The Stainless Steel Monthly Metals Index (MMI) dropped two points, bringing the index value to 66 points.

The drop came as a result of lower LME nickel prices, while U.S. stainless steel surcharges held steady this month.

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LME Nickel

LME nickel prices traded lower in November, continuing the six-month downtrend that started back in June 2018.

LME nickel prices started to rise slightly at the end of November, and have risen so far this month. Current trading volumes appear weaker, which usually supports a downtrend.

Source: MetalMiner analysis of FastMarkets

Nickel Global Tightness

Forecasts suggest nickel will see increased availability in 2019.

Indonesia plans to increase capacity further, adding to nickel supply. Moreover, U.S.-China trade tensions over steel and stainless steel have driven LME nickel prices lower.

Despite the expectation of a nickel supply increase, current stock numbers do not indicate that yet. Nickel stocks at LME warehouses sit at 215,000 tons, 40% lower than at the beginning of 2018.

In December, Indonesia granted permission for two commodity companies to restart exports of nickel ore. In August, the mining ministry revoked export permits for around 4,222,119 tons of nickel ore shipments from PT Surya Saga Utama, PT Modern Cahaya Makmur and PT Integra Mining Nusantara, as they were not showing any smelter development.

Brazilian miner Vale SA, the world’s top nickel producer, plans to invest $500 million in its New Caledonia nickel mine, reflecting the recent boost in electric vehicle (EV) sales.

Miner BHP received approval from the Australian government to develop a nickel mine that would primarily feed its Nickel West battery chemicals business. The Venus deposit is one of the most relevant nickel deposits for the company, as it is looking to produce nickel sulphate (primarily used for electric vehicle batteries).

Domestic Stainless Steel Market

Domestic stainless steel surcharges fell again. This is the fifth consecutive drop in stainless steel surcharges this year.

The 316/316L-coil NAS surcharge fell to $0.87/pound, while the 304/304L surcharge fell to $0.60/pound.

Source: MetalMiner data from MetalMiner IndX(™)

The stainless steel surcharge has started a short-term downtrend, driven by the general slowdown in the steel and stainless steel markets.

However, stainless steel surcharges still remain well above 2015/2016 lows.

What This Means for Industrial Buyers

Stainless steel price momentum slowed down again this month, similar to carbon steel.

Nickel prices also appear weaker, following slower momentum in commodities markets.

Buying organizations may want to follow the market closely for opportunities to buy on the dips.

To understand how to adapt buying strategies to your specific needs on a monthly basis, request a free trial of our Monthly Outlook now.

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Actual Stainless Steel Prices and Trends

Chinese 304 stainless steel coil decreased by 2.07%, while Chinese 316 stainless steel coil prices fell this month by 3.34%.

Meanwhile, Chinese Ferrochrome prices fell by 0.25%, down to $1,852/mt. FerroMolybdenum lumps prices fell 8.6%, moving to  $18,739/mt.

Nickel prices fell by 3.38% to $11,280/mt.

The Raw Steels Monthly Metals Index (MMI) fell again this month, dropping to 83 points. The Raw Steels MMI held at 89 points since August for four consecutive months, but started decreasing in November.

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The recent slowdown in domestic steel price momentum led to the decline. Domestic steel prices recently decreased sharply on the back of slower demand and softer Chinese prices.

Domestic steel prices have showed slowing momentum since June 2018. Domestic steel prices increased sharply at the beginning of the year, driven by a bullish market in commodities and industrial metals and Section 232 tariffs. During most of 2018, domestic steel prices have remained at seven-year highs.

Source: MetalMiner data from MetalMiner IndX(™)

All forms of steel decreased in November except plate, which increased (driven by tight supply). Domestic plate has longer lead times than other forms of steel.

Hot-rolled coil (HRC), and hot-dip galvanized (HDG) prices also fell in December, while cold-rolled coil (CRC) prices increased slightly.

However, domestic steel prices remain in a downtrend that may last until the Chinese steel sector shows some strength again.

Historically, prices tend to drift lower during the beginning of Q4 and then rise. Last year, HRC domestic prices started to increase in December, then skyrocketed during the first quarter of 2018. However, MetalMiner does not see this increase happening during this year’s Q4 cycle.

Chinese Steel Prices

So far in December, prices of all forms of Chinese steel have decreased.

Chinese domestic steel prices started to decrease at the end of October, driven by the start of the winter season.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese steel domestic demand appears weaker; fears around the Chinese economy and manufacturing growth have sent prices down.

HRC prices have declined by 5% in December already, while CRC prices have fallen by 7%.

