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Articles on: Metal Prices

A recent article from news service Reuters raises concerns over the continued strength of the aluminum price.

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

Global aluminum prices have risen over the last six months, led by a strong rebound in the Chinese market. From a low of just over 9,000 yuan (electric town) in November 2015, the Shanghai price as risen steadily to above 14,000 yuan today as this graph from Thompson Reuters illustrates.

Source: Reuters

Spurred by healthy demand and the rising price, smelters have responded with gusto. As primary metal production in the rest of the world has fallen by an annualized 182,500 metric tons per year, output in China has surged. Although monthly figures are subject to considerable swings, Reuters reports January hitting a record of 2.95 million mt according to figures from China’s non-ferrous metals industry association. That is equivalent to an annualized rate of 34.7 mmt or 56% of global output, a staggering 19% year-on-year growth. Read more

The International Lead and Zinc Study Group released its February 2017 report on zinc, which found the global market for the refined metal was in deficit in 2016.

It’s reported that zinc inventories in warehouses operated by the London Metal Exchange, Shanghai Futures Exchange and Chinese State Reserve Bureau — along with those reported by producers, merchants and consumers — decreased last year.

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 ILZSG report stated: “A substantial 43.1% decline in Australian zinc mine output was primarily a consequence of the closure of MMG’s Century mine at the end of 2015 and a reduction in output at a number of Glencore’s mines. Production was also significantly lower in Ireland, due to the shutdown of Vedanta’s Lisheen operation, India and Peru. However, these reductions were offset by increases in Bolivia, Canada, China and the commissioning of new production in Eritrea. As a consequence overall world production was at a similar level to that in 2015.”

It’s also important to note the global output of refined zinc metal was on par with the total tallied in 2015, with China and the Republic of Korea leading the way.

Zinc Prices on the Rise

Our own Raul de Frutos covered the ILZSG findings earlier this week, and also noted that it is only a matter of time before Chinese zinc producers are forced to reduce their output of the refined metal.

He added: “As a result of this narrative of supply shortfall, zinc is trading at the highest levels in more than eight years. Bulls have been in such a powerful position that prices have barely retraced during this run.”

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:

When it comes to metal prices, is any one price really representative of the hundreds of transactions that happen every day? While market prices posted on exchanges are a good guide, isn’t it the transactions behind them actually move markets?

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Organizations have been tapping the potential of crowdsourcing, defined by the Tow Center for Digital Journalism as the act of specifically inviting a group of people to participate in a reporting task—such as newsgathering, data collection, or analysis—through a targeted, open call for input; personal experiences; documents; or other contributions.

The British Parliament used a primitive form of crowdsourcing in 1719 to find a way to measure a ship’s longitudinal position. The Crown offered the public a monetary prize to whoever came up with the best solution. In 1970 French amateur photo contest ‘C’était Paris en 1970’ (‘This Was Paris in 1970’) — sponsored by the city of Paris, France-Inter radio, and the Fnac — got 14,000 amateur photographers to produce 70,000 black-and-white prints and 30,000 color slides of the French capital to document the architectural changes of Paris. Photographs were donated to the Bibliothèque historique de la ville de Paris.

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

The actual term crowdsourcing wouldn’t be coined until 2005 when Wired writer Jeff Howe used it. Some organizations have successfully mined its potential to create powerful e-businesses. Netflix used crowdsourcing to improve its recommendation engine by 10%, attracting over 44,000 submissions. Wikipedia’s content is entirely crowdsourced from contributors to create a “free-access, free content Internet encyclopedia. Wikipedia executives have said the non-profit service never could have worked without crowdsourcing.

MetalMiner Benchmark

We recently launched MetalMiner Benchmark. Source: MetalMiner.

Lego Ideas is a platform that lets individual Lego builders submit their ideas, like this Volkswagen Golf brick creation, to the company for production. Kickstarter, GoFundme and other platforms have branched out into crowdfunding, using crowdsourcing to solicit donations for specific projects or, as in the link above, even funding for zoo animals like giraffes.

What Does This Mean for Metal Buyers?

MetalMiner recently launched a new metal price benchmark service. You can currently use MetalMiner Benchmark to compare what you’re paying for raw materials against 31,384,272 price benchmarks from 1,232 companies in 22 Industries. By adding your prices to the MetalMiner Benchmark database, the crowdsourced price database will grow exponentially.

