Bombardho/Adobe Stock

The Copper Monthly Metals Index (MMI) rebounded to 74 following last month’s fairly sizable drop from 78 to 73 (hitting a 2019 index  low).

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

LME copper prices dropped by nearly $100/mt around the first of July after gaining strength in June, then traded sideways during the first week of the month.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets

Meanwhile, LME warehouse stocks increased.

Source: MetalMiner analysis of FastMarkets

However, copper mining disruptions continue to impact mine output. According to Reuters, Chile’s exports of copper declined by 14% in June compared with June of 2018, coming on the heels of extremely rainy weather early in 2019. Additionally, falling ore grades continue to hurt Chilean mining production.

The Congo army recently evicted illegal miners working at Kamoto Copper Company (KCC), a Glencore subsidiary in the Kolwezi area. According to the company, around 2,000 illegal, small-scale miners intruded illegally daily, on average. The move followed a landslide that killed 43 people at the KCC concession.

Zambia announced plans for a law that will compel miners to procure locally, according to the country’s mine minister, as reported by Reuters. Zambia continues to take a greater role in the mining sector. Zambia ranks second in Africa in copper export volume, with the metal dominating the country’s exports.

Chinese Copper Scrap vs. LME Copper

The price gap between Chinese copper scrap and LME copper narrowed last month considerably due to the steep LME price drop. This month, however, the slight LME price increase exceeded the slight increase in Chinese copper scrap prices.

Notably, China’s refined copper output in May dropped by 5.2% compared with May 2018. Output totaled 711,000 tons, marking a 3.9% decrease compared with the previous month.

The recent crackdown on scrap imports has likely caused the production decline. Further restrictions impacting high-grade copper scrap came down in early July as the Chinese government continues to ramp up its crackdown on scrap.

Given that scrap imports fueled about 10% of production last year, producers need to find alternative sources of raw material. According to China Minmetals Corporation in press reports, copper imports made by the company from a preferred Chilean trading partner look set to increase this year to a value of $900 million.

What This Means for Industrial Buyers

With copper prices showing some strength in June, industrial buying organizations will need to pay careful attention to macroeconomic growth, which could continue to support prices.

It’s important for buying organizations to understand how to react to copper price movements. The MetalMiner Monthly Metal Buying Outlook helps buyers understand the copper marketplace.

Actual Copper Prices and Trends

Copper prices strengthened this month across the index with the exception of Korean copper strip, which dropped 0.4% to $8.29 per kilogram.

The Indian copper cash price increased by 10.9%, the largest increase in the index this month, to $6.53 per kilogram.

Chinese prices turned around this month, as all of the Chinese prices in the index increased. China’s primary cash price and copper wire price increased by 2.7% to $6,898/mt and $6,892/mt, respectively. Copper bar increased 2.8% to $6,885/mt.

Chinese scrap copper #2 increased by 0.6% to $5,592/mt.

U.S. prices in the index all increased by 1.7%. U.S. copper producer copper grade 110 increased to $3.49 per pound, grade 102 priced at $3.68 per pound and grade 122 at $3.49 per pound.

Want to a see Cold Rolled price forecast? Get two monthly reports for free!

The Japanese primary cash price increased by 2.1% to $6,163/mt. The LME primary 3-month increased by 2.8%, up to $5,982/mt.

The Aluminum Monthly Metals Index (MMI) held steady at 86 this month based on mixed price movements. While prices in China dropped in the 1% to 2% range, all other prices in the Aluminum MMI basket rose slightly.

Buying Aluminum in 2019? Download MetalMiner’s free annual price outlook

LME aluminum prices continued to fall into June, but recovered toward the end of the month. LME prices are currently moving sideways at around $1,800/mt, with the present price slightly higher at $1,807/mt.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets

Due to lower LME prices, a recent forecast for Indian production projects a slowdown in output growth. Domestic production costs increased by around 25% during the past three to five years, putting break-even costs above the current LME price, which was at $1,777/mt in late June.

According to Reuters, Japanese aluminum premiums increased 3% to $108/ton for Q3 due to tighter aluminum supplies in Asia. Japanese producers initially sought increases to the $115-$120 per ton range. Weakness in the semiconductors market and trade worries capped gains.

