Articles on: Metal Prices

The Renewables Monthly Metals Index (MMI) tracked back two points, falling to 105 for our May MMI reading.

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Within the basket of metals, Japanese and Korean steel plate posted month-over-month price drops. Meanwhile, Chinese and U.S. steel plate were up for the month.

U.S. grain-oriented electrical steel (GOES) dropped for the month, while Chinese neodymium, silicon and cobalt all posted price drops.

Ethical Concerns in Cobalt Supply Chains

As the electric vehicle (EV) race has heated up in recent years, so, too, has the demand for cobalt, a coveted material used in EV batteries.

Approximately 60% of the world’s cobalt is mined in the Democratic Republic of the Congo, where multinational miners do business despite the precarious political climate in the resource-rich country.

News reports and general coverage of child labor in the cobalt supply chain has led to some companies to issues public statements and, in some cases, take efforts to implement measures to work toward more ethical cobalt supply chains.

As reported by the Financial Times, carmaker Daimler has developed an auditing system through which it can assess its supply chains to avoid sourcing of material from mines where child labor is used.

Cobalt-mining companies came in for criticism from Amnesty International in November.

“More than half of the world’s cobalt, which is a key component in lithium-ion batteries, comes from the DRC, and 20% of it is mined by hand. Amnesty International documented children and adults mining cobalt in narrow man-made tunnels, at risk of fatal accidents and serious lung disease,” the report stated.

“The organization traced the cobalt from these mines to a Chinese processing company called Huayou Cobalt, whose products then end up in the batteries that are used to power electronics and electric vehicles.”

Speaking of Cobalt…

As we mentioned yesterday in our Rare Earths MMI report, EV maker Tesla is one firm that is deemphasizing cobalt in its product mix.

“Cells used in Model 3 are the highest energy density cells used in any electric vehicle,” Tesla’s quarterly earning report noted last week. “We have achieved this by significantly reducing cobalt content per battery pack while increasing nickel content and still maintaining superior thermal stability.

“The cobalt content of our Nickel-Cobalt-Aluminum cathode chemistry is already lower than next-generation cathodes that will be made by other cell producers with a Nickel-Manganese-Cobalt ratio of 8:1:1. As a result, even with its battery, the gross weight of Model 3 is on par with its gasoline-powered counterparts.”

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Given cobalt’s high cost, relative scarcity and sometimes unreliability of its supply (as a result of political tensions in the DRC), some companies have looked to scale back the percentage of cobalt used in their batteries, instead opting for other materials.

The May Aluminum Monthly Metals Index (MMI) increased six points. Skyrocketing LME aluminum prices drove the subindex value increase. The current Aluminum MMI subindex stands at 100 points, 6.4% higher than in April.

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LME aluminum price momentum recovered strongly in April. LME aluminum prices reached a more than seven-year high.

Source: MetalMiner analysis of FastMarkets

LME aluminum prices fell slightly at the end of the month. However, this movement appears as a price correction from previous highs. LME aluminum prices increased again at the beginning of May, showing a strong uptrend.

The Reasons for Aluminum Volatility

LME aluminum price volatility came as a result of U.S. sanctions levied April 6 on Russian companies and their owners.

Russia is the world’s second-largest aluminum producer (accounting for 6% of world production). Therefore, the sanctions created the alarm of supply shortages in the U.S., along with all international markets outside China.

However, the U.S.Treasury Department delayed the first due date for the sanctions until Oct. 23, at which point investors must divest or transfer debt and equity and industrial metal buyers must wind down pre-existing long-term contracts.

The delay in the aluminum sanctions eased LME aluminum prices; however, the market has tightened significantly.

SHFE Aluminum

Given the current alarm bell around aluminum and aluminum product shortages outside China, the country may see increased exports, despite U.S. tariffs. Therefore, market observers will want to follow SHFE aluminum prices closely.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese SHFE prices traded similarly to LME prices. However, the degree of the SHFE price increase appears to be less sharp.

Chinese SHFE stocks fell for the first time in nine months (since June 2017) to 970,233 mt, according to exchange data.

U.S. Domestic Aluminum

As a result of the ongoing uncertainty in the aluminum market, U.S. aluminum Midwest premiums increased again to $0.19/pound, climbing to a more than three-year high.

At the end of April, the country-specific aluminum (and steel) tariff exemptions for the E.U., Canada and Mexico were extended until June 1. The decision came  just hours before the temporary exemptions from the tariffs expired.

The final agreements have not yet been released, but the government suggested that quotas will replace tariffs. This action could ease U.S. Midwest premiums.