We will continue to offer the latest transactional price information to you, the metals buyer, to inform your decisions about several forms of carbon steel, stainless steel, aluminum, nickel alloy and alloy steel on our safe, secure and anonymous platform. All data entered is validated for its accuracy and then only used for price comparisons.

Macro photo of a piece of lead ore

The International Lead and Zinc Study Group released its initial lead findings for February, and found that in 2016, supply exceeded demand in the global market for the refined metal.

Furthermore, lead inventories reported by the London Metal Exchange, Shanghai Futures Exchange and consumers and producers during that same period of time increased, as well.

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 ILZSG report elaborated: “There was a sharp decrease in Australian lead mine output mainly as a consequence of the closure of the Century mine in 2015 and cutbacks in output at some Glencore operations. Production was also lower in India and Mexico. However, these reductions were partially balanced by a rise in China resulting in an overall global decline of 1.3%.”

However, world refined lead metal production actually increased 2.4% in 2016. This was mostly attributed to the Republic of Korea (South Korea) commissioning a new primary lead plant in 2015.

Lead Price Momentum on High in 2017

According to a recent piece from our own Raul de Frutos, after a strong run in 2016, lead prices pulled back to close the year. However, prices have since recovered and Raul predicts they will trade at $2,800 by the end of this year.

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

“(Lead prices) are currently below $20 per metric ton, 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. In 2017 investors will be closely monitoring China’s numbers. The slump in treatment charges and the fact that China must get serious about controlling industrial metals output to solve its pollution problem could result in lower lead refined output this year.”

How will lead and base metals fare this year? 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 administration is mulling changes to how the U.S. calculates trade deficits. A change could be made that would show more movements of goods between free trade agreement countries, the Wall Street Journal reported recently citing people involved in the discussions.

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The leading idea under consideration would exclude from U.S. exports any goods first imported into the country, such as cars, and then transferred to a third country like Canada or Mexico unchanged, the sources told The Wall Street Journal. These would not be traditional transshipments, generally done to disguise a country of origin, but rather shipments that are manifested to include the country of origin but simply move goods through a trade agreement country.

Economists say that approach would cause trade deficit numbers to go up because it would typically count goods as imports when they come into the country but not count the same goods when they go back out, known as re-exports.

Trump has been highly critical of trade deals including the North American Free Trade Agreement (NAFTA) with Mexico and Canada. By using a metric that widens the trade deficit, it could give him political leverage to make sweeping changes, the newspaper reported.

If the government adopted the new method, the deficit with Mexico would be nearly twice as high.

The effect of such a change would be particularly stark on data involving countries that have free trade deals with the U.S., this person said—and in some cases the new methodology could even change a trade surplus into a trade deficit.

Trump trade officials said the idea is part of an early discussion and that they are examining various options. It is unclear whether the administration would adopt any new approach for measuring trade as part of official government data, or just use the higher deficit calculation to make the case for new trade deals.

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“We’re not even close to a decision on that yet,” Payne Griffin, the deputy chief of staff at the office of the U.S. Trade Representative told the Journal. “We had a meeting with the Commerce Department, and we said, ‘Would it be possible to collect those other statistics?’”

The Journal reported that career government employees at the USTR’s office complied with the request to prepare data using the new methodology but also noted their objections.

The showdown between global copper miner Freeport-McMoran, Inc. and the Indonesian government got a little hotter this week.

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Arizona-based Freeport majority-owns the world’s second-largest copper mine, Grasberg in Indonesia. The company has been trying to get a new permit from the Indonesian government to continue exporting copper concentrates for the last six months. On Monday Freeport said it would not accept terms of a deal the government offered that would allow it to resume shipments of copper concentrate that have been idled since January 12.

One More Year… Then Give Up Your Mine

Friday the Indonesian government offered Freeport a new, one-year deal that would allow the company to continue exports but only if it agrees to new rules requiring it to build a new copper smelter in Indonesia within the next five years and also agree to switch to an operating license, the terms of which would require Freeport to, eventually, give up control of Grasberg.

Kennecott Copper Mine

Open pit copper mines such as Rio Tinto’s Kennecott in Utah could increase production and increase sales if Grasberg stays closed. Source: Adobe Stock/Photofly.