Chinese Aluminum Prices

SHFE aluminum prices weakened during the past month, reversing the upward trend evident since around February 2019. Demand appears seasonally weaker at this time; therefore, market observers will want to watch prices carefully during the next month or two to see if the downtrend continues.

Source: MetalMiner analysis of Fastmarkets

In a normal cycle, prices might rise again as China moves away from seasonally hot and rainy weather.

According to a recent Reuters report, China’s aluminum production increased by 2.4% in May compared with May 2018 because of smelter restarts in response to higher prices, which could also contribute to the recent weakness.

Price weakness appears to be temporary. If prices do not increase, this will indicate a weaker-than-expected Chinese economy and/or that output continues to increase, with increased supply capping price gains.

Increased Aluminum Use on the Horizon Across Sectors

Aluminum prices may also receive future support from innovations beyond just the automotive sector, based on the metal’s flexibility and lightweight profile.

The Indian government announced that railway coach cars will transition to aluminum, while older conventional stock will begin a phaseout.

Coca-Cola announced its AQUAFINA® water brand will see an aluminum can package in U.S. food service outlets. The announcement comes as part of the company’s greater move to reduce the use of plastic packaging.

U.S. Aluminum Premiums

The U.S. Midwest Premium finally dropped, but only slightly, to $0.18/lb. With aluminum prices rising in most countries, supply tightness may continue to support the premium. The U.S. Midwest Premium still remains stubbornly high since the the U.S. removed its aluminum tariffs on Canadian and Mexican aluminum in May.

What This Means for Industrial Buyers

Price signals were mixed this month, with weaker Chinese prices contrasting with higher prices in the rest of the world. Global production increased, but not enough to offset overall tightness in terms of supply.

Do you need more pricing guidance? Subscribe to MetalMiner’s Monthly Metal Buying Outlook.

Actual Metal Prices and Trends

Chinese prices dropped again this month, in the range of 1-2%. The Chinese primary cash price dropped 1.6% to $2,013/mt, while Chinese aluminum scrap fell 1.7% to $1,835/mt. Billet and bar prices dropped by 1.6% and 1.5%, respectively, to $2,080/mt and $2,177/mt.

This month, European prices increased. European commercial 1050 sheet increased by 2.3% to $2,553/mt, while the 5083 plate price increased by 2% to $3,011/mt.

Korean commercial 1050 sheet, 5052 coil premium over 1050, and 1050 all increased by around 2% to $3.1, $3.14 and $3.27 per kilogram, respectively.

India’s primary cash price increased 1% to $2.09 per kilogram.

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

The LME primary 3-month aluminum price held essentially flat, increasing 0.28% increase to $1,794/mt.

metamorworks/Adobe Stock

The Rare Earths Monthly Metals Index (MMI) picked up one point, rising for a July MMI value of 23.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

New Rare Earths Association

A new rare earths industry based in Belgium was launched last month.

Dubbed the Rare Earths Industry Association (REIA), it is the first rare earths association outside of China, Euractiv reported.

The group aims to bring together all elements of the rare earths supply chain and “strengthen the European REE skills and knowledge base,” according to the group’s website.

“GloREIAs second ambitious goal is to develop a more synergistic REE supply chain; aiming to reduce the deep fragmentation known in this sector and apply the knowledge gained from EU projects, research and members to generate an economy wide impact,” the website adds. “The GloREIA consortium assembles the best European manufacturers and academic expertise on REEs, together with global associations such as the Chinese Society of Rare Earths (CSRE) and Association of China Rare Earth Industry, Japan Oil, Gas and Metals National Corporation (JOGMEC) and EIT RawMaterials so that research and policy activities in the area of Rare Earth Elements can be streamlined, integrated and mutually strengthened for the benefit of all stakeholders.”

The mining of rare earths — a misnomer given their abundance — has long been dominated by China. These elements are coveted for their use in a wide range of high-tech applications.

On the Tariff Front

Speaking of China’s dominance of the market, that fact has to date has given the U.S. pause when it comes to imposing tariffs on imports of rare earth elements (REEs) from China.

In a $200 billion tariff list imposed last September, the U.S. ultimately opted not to include REEs.

However, in a tense May, President Donald Trump opted to raise the tariff rate on those $200 billion in goods from 10% to 25%, and even threatened an additional $325 billion in tariffs, essentially subjecting all remaining imports from China to duties.