What This Means for Industrial Buyers

The LME aluminum price retracement in April presented buying organizations with a good opportunity to buy some volume, as prices increased again later in the month.

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Adapting the right buying strategy becomes crucial to reduce risks. Given the ongoing uncertainty around aluminum and aluminum products, buying organizations may want to take a free trial now to our Monthly Metal Buying Outlook.

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This morning in metals news, Chinese exports of steel and aluminum were up in April, copper prices fell and negotiators are working to reach a deal on the North American Free Trade Agreement (NAFTA) this month.

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Chinese Steel, Aluminum Exports Jump in May Despite Section 232 Tariffs

China saw an increase in its steel and aluminum exports in April as U.S. sanctions on Russia canceled out the impact of the Section 232 tariffs, Reuters reported.

China’s steel exports rose to their highest level since August, according to customs data cited by Reuters.

Copper Price Falls

Copper prices dropped as the inversely correlated U.S. dollar gained strength, Reuters reported.

LME three-month copper dropped to $6,758 per ton, according to the report.

NAFTA Talks

Renegotiation efforts around NAFTA began last fall, but last week U.S. Trade Representative Robert Lighthizer said he hopes to reach a deal this month.

However, according to a Bloomberg report, Lighthizer hasn’t given any ground on some proposals with which Mexico and Canada are unlikely to agree.

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Lighthizer met with Mexican Economy Minister Ildefonso Guajardo on Monday and was scheduled to meet Canadian Foreign Affairs Minister Chrystia Freeland this morning.

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The Rare Earths Monthly Metals Index (MMI) lost one point this month, dropping to 20 for our May reading.

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Within this basket of metals, yttrium dropped slightly, while terbium oxide fell 7.8%. Neodymium oxide dropped 7.9%.

Europium oxide fell 0.9%. Dysprosium oxide fell 4.2%.

A New Source?

As those who follow the rare earths metals market know, China has long boasted dominance in the sphere.

However, a recent discovery in Japan could lessen China’s dominance in the market down the road.

According to a CNBC report, a study last month said a “semi-infinite” supply of rare earths has been discovered under Japanese waters.

According to the study, the seabed area where the rare earths were discovered “contains more than 16 million tons of rare-earth oxides.”

Rare earths are coveted for their application in high-tech products, like cellphones and computers. As such, the materials are vital for Japan, which is a major player in the tech industry.

As Reuters reported in 2014, Japan sought to lessen its dependence on Chinese rare earths, looking to secure 60% of the materials from outside China.

What Does the Discovery Really Mean?

The aforementioned discovery made a big splash last month in global headlines, but how immediate could returns from the discovery be?

According to a rare earths primer published by the Nikkei Asian Review, those returns won’t exactly come any time soon.

“One major problem, though, is the depth,” the Nikkei Asian Review reported. “The metals are buried beneath waters as deep as 5,600 meters — too deep to extract with existing technology. The next step for researchers and companies will be to figure out how to reach them.”

The news source goes on to note that given the cost-prohibitive nature of rare earths, many companies are looking for alternative materials for their high-tech products. As such, the basket of metals could become gradually less coveted over time.

For now, however, any discovery of a potential new supply source in the rare earths sphere is inevitably going to be a cause for celebration, even if extraction is not currently possible.

Tesla and Cobalt

It has been a turbulent couple of months for electric carmaker Tesla, which has taken a beating in headlines lately, particularly on the heels of what many deemed a dismissive performance from Elon Musk vis-a-vis analysts’ questions during last week’s quarterly earnings call.

However, in supply news, Musk offered insight into the company’s stance on cobalt, used in electric vehicle batteries.

As mining.com reported, Musk last week said Tesla’s nickel-cobalt-aluminum batteries contain less cobalt than other electric car batteries on the market, noting their battery “is already lower than next-generation cathodes that will be made by other cell producers with a nickel-manganese-cobalt ratio of 8:1:1.”

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Cobalt is coveted by the electric vehicle industry for its application in batteries, but it is notorious for significant price swings. A majority of the world’s cobalt is mined in the Democratic Republic of the Congo, where political instability often impacts the metal’s price.

The Copper MMI (Monthly Metals Index) increased one point in May. Stronger LME copper prices led the increase.

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LME copper prices recovered previous price momentum and increased in April. At the beginning of last month, LME copper prices fell. At this point, buying organizations had an opportunity to buy some volume.

LME copper prices then recovered and moved toward the $7,000/mt level. LME copper prices have also risen so far this month.