Lower prices in China come as a result of weaker demand and increasing production. October Chinese steel output increased for a third straight month, as mills boosted output ahead of production cuts.

Chinese stock market (FXI Shares). Source: MetalMiner analysis from SeekingAlpha

The yuan continues to weaken, and the yuan/USD exchange rate is falling. U.S. importing organizations might want to remember that a weaker yuan makes Chinese goods more appealing, despite the tariffs.

Meanwhile, the Chinese stock market (FXI Shares) has fallen during most of 2018 after reaching a peak at the beginning of the year. The new downtrend comes as a result of a slowdown in China.

What This Means for Industrial Buyers

Current domestic steel prices seem to have started a downtrend.

Adapting the right buying strategy becomes crucial to reducing risks.

Only the MetalMiner monthly outlooks provide a continually updated snapshot of the market from which buying organizations can determine when and how much to buy of the underlying metal.

For more information on how to mitigate price risk year-round, request a free trial to our Monthly Metal Buying Outlook.

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Actual Raw Steel Prices and Trends

The U.S. Midwest HRC 3-month futures price fell this month by 6.86%, moving to $760/st.

Chinese steel billet prices fell this month by 12.81%, while Chinese slab prices fell by 10.78% to $536/mt. The U.S. shredded scrap price closed the month at $358/st, increasing by 4.6% month over month.

In December, the Copper Monthly Metals Index (MMI) rose three points, returning to October 2018 levels. Higher LME copper prices drove the index. The current Copper MMI stands at 77 points.

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Contrary to other base metals, LME copper prices increased in November.

LME copper prices have maintained momentum that started back in September. LME copper prices still trade over the $6,000/mt level, which served as a stiff resistance level for most of 2017. Prices over this level indicate a bullish copper market, while prices below that level signal a more bearish trend. Trading volume remains heavier on the buys, which also supports prices.

LME Copper prices. Source: MetalMiner analysis of Fastmarkets

LME copper prices, however, have fallen so far in December. However, this slight decrease does not seem to be relevant.

Buying organizations can expect LME copper price momentum to remain strong in the short term.

Global Copper Outlook

Chile, the world’s top copper producer, reported a 7.3% increase in copper output in the January- September time frame compared with the same period in 2017, boosted by a sharp increase from BHP’s Escondida copper mine.

The Escondida mine reached 950,000 tons of copper output, 57.8% higher from the same period in 2017 (due to the 40-day strike last year).

Meanwhile, Codelco’s production came in at  1.29 million tons, down 2% from last year. The Collahuasi mine, owned by Anglo American Plc and Glencore Plc, currently the second-largest mine in the country, reached 401,8000 tons of copper output during this period, 5.8% higher than last year.

Delegates at the Asia Copper Conference in Shanghai forecasted a strong and healthy outlook for copper demand in the mid- to long term. According to Jerry Jiao, vice president of China Minmetals Corp., the renewable energy revolution will boost copper demand in the future, with an expected increase of 2.4 million tons by 2030. That demand, together with the increase of the Chinese car fleet replaced by 20% electric vehicles by 2030 will result in 2.8 million tons of incremental copper demand (based on 60 kilogram per car and 47 million cars in the country, as reported by Reuters).

Current copper Chinese demand goes toward air conditioning, automobiles (for which demand has weakened) and infrastructure investment. In fact, copper used for infrastructure investment will serve as the biggest contributor to Chinese copper demand in 2019.

Indian copper demand will likely double by 2026, due to increasing demand in power, auto and consumer sectors. Demand in the country could reach 1.433 million tons by 2026 from 650,000 tons in 2018. Different projects have boosted investments, but this projection does not include copper usage in electric vehicles, which would increase demand up to 2.5 million tons.

Indian smelter capability utilization came in at 80%, or 843,000 tons of refined copper versus the projected 642,000 tons of projected demand. However, the recent shutdown of Vedanta (400,000 tons per year) may lower the refined copper number in 2018.

Chinese Scrap Copper

LME copper prices and Chinese copper scrap prices tend to follow the same trend. Both increased this month.

However, the pace of the increases seems to differ.

Chinese scrap prices increased softly, while LME copper prices showed stronger momentum.

Source: MetalMiner data from MetalMiner IndX(™)

The spread has become wider again. The wider the spread, the higher the copper scrap consumption, and therefore, the price.

What This Means for Industrial Buyers

LME copper prices increased this month, following a two-month uptrend. Buying organizations will want to understand how to react to the latest copper price movements.

Adapting the right buying strategy is crucial to reducing risks. Only the MetalMiner monthly outlooks provide a continually updated snapshot of the market from which buying organizations can determine when and how much to buy of the underlying metal.