Given China’s role in the rare earths sector, it remains to be seen if rare earths would be included on a future tariff list.

According to a CNBC report in June, China’s exports of rare earths fell to 3,639.5 metric tons in May after reaching 4,329 metric tons the previous month.

Actual Metal Prices and Trends

Chinese yttrium rose 0.6% month over month to $32.77/kg as of July 1. Terbium oxide rose 13.0% to $597.81/kg.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Neodymium oxide dropped 0.3% to $50,522.20/mt. Europium oxide fell 1.6% to $32.77/kg. Dysprosium oxide fell 1.0% to $283.25/kg.

As many of our readers are celebrating the Fourth of July, it is a good time to take a look back at some of the most-viewed stories here on MetalMiner in the second quarter of the year:

1. Trump Drops Metals Tariffs on Canada, Mexico; What’s the Impact on Steel, Aluminum Prices?

2. Could Spot Iron Ore be on Track for $100/Ton?

3. This Morning in Metals: Iron Ore Price’s Rise Slows

4. Rising Iron Ore Prices Push Some Chinese Steel Mills into the Red

5. Taking a Closer Look at the Platinum-Palladium Price Spread

6. A Shifting U.S. Dollar Could Impact Precious Metals Prices

7. Aluminum MMI: Aluminum Prices Fall Despite Global Supply Deficit

8. Is British Steel a Victim of Brexit or an Undeserving Wastrel?

9. Alunorte’s Restart Does Not Bode Well for Aluminum Prices

10. Stainless MMI: Stainless Prices Hold Flat

The Construction Monthly Metals Index (MMI) held flat at 81 for the July MMI reading.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

U.S. Construction Spending

U.S. construction spending in May totaled an estimated $1,293.9 billion, according to the U.S. Census Bureau, marking a 0.8% decline from April’s $1,304.0 billion.

The estimated May 2019 spending figure marked a 2.3% decline on a year-over-year basis; according to economists polled by Reuters, construction spending was forecast to increase 0.1% in May.

Private construction spending in May was $953.2 billion, down 0.7% from the revised April estimate of $960.3 billion.

Under the umbrella of private construction, May residential construction spending fell 0.6% from the previous month, down to $498.9 billion. Nonresidential construction spending fell 0.9% in May, down to $454.3 billion.

Meanwhile, public construction spending fell 0.9% to $340.6 billion. Under public construction, educational construction was nearly flat at a seasonally adjusted annual rate of $79.3 billion. Highway construction fell 3.2% to $111.6 billion.

Billings Growth Ticks Up Marginally

After a decline in March billings, billings grew for the second straight month in May, according to the American Institute of Architects’ (AIA) monthly Architecture Billings Index (ABI).

The May ABI checked in at 50.2 after recording a value of 50.5 in April; any value greater than 50 indicates billings growth.

Billings grew in the Midwest (51.6) and the South (51.4) regions, held flat in the West (50.0), and fell in the Northeast (47.6).

Despite the technical increase as reflected by the ABI, the past four months have showcased a slowdown not seen in seven years, according to the AIA.

“In fact, for the last four consecutive months, firm billings have either decreased or been flat, the longest period of that level of sustained softness since 2012,” the AIA said in its ABI release. “In addition, while both inquiries into new projects and the value of new design contracts remained positive, they both softened in May as well, another sign that the amount of pending work in the pipeline at firms may be starting to shrink.”

May Housing Starts Fall 0.9%

Last month, we reported U.S. housing starts, at a seasonally adjusted rate of 1.29 million, fell 0.9% in May compared with the previous month.

In addition, the National Association of Realtors (NAR) reported April pending home sales dropped 1.5% over the previous month. NAR’s Pending Homes Sales Index, which is based on contract signings, fell 2.0% in April, marking the 16th consecutive month of decline for the index.

Actual Metal Prices and Trends

The Chinese rebar price rose 0.6% month over month to $582.52/mt as of July 1. Chinese H-beam steel dropped 1.5% to $554.85/mt.

U.S. shredded scrap steel fell 7.1% to $274/st.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

European commercial 1050 aluminum sheet rose 2.3% to $2,552.81/mt.