Source: MetalMiner analysis of FastMarkets

Despite a falling copper short-term trend at the beginning of 2018, LME copper prices remain in a long-term uptrend. Therefore, buying organizations can expect further copper price increases.

In May, most of the prices that comprise the Copper MMI basket increased. LME copper rose by 1.5% this month. Indian copper prices increased by 1.33%, while Chinese primary copper prices increased further by 2.03%. Prices of U.S. copper producer grades 110 and 122 rose by 1.06%. Meanwhile, the price of U.S. copper producer grade 102 increased by 1.01%.

Copper Bullish Narrative

The fundamentals also support LME copper prices. Forecasts suggest copper demand will grow this year, while copper mine supply appears unsecured. Therefore, the balance for demand and supply in 2018 could result in a deficit, as it previously did in 2017.

Mitsubishi Materials Corp., Japan’s third-biggest copper smelter, might increase refined copper production by 7% in the April-September period this year. Production in this period will reach 187,374 tons. The increased production comes as a result of stronger domestic copper demand, mainly in the automobile and semiconductor sectors (where copper is used).

The pace of copper demand growth will likely increase and  continue until 2020 due to  construction in anticipation of the Olympic games.

India’s copper consumption has increased over the last few years. Local demand has grown  at a 7-8% rate per year. If the country’s consumption rate increased, India will become a net importer of copper by the end of March 2020.

In April, Vedanta Resources Plc, one of India’s biggest copper smelters, had its renewal of consent to operate its copper smelting plant rejected. The plant remains closed due to scheduled maintenance. The company planned to double capacity at the smelter to 800,000 tons per year. This closure may create more copper imports over the next few months.

Has the EV Boom Lost Its Relevance?

Despite the EV boom that pushed some base metal prices up in 2017, copper demand corresponding to this electric-vehicle sector does not appear strong enough.

Copper demand for the EV sector could reach 1.5% of global copper consumption in 2018. The EV demand for copper will likely increase up to 3% in five years.

Chinese Scrap Copper

Since the announcement of the ban on copper scrap in China last summer, MetalMiner has followed Chinese copper scrap prices closely.

Source: MetalMiner data from MetalMiner IndX(™)

LME copper prices and Chinese copper scrap prices follow the same trend. Both appear to be in a long-term uptrend. However, the latest LME copper price increase appears sharper than Chinese copper scrap prices.

In addition, the spread between Chinese copper scrap prices and LME copper prices appears wider. The wider the spread, the higher the copper scrap consumption — and, therefore, the price. However, this equation may not play out as formulated here, depending on the U.S. Section 301 investigation. The investigation could lead to an additional 25% tariff to copper electric conductors and copper winding wire. Chinese copper products and buying organizations purchasing those could see price increases.

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What This Means for Industrial Buyers

LME copper prices recovered from their previous lows and increased in April, remaining in a long-term uptrend. Therefore, buying organizations could expect further copper price increases.

Buying organizations reading the Monthly Metal Outlook had the opportunity to identify the buying signal at the beginning of April and reduce price risks by purchasing some volume.

For those who want to understand how to reduce risks, take a free trial now to MetalMiner’s Monthly Outlook.

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This morning in metals news, China iron ore futures were up Monday, the chief executive of Japan’s LIXIL Group expressed concern about aluminum price volatility, and a new study measures the economic effect of a potential U.S. withdrawal from the North American Free Trade Agreement (NAFTA).

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Chinese Iron Ore Futures Rise

Chinese iron ore futures were up Monday, Reuters reported, on the second day that contracts have been open to foreign investors.

According to Reuters, the most-traded September iron ore contract rose 0.2% to $73.86 per ton.

Japan’s LIXIL Group Concerned About Aluminum Prices

The U.S. has made waves in the metals markets in recent months with the Section 232 tariff measures, and Japan’s LIXIL Group is among the firms concerned about the trade moves’ impact on prices (particularly aluminum). In addition, U.S. sanctions against Russian individuals and companies had seen aluminum prices rise sharply last month.

According to Reuters, LIXIL CEO Kinya Seto said the company isn’t concerned about the impact of sanctions on Russian aluminum giant Rusal, but that LIXIL is still worried about volatility in aluminum prices.

Impact of NAFTA

According to a study by A.T. Kearney, the near-term cost to American retailers of a withdrawal from NAFTA is estimated at $15.8 billion.

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NAFTA, the trilateral trade deal in place since 1994, has been the subject of renegotiation talks dating back to last fall. Last week, U.S. Trade Representative Robert Lighthizer indicated he hoped to reach a deal with Canada and Mexico this month.