For more information on how to mitigate price risk year-round, request a free trial to our Monthly Metal Buying Outlook.

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Actual Copper Prices and Trends

In November, most of the prices comprising the Copper MMI basket rose.

LME copper increased by 4.48% this month. Indian copper prices rose by 6.82%, while Chinese primary copper prices jumped 3.92%.

Prices of U.S. copper producer grades 110 and 122 increased by 4.08%. Meanwhile, the price of U.S. copper producer grade 102 rose 3.86%, up to $3.76/pound.

ronniechua/Adobe Stock

Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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• Following the signing of the United States-Mexico-Canada Agreement (USMCA) during the Group of 20 (G20) summit in Argentina, industry groups and companies shared their thoughts.
• Speaking of G20, Stuart Burns delved into what the G20 meant for U.S.-China relations and the prospects for a deescalation of trade tensions.
• U.S. aluminum maker Century Aluminum announced the expansion of its Sebree smelter in Kentucky.
• Miner Rio Tinto celebrated its first bauxite shipment from its Amrun mine in Australia.
• We kicked off our monthly round of Monthly Metals Index (MMI) reports this week. Check out the first installments for the following subindexes: Automotive, Construction, Rare Earths, Renewables and Aluminum.
• Burns touched on one indicator to consider when looking to predict the direction of metal prices: pollution levels in China.

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gui yong nian/Adobe Stock

This morning in metals news, the state of falling global steel prices is a temporary condition attributable to Chinese overproduction ahead of winter cuts, according to miner Brazilian miner Vale; Chilean copper exports in November were less valuable; and the arrest of a Huawei Technologies executive has caused concern that it could cast a shadow on ongoing U.S.-China trade talks.

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Falling Steel

Brazilian iron ore miner Vale said the recent dip in global steel prices is temporary, a result of a Chinese surge in production just ahead of scheduled winter cuts, Reuters reported.

Unlike last year, Beijing has delegated authority on the exact specifications of the winter cuts — aimed at tackling pollution in the country’s industrial hubs — to local authorities this year, as opposed to the blanket cuts it imposed last year.

Chilean Copper

The world top copper producer, Chile, announced a budget surplus for November, but the value of its copper exports fell, according to a Reuters report citing the country’s central bank.

The value of its copper exports fell 12.5% in November, according to the report.

Arrest of Huawei CFO Raises Concerns Regarding U.S.-China Trade Talks

The Group of 20 (G20) summit saw President Donald Trump and President Xi Jinping agree to commencing a 90-day negotiating window on trade — a positive, if still uneasy step toward potential resolutions to the ongoing U.S.-China trade conflict.

However, the arrest of Huawei CFO Meng Wanzhou, at the behest of the U.S., has led to concern that it could impact the footing — uneasy footing — established for the current round of trade talks.

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According to the Washington Post, citing analysts in Beijing, the Chinese government, while upset about the arrest, will attempt to not allow it to impact the trade talks going forward.

The Rare Earths Monthly Metals Index (MMI) picked up one point, rising for a December MMI reading of 18.

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Lynas Considers Legal Action Against Malaysian Government

In last month’s installment of the Rare Earths MMI, we noted shares of Australian miner Lynas Corporation Limited got a boost on news that the Malaysian government would allow it to continue storing waste materials in the country.

However, this week the miner announced it was considering legal action, among other options, against the Malaysian government, which recently issued a statement regarding conditions for the miner’s license renewal.

According to a Lynas statement, the two conditions for renewal on Sept. 2, 2019, from the Malaysian government are: 1) the export of Water Leach Purification residue before Sept. 2, 2019, and 2) submission of an action plan for the disposal of Neutralization Underflow Residue (NUF) (which has valid approval through Feb. 5, 2019).

As readers know, China overwhelmingly dominates the global rare earths sector; however, Lynas represents the biggest rare earths miner outside of China.

Rare-Earths Elements in Mining Waste?

Given the demand for rare earths, particularly vis-a-vis high-tech applications (e.g. electrical vehicle batteries), every little bit of supply helps.

According to doctoral research cited by phys.org, it may be possible to extract quantities of rare earths from quarried ore.

“The problem is that the minerals we want are hidden in the waste heaps in very small quantities, and we do not have efficient methods for extracting them,” Wenzhong Zhang, a doctoral researcher in the Department of Chemistry at the University of Helsinki, was quoted as saying.

His research focuses primarily on recovery of rare-earths elements, namely scandium, from aluminum.