The Automotive Monthly Metals Index (MMI) picked up one point this month, rising for a reading of 87.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

U.S. Auto Sales

General Motors reported Q2 deliveries of 746,659 vehicles, marking a 1.5% decline on a year-over-year basis.

GM’s chief economist said U.S. light-vehicle SAAR for the first half of the year is expected to reach 17.0 million units.

“The U.S. economy continues to grow at a healthy pace. Jobs are plentiful and inflation remains low,” said Elaine Buckberg, GM’s chief economist. “Auto demand was better than anticipated in the first half and we expect strong performance in the second half of the year. If the Fed cuts rates, as widely expected, lower financing costs will provide further support to auto sales.”

Meanwhile, Ford Motor Co. is scheduled to announce its Q2 sales results at 9:15 a.m. ET on Wednesday, July 3.

Fiat Chrysler reported it had its best June in 14 years, posting total sales growth of 2%, tallying 206,083 vehicle sales. Ram pickup truck sales surged 56% in June to 68,098 vehicles and 179,454 vehicles in the quarter.

Total Honda sales fell 7.3% in June, while Nissan sales fell 14.9%. Hyundai sales were up 2% in June and rose 2% in the first half of the year. Subaru reported 61,511 vehicle sales in June, marking a 2.8% year-over-year increase.

Toyota sales fell 3.5% on a volume basis and increased 0.3% on a daily selling rate basis.

According to a monthly forecast released jointly J.D. Power and LMC Automotive, June retail sales were expected to fall 2.9% compared with June 2018, while total sales were forecast to drop 1.5% year over year.

Despite slumping sales this year, automakers have cashed in on higher average transaction prices. According to J.D. Power and LMC Automotive, new-vehicle prices are up 4% in the first half of the year compared with the first half of 2018.

“While the first half of 2019 is expected to deliver its weakest retail sales since 2013, the growth in prices has been nothing short of remarkable,” said Thomas King, senior vice president of J.D. Power’s data and analytics division. “Average transaction prices set a record during the first half, which has big implications for manufacturer revenues.”

GM Announces Michigan, Texas Investments

Last month, GM announced plans to invest $150 million in its Flint Assembly plant and $20 million at its Arlington Assembly plant.

At the Flint plant, the automaker aims to augment production of its Chevrolet Silverado and GMC Sierra models.

Meanwhile, the $20 million investment in the Texas plant aims to upgrade the plant’s conveyors in preparation for the rollout of the automaker’s new full-size SUVs. According to a GM release, the upgrades are expected to be completed next year.

Actual Metal Prices and Trends

The U.S. HDG price fell 6.9% month over month to $779/st as of July 1. The U.S. platinum bar price increased 1.7% to $834/ounce, while palladium surged 15.8% to $1,516/ounce.

U.S. shredded scrap steel fell 7.1% to $274/st. LME copper jumped 2.8% to $5,981.50/mt.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Chinese primary lead ticked up 0.9% to $2,340.98/mt.

Zerophoto/Adobe Stock

This morning in metals news, India is likely to remain a net steel importer for at least the next two years, residents of Scunthorpe are concerned about the future of their town should British Steel close down and the copper price retreated to a one-week low.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

India to Remain Net Steel Importer

As steel imports continue to flow into the country, India is likely to remain a net steel importer over the next two years, Bloomberg reported citing Fitch Ratings Ltd.’s local unit.

India’s annual steel consumption is nearing 100 million tons, according to the report.

Worrying About the Future

A recent bid deadline came and went for the liquidated British Steel, based in Scunthorpe, England.

Media reports indicate there have been at least nine interested buyers, but it remains unclear if a buyer would be willing to take on the entirety of the business, as opposed to individual parts.

With the plant’s future in limbo, the BBC reported residents of Scunthorpe are concerned about a potential shuttering of the plant and the impact it would have on the town.

“If the worst comes to worst, and the steelworks does actually shut, it will be devastating for so many people here,” one resident is quoted as saying.

“People will probably have to move away.”

Copper Slides

On the heels of the weekend’s G20 Summit in Japan, the copper price fell to a one-week low Tuesday, Reuters reported.

For more efficient carbon steel buying strategies, take a free trial of MetalMiner’s Monthly Outlook!

