,722/mt.

Korean commercial 1050 aluminum sheet fell 3.7% to $2.79/kg, while its European equivalent rose 5.2% to $2,449.43/mt.

Chinese aluminum billet rose 6.5% to $2,144/mt. The price of Chinese aluminum bar rose 6.3% to $2,240.02/mt.

Chinese primary cash aluminum rose 4.6% to $2,132.53/mt. Indian primary cash aluminum increased 2.7% to $1.88/kg.

Stay up to date on MetalMiner with weekly, monthly, or quarterly updates – without the sales pitch. 

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This morning in metals news:

• The U.S. steel sector posted another incremental increase in capacity utilization.
• Meanwhile, the Aluminum Association applauded a Department of Commerce decision regarding subsidies of imported aluminum sheet.
• Lastly, Alcoa criticized the Trump administration’s decision to reimpose the Section 232 aluminum tariff on imports from Canada.

Steel sector capacity utilization rises to 60.4%

The U.S. steel sector’s capacity utilization rate rose to 60.4% for the week ending Aug. 8, according to the American Iron and Steel Institute (AISI).

The rate marked an increase from 59.3% the previous week. Even so, the rate marked a steep decline from the previous year, when it reached 79.1%.

Production for the week ending Aug. 8 totaled 1.35 million net tons, up 2.0% from the previous week. However, production for the week fell 26.5% year over year.

Furthermore, production for the year through Aug. 8 fell 20.1% year over year.

Do you know which market conditions are best with different steel contracting mechanisms? Check out our best practices on this topic.

DOC issues preliminary determination in aluminum sheet subsidy probe

The Aluminum Association applauded the Department of Commerce’s preliminary determination in its subsidy probe related to imports of aluminum sheet from Bahrain, Brazil, India and Turkey.

According to the Aluminum Association, the DOC calculated preliminary subsidy margins of:

• Bahrain: 9.49%
• Brazil: 0.76-1.32%
• India: 4.55-34.84%
• Turkey: 0.07-3.15%

Next, the DOC will announce preliminary antidumping determinations by Oct. 7, 2020.

Alcoa critical of reimposition of Section 232 aluminum tariff

In a statement to the Pittsburgh Post-Gazette, aluminum maker Alcoa criticized President Donald Trump’s decision to reimpose the 10% Section 232 tariff on some imports of Canadian aluminum.

In March 2018, the U.S. initially imposed Section 232 steel and aluminum tariffs. Then, in May 2019, the U.S. rescinded the tariffs for imports from Canada and Mexico.

However, late last week, Trump announced the reimposition of the tariff for some aluminum coming from Canada.

Alcoa told the Post-Gazette the move would “cause unnecessary disruption” and “further distort the market.”

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We are only two days away from 2021’s MetalMiner Budget and Forecast Workshop on Thursday, Aug. 13, 2020. Many metal buyers are about to lock themselves into pricing for the next 12 months – in a very, very, very unsteady world.

If 2020 has taught us anything, it’s that flexibility is key.

Going into negotiations, buyers have a lot on their minds. A looming recession? Supply and demand all over the place? Will my suppliers stay in business? What will prices do? How will the presidential election potentially affect all of this?

How the heck do I even begin to think about all of the things I don’t know about what’s to come?

Take a deep breath. We can do this together.

Here’s how we plan to help

• A bummer, but we’re virtual this year to keep things safe. So, you’ll be able to work from the comfort of your own home.
• Don Hauser, our vice president of business solutions, comes to us after more than a decade of steel buying for John Deere. He’s bought a LOT of steel. Don will be leading some strategy discussions, including walking through some of his John Deere secret sauce. Steel buyers: get excited. 
• Maria Rosa Gobitz, our new senior research analyst, comes to us from Wood Mackenzie. As a copper, gold and zinc analyst, she’ll lend some interesting insights that we’ve never had before. Copper buyers, you’ll be happy to hear her shed some light on 2021.
• We know very well how much every dollar counts right now. With that in mind, we’re planning a rigorous discussion around how best to work with service centers and mills for cost savings.
• We’re launching should-cost models. They’re good, and we can’t wait to show them to you.

As of publication, we only have seven spots left in the live session. It’s FREE for corporate MetalMiner Outlook and MetalMiner Insights subscribers, and $99 for non-subscribers. 

Lastly, if you have questions, feel free to reach out. If not, be sure to register now before seats fill up.

The Copper Monthly Metals Index (MMI) increased 5.1% for this month’s MMI reading.

LME copper prices increased through the first half of July and have traded sideways since mid-July.

However, the price remains well above $6,000/mt. Chinese demand remains strong and market sentiment remains positive.

Will prices temporarily slow down?

LME copper prices continued to rise throughout July. The price reached a 14-month high by surpassing the $6,400/mt level.

SHFE prices followed a similar trend.

However, the price increase seems to have slowed. LME and SHFE prices have trended sideways for the last three weeks.

Copper inventories in LME warehouses decreased nearly 60% to 128,125 tons in July, reaching the same low levels seen in mid-January.

On the other hand, SHFE stocks had the exact opposite trend. SHFE stocks increased by 60% to 159,513 tons by the end of the month. This could be due to the fact that even though demand in China remains strong, it tends to have a seasonally weak demand period from June to August. During that period, in which construction slows due to the hot and rainy summer (as MetalMiner reported last month).

Another factor contributing to the price slowdown is that despite positive sentiment toward economic recovery in the next few months, the rest of the world needs to show more signs of demand improvement.

Moreover, a week ago, the Brent crude market appeared to have moved back into contango.

This could signal the demand recovery expected for the second half of 2020 could appear too optimistic, which may bring some negative sentiment to copper prices.

China sets a copper imports record

Another explanation as to why LME stocks remain low while SHFE stocks have surged involves China’s record copper imports in July.

Reuters reported China imported 762,211 tons of raw copper and copper products in July, a 16.1% increase from the previous month.

High demand from the Chinese manufacturing industry and durable goods sectors drives the high import levels. However, the main driver may have been the arbitrage between the LME and the SHFE prices.

Chilean copper supply takes a hit

The National Statistics Institute (INE) of Chile reported at the end of July that copper production had declined 0.6% to 472,172 metric tons in June.

July marked the first month since the beginning of the pandemic that copper production in Chile saw little impact due to the coronavirus. Until now, Chile served as the only main producer that did not implement temporary shutdowns. However, throughout June, producers had to scale down as some reported coronavirus-related fatalities.

Despite Chile being one of the hardest-hit countries in South America, coronavirus cases seemed to have peaked in mid-June. As such, production could ramp up later this year.

Actual copper prices and trends

Copper prices continue to rise, with the Copper MMI value increasing 5.4% over last month.

Japan’s primary cash price increased 7.0% month over month to $6,640/mt.

U.S. producer copper grades 110 and 122 increased by 4%, resulting in a $0.14/pound increase for both to $3.66/pound. U.S. producer copper grade 102 increased by 3.7% to $3.88/pound, compared to $3.74/pound last month.

Indian copper cash prices increased by 8.3% to $6.68 per kilogram.

Korean copper strip increased by 0.4% to $7.42 per kilogram.

The Chinese copper primary cash price increased by 4.3% to $7,283/mt.