Freeport CEO Richard Adkerson, naturally, turned down that offer and said the company is unwilling to revisit the terms of its 30-year contract to mine at Grasberg, which accounts for about a third of Freeport’s annual copper production and 40 to 50% of its worldwide assets. He also said Freeport would consider going to arbitration if it can’t settle this dispute within 120 days. Read more

The London Metal Exchange steel scrap contract is coming of age much more rapidly than the old steel billet contract did. Unlike its older sibling, the steel scrap contract has the prospect of becoming a meaningful and valuable tool both for the trade but also for analysts and financial players.

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The LME Ferrous Monthly Update report for February reported there was steady uptake of both scrap and steel rebar contracts last year and that there was  a surge of activity in January, for both February dates and out to September of this year. LME Steel Scrap and LME Steel Rebar both traded record volumes last month. LME Steel Scrap traded the equivalent of 262,450 metric tons composed of almost 2,500 individual trades, the LME reports.

Source London Metal Exchange

As volume and liquidity builds, the contract will become more representative of real market prices and as a result increasingly relevant as a viable tool. One measure of liquidity is the narrowing of bid/offer spreads. In a non-liquid market buyers and sellers are harder to find and spreads tend to be wider, but as volume has built market makers have been able to narrow the spreads reducing trading costs and increasing the attractiveness of the contract for hedging. Read more

Source: MetalMiner IndX

Zinc hit a record shortage in 2016. According to the International Lead and Zinc Study Group, zinc registered a deficit of 286,000 metric tons last year. Global usage of refined zinc metal rose 3.6% while supply remained pretty much flat thanks to a number of mine shutdowns.

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The tightening in zinc’s raw material segment accelerated last year thanks to the closure of big mines such as Century, Lisheen and Glencore‘s suspension of 500,000 mt of annual mine capacity. These closures have impacted the supply of mine concentrates drastically and, for the first time, we are seeing an impact in the refined metal market.

In February, Korea Zinc Co. announced it will reduce its refined zinc output by 7.7% (or 50,000 mt) this year. The company attributed its decision to tight supplies of mined concentrate and the accompanying reduction in treatment charges, which have plummeted to multiyear lows.

Prices at Multiyear Highs

Zinc is trading near multiyear highs. Source: MetalMiner analysis of Fastmarkets.com data.

As a result of this narrative of supply shortfall, zinc is trading at the highest levels in more than eight years. Bulls have been in such a powerful position that prices have barely retraced during this run.

Will China Cut Output This Year?

Outside of China, mine supply of zinc fell by 10% last year. However, production increased inside China. In 2017 investors will be closely monitoring China’s numbers. Although output rose, imports slumped by 38% last year. This, combined with falling treatment charges, suggests that a raw material shortfall is building in China as well. China must get serious about controlling industrial metals output to solve its pollution problems.

Two-Month Trial: Metal Buying Outlook

The conclusion: it’s only a matter of time before Chinese producers are forced to cut refined zinc output.

Much to the delight of not only its executives and employees but both the global steel sector and even stock markets, the Luxembourg-based steel giant ArcelorMittal has posted its first annual profit in more than five years, registering the biggest jump in earnings in the same period.

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The world’s largest steelmaker by output swung from a $7.9 billion net loss in 2015 to a net profit of $1.8 billion last year. Read more

All work has stopped at Freeport-McMoran‘s giant Grasberg copper mine in Indonesia, just over a month after the country halted exports of copper concentrate to boost domestic industries.

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Freeport had said the suspension would require the mine to slash output by 60% to approximately 70 million pounds of metal per month if it did not get an export permit by mid-February, due to limited storage. A strike at Freeport’s sole domestic taker of copper concentrate, PT Smelting is expected to last at least until March and has limited Freeport’s output options as Grasberg’s storage sites are now full.

Nippon Exec: Chinese Steel Prices Will Hold Firm

Nippon Steel & Sumitomo Metal Corp., Japan’s biggest steelmaker, expects steel prices in top consumer China to hold firm at least until its Communist Party congress late this year, amid solid demand that is underpinning coking coal and iron ore markets.

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Chinese futures contracts for steel rebar used in construction have already risen 17% in 2017, on top of a gain of more than 60% last year