Copper prices soared to a six-week high on Monday. The LME copper price traded down 0.5% Tuesday, according to the report, down to $5,925 per ton, on weak global manufacturing data.

alfexe/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:

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

• Belinda Fuller touched on the U.S. dollar’s impact on precious metals prices.
• Sticking with currency issues, Stuart Burns delved into some upcoming decisions that could impact U.S.-E.U. relations.
• Global crude steel production jumped 5.4% in May on a year-over-year basis.
• Steel mills in China are battling rising iron ore prices.
• Global aluminum production hit 5.43 million tons in May.
• U.S. imports of steel are down 12% through the first five months of the year.
• MetalMiner’s new Trade Resource Center is live, available for perusal by navigating to the site’s Research tab or visiting trade.metalminer.com.
• Burns looked into the impact of a strike at Codelco’s Chuquicamata copper mine (labor unions at the mine later voted Thursday to accept the company’s latest contract offer).
• Burns on the decline of the U.K. automotive sector.

Want to a see Cold Rolled price forecast? Get two monthly reports for free!

Bombardho/Adobe Stock

This morning in metals news, the copper price didn’t budge Thursday ahead of a key meeting between U.S. President Donald Trump and Chinese President Xi Jinping, Nucor announced a price hike for flat-rolled steel products, and automaker Tesla won a tariff exemption on aluminum imported from Japan.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

Copper Price Holds Flat

Markets are anxiously awaiting the results of a key meeting between U.S. President Donald Trump and Chinese President Xi Jinping during the G20 Summit in Japan this weekend.

On Thursday, however, the copper price held flat.

The LME three-month copper price ticked up 0.1% Thursday after soaring to a five-week high during the previous session, Reuters reported.

Nucor Raises Flat-Rolled Steel Prices

Steelmaker Nucor announced its first price hike on flat-rolled steel since February, according to Yahoo! Finance.

The price hikes apply to HRC, CRC and HDG, according to the report.

Tesla Wins Aluminum Tariff Exemption

Electric car maker Tesla secured a tariff exemption for aluminum it imports from Japan, Reuters reported.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

The automaker sought the exemption for the aluminum — which it uses for the production of battery cells at its Nevada Gigafactory — at an annual rate of 10,000 tons, according to the report.

Copper appears to be caught in the crosswinds.

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

After months of steady declines from a peak of U.S. $6,600 per ton in April, the copper price had drifted down to well below $6,000 per ton on fears of what impact the ongoing trade war between the U.S. and China would have on top consumer China.

But while trade war tensions continue to provide significant headwinds, an extending strike at Codelco’s Chuquicamata copper mine is raising concerns about supply.

The copper market is considered to be in deficit, according to Reuters, saying the global refined copper market showed a deficit of 51,000 metric tons in March, compared with a 72,000-ton surplus in February. Bloomberg cited the International Copper Study Group, which forecast a deficit of 189,000 tons by the end of this year.

Codelco’s strike has been rumbling on for 12 days now. Chuquicamata is the company’s third-largest mine, producing 321,000 metric tons last year (so over 10,000 tons have been lost so far).

Some 3,200 workers at the mine are represented by three unions. Their grievance is focused on comparable terms of employment between retiring older workers and incoming new workers. The company is holding back on the more generous terms older workers enjoy as they negotiate the severance of some 1,700 workers due to the transition from open pit to underground mine in the next 12 months.

So far, Codelco says it has made the best offer it can.

Workers, however, are not satisfied.

Negotiations are at an impasse. The union is going back to the workers later this week for an extension to the strike. In and of itself, the loss of Chuquicamata’s production is not critical for the copper market, but it heightens concerns about where supply is going to come from, as investment in new mines has been depressed for some years by excess supply and low prices.

Perversely, though, inventory has been rising.

Both the LME and SHFE have seen increases in stocks this year, although they have fallen somewhat in the last month or so. Generally, inventory levels do not suggest a market in crisis.

So, what can we make of the recent price rises: are they purely a reaction to the Chuquicamata strike and a weaker dollar boost to commodity prices, or the buildup for a move higher?

Demand, while less robust than previous years, remains fairly solid. Much of the negativity is down to fears over the trade conflict between the U.S. and China, as is the case with much of the commodity and equity markets; a resolution to that squabble would see a return of optimism and higher prices.

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

Without it, though, it is hard to see significant upside to copper this year — the fundamentals are not supporting that yet. In the meantime, sentiment is king.