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Actual Metal Prices and Trends

Yttrium rose 1.3% to $32.68/kilogram, while terbium oxide rose 3.6% to $432.16/kilogram.

Neodymium oxide jumped 2.8% to $45,903.70/mt. Europium oxide was up 1.3% to $42.13/kilogram, while dysprosium oxide rose 9.5% to $180.13/kilogram.

gui yong nian/Adobe Stock

This morning in metals news, steel imports coming into the U.S. continue to be down from last year’s levels, Shanghai steel prices are down and the sharp corrective trend in iron ore prices could be coming to an end.

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U.S. Steel Import Market Share at 21% in November

According to a report by the American Iron and Steel Institute (AISI), U.S. steel import market share reached 20% for November.

Market share for the year to date is 23%, according to the report.

MetalMiner’s Take: What nuggets in the steel import data should buying organizations pay special attention to?

MetalMiner finds the rising import numbers of HRC and plate of greatest interest because it suggests the arbitrage between HRC prices (as well as plate prices) in the U.S. and elsewhere are so significant that buying organizations still achieve a lower total cost — even after paying a 25% import duty.

Rising imports for these two products will continue to put price pressure on domestic steel prices. Rising import levels (and 2018 imports for both products are higher than 2017 levels), suggest that the Q4 bounce that we have seen in prior years may not appear at all. The best way to gauge the trend is to track the spread between countries, factoring in freight, margin, duty, etc.

MetalMiner forecast subscribers can receive this kind of analysis via the MetalMiner Monthly Outlook.

Shanghai Steel Prices Fall

According to a Reuters report, Shanghai steel prices fell Thursday on oversupply concerns.

The most-traded SHFE rebar contract fell to 3,375 ($484.55) yuan per ton from an opening price of 3,360 yuan ($488.18) per ton.

An Iron Ore Recovery?

After a November that saw iron ore prices tumble, iron ore may be headed for a more stable period.

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According to Goldman Sachs, cited by Business Insider Australia, the iron ore price is expected to hold in the $60-$70 range over the coming 12 months.

The December Aluminum Monthly Metals Index (MMI) held steady this month at 88.

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LME aluminum prices also fell in November. Aluminum prices appear weaker this month. However, prices have increased so far in December.

Source: MetalMiner analysis of FastMarkets

From last July until November, LME aluminum prices traded in the $1,970-$2,170/mt level. However, prices moved slightly below the $1,970/mt floor in November.

The politics of trade and financial uncertainty in China, rather than supply and demand in the aluminum market, have moved LME price levels.

Rusal Aluminum Market

Russian aluminum giant Rusal’s aluminum profits continue to rise while sanctions continue to get postponed, this time from Dec. 12 to Jan. 7.

Rusal primary aluminum production reached 940,000 tons in Q3, 1% higher year on year. Primary aluminum and alloys sales increased by 8.1% year on year to 1.05 million tons. Rusal aluminum exports increased by 4% in October compared to September.

China Alumina Market

According to the president of Aluminum Corp of China Ltd, alumina exports held steady in October. Chinese aluminum makers have exported unusually high alumina volumes in 2018 due to supply constraints.

Alumina tightness came as a result of the strike at Alcoa’s operations in Western Australia, the outage at the Norsk Hydro Alunorte alumina refinery and U.S. sanctions on Russia’s United Company Rusal.

September alumina exports were five time higher than August, rising to over 165,000 tons. The higher numbers come on the heels of advanced production in September-October before the winter cuts (Nov. 15-March 15).

However, unlike last year, Chinese production in 2018 will not have blanket requirements for 30% output cuts.

SHFE aluminum prices also fell this month, hitting their lowest level since October 2016. Current prices have fallen 13% from the beginning of 2018. SHFE trading volumes fell 37% from this time last year, which means buyer sentiment — and, therefore, prices — have fallen.

Source: MetalMiner analysis of FastMarkets

However, SHFE aluminum prices traded similarly to LME aluminum prices and increased so far in December.

U.S. Domestic Aluminum

The U.S. aluminum Midwest Premium has traded sideways in December.

The current price stands at $0.18/pound, the same level as November, and lower than the $0.20/pound level in April-May 2018. Despite the sideways trend, the current premium remains high.

Source: MetalMiner data from MetalMiner IndX(™)

What This Means for Industrial Buyers

LME aluminum prices appear weaker at this point. Tariffs, sanctions and supply concerns may act as a support to aluminum prices, both for LME aluminum and the U.S. Midwest Premium.

Adapting the right buying strategy becomes crucial to reducing risks.

Only the MetalMiner monthly outlooks provide a continually updated snapshot of the market from which buying organizations can determine when and how much to buy of the underlying metal.

For more information on how to mitigate price risk year-round, request a free trial to our Monthly Metal Buying Outlook.

Want to see an Aluminum Price forecast? Take a free trial!

Actual Aluminum Prices and Trends

Aluminum prices fell this month, with a closing price in November of $1,950/mt.

Meanwhile, Korean commercial grade 1050 sheet increased by 3.96% to $3.41/kilogram after last month’s downtrend.

Chinese aluminum primary cash prices increased by just 0.28%, while Chinese aluminum bar fell by 1.63%. Chinese aluminum billet prices also decreased, down 3.13% this month to $2,042/mt.

The Indian primary cash price rose by 1.02% to $1.98/kilogram.

Pavel Ignatov/Adobe Stock

Price forecasters are always looking out for apparently unrelated factors that correlate to the price movement they are tracking.

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Sometimes the relationship seems bizarre.

At first sight, a link between oil prices and aluminum prices appears tenuous until you consider that the oil price is taken as a proxy for energy prices in general, particularly as fuels like liquefied natural gas (LNG) can be linked to the crude oil price.

So, here is one for you. If you would like a leading indicator to price movements for coal, steel and energy-intensive base metals, the South China Morning Post suggests, or at least links, pollution levels in major Chinese cities to production levels of steel and aluminum.

According to the argument, if pollution levels are high it is because production is high, and if production is high then the market is going to be oversupplied and prices will fall.

The South China Morning Post compares pollution levels this year to last around Beijing and other major eastern seaboard cities. Last winter, local government officials in Beijing restricted — or simply banned — the burning of coal across much of northern China, the article reports. Consequently, in early December average pollution levels in Beijing were less than half the concentrations seen in the previous two years.

Beijing’s citizens no doubt welcomed the blue skies. Unfortunately, coal is not just used as an energy source for electricity generation — it is also burned as fuel by millions to heat their homes, workplaces and schools, the South China Morning Post reports.

With industry slowing and reports of school children facing hardship, Beijing relented, and by late December to early January, the smoke had returned.

Read more

The Construction Monthly Metals Index (MMI) fell seven points, down to a December MMI reading of 82.

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U.S. Construction Spending

Estimated U.S construction spending in October fell 0.1% from September according to Census Bureau data, but marked a 4.9% increase from the October 2017 spending total.

Spending in October hit an estimated seasonally adjusted annual rate of $1,308 billion, the lowest monthly spending total since March ($1,293 billion).

As for private construction, spending was at a seasonally adjusted annual rate of $998.7 billion, down 0.4% from the revised September estimate of $1,003.0 billion.

Within the umbrella of private constriction, residential construction hit $539.0 billion in October, down 0.5% from the revised September estimate of $541.7 billion. Nonresidential construction reached $459.7 billion in October, down 0.3% from the revised September estimate of $461.3 billion.

Public construction hit $310.2 billion, up 0.8% from the revised September estimate of $307.8 billion.

Within public construction, educational construction hit $76.9 billion, up 2.6% from the September estimate of $75.0 billion. Highway construction reached $94.6 billion, down 0.1% from the revised September estimate of $94.6 billion.

October Sees Only Slight Billings Growth

The Architecture Billings Index (ABI), put out monthly by the American Institute of Architects, reached a value of 50.4 for October, down from 51.1 in September. A reading of 50 indicates no growth, with anything greater signifying growth.

“Although growth is still occurring, the pace of that growth has continued to ebb and flow through much of the year,” the ABI report states. “But the outlook still remains positive, as inquiries into new work remain strong, and the value of new signed design contracts remains relatively strong as well.”

By region, the Midwest led the way with a reading of 57.8, followed by: the Northeast (51.8), the South (48.4) and the West (46.9).

“Regionally, conditions look to be changing from the trends that have dominated so far this year,” the report states. “Billings at firms in the Northeast rebounded modestly in October, following several months of softness, while billings declined at firms located in the South and West, where conditions have been strong recently. However, it is too early to say if this is a one-month blip or a more protracted change.”

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Actual Metal Prices and Trends

Chinese rebar plunged 20.2%, down to $544.74/mt, while Chinese H-beam steel fell 12.2% to $540.39/mt. It remains to be seen whether the U.S. and China can reach an agreement to deescalate trade tensions during the 90-day window agreed upon at the Group of 20 (G20) summit this past weekend in Argentina.

U.S. shredded scrap steel rose 4.7% to $358/st.

European commercial 1050 aluminum sheet fell 4.0% to $2,644.47/mt, while Chinese aluminum bar fell 1.6% to $2,139.75/mt.