The Construction Monthly Metals Index (MMI) increased four points, up to 95 for our May MMI reading. 
Within the basket of metals, Chinese rebar was down slightly on the month, while Chinese H-beam steel jumped 5.4%.

U.S. shredded scrap steel rose 3.0%. European aluminum sheet jumped 4.9%. Chinese aluminum bar jumped 8.2%.

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U.S. Construction Spending

The U.S. Census Bureau released its monthly report on U.S. construction spending earlier this week, covering spending in March.

March spending was estimated at a seasonally adjusted annual rate of $1,284.7 billion, or 1.7% below the revised February estimate of $1,306.4 billion.

The March figure, however, represents a 3.6% increase from the March 2017 estimate of $1,239.6 billion. Through the first three months of the year, construction spending is up 5.5% compared with the same period in 2017.

As for private construction, it came in at a seasonally adjusted annual rate of $987.5 billion, 2.1% below the revised February estimate of $1,009.1 billion.

Under the private construction umbrella, residential construction was at a seasonally adjusted annual rate of $536.8 billion in March, 3.5% below the revised February estimate of $556.5 billion. Nonresidential construction was at a seasonally adjusted annual rate of $450.7 billion in March, or 0.4% below the revised February estimate of $452.5 billion.

Meanwhile, public construction came in at an estimated seasonally adjusted annual rate of $297.2 billion, holding just about flat from the revised February estimate of $297.3 billion. Educational construction was at a seasonally adjusted annual rate of $73.1 billion, down 0.1%. Highway construction was $91.0 billion, up 1.2%.

Billings Increase Slows, According to ABI

According to the monthly Architecture Billings Index (ABI), put out by the American Institute of Architects, billings increased in March, albeit at a slower rate than previous months.

The billings ABI for March came in at 51 (anything greater than 50 indicates growth). The ABI has now posted increases for six consecutive months.

According to the ABI report, the March increase “indicates that the majority of architecture firms are still continuing to experience improving business conditions.”

This month’s report included polling of architecture firm leaders regarding the Trump administration’s Section 232 tariffs and their impact on architecture firms.

According to the report, 24% responded they had already seen “specific consequences” from the proposed tariffs.

“This share was highest for firms located in the West and Midwest regions of the country (32 percent and 28 percent reporting that they have seen consequences, respectively), as well as for firms with an institutional specialization (27 percent),” the report states. “Firms located in the Northeast were least likely to have already seen an impact, with just 13 percent of respondents from that region indicating such.”

Respondents also addressed the potential for future impacts. An overwhelming 91% said they expect to see an at least minor impact as a result of the tariffs.

Many respondents expressed concerns about rising costs of construction materials. According to the report, 53% agreed that it is “very likely” that construction costs will increase for most projects.

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Broken down by four regions, growth was highest in the West, which boasted an ABI reading of 53.4. Trailing the West were the South (53.2), Midwest (50.7) and the Northeast (49.0) regions.

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This morning in metals news, several countries received good news ahead of the midnight deadline for the expiration of Section 232 tariff exemptions, Canada argues the steel tariff would hurt American jobs and LME copper falls to a three-week low.

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Countries Breathe a Sigh of Relief on 232 Exemptions

Several countries originally won temporary exemptions from the Trump administration’s Section 232 tariffs on steel and aluminum, those being Canada, Mexico, the E.U., Australia, Brazil and Argentina (South Korea also had a short-term exemption, which became a long-term exemption after negotiations).

Those short-term exemptions were set to expire at midnight, but news came down Monday evening that the Trump administration has pushed back the deadline for talks on the exemptions for Canada, Mexico and the E.U., while also reaching agreements on permanent exemptions for Brazil, Argentina and Australia, Reuters reported.

Canada Says Steel Tariffs Would Hurt America

Canada argued the U.S.’s steel tariff would actually negatively impact American jobs, Reuters reported.

On Monday, the Trump administration announced that the deadline on Canada’s short-term exemption from the Section 232 tariffs will be pushed back to June 1.

LME Copper Falls

The price of LME copper dropped to a three-week low Tuesday, Reuters reported.

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London copper fell to $6,752 per ton, according to the report.

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

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  • What’s going on with steel prices? Have they neared a top? MetalMiner’s Irene Martinez Canorea offered her analysis on the subject earlier this week.
  • Also on Monday, MetalMiner’s Stuart Burns touched on aluminum prices, which have been on a wild ride the past couple of weeks with the announcement of sanctions on Russian companies and oligarchs, and then again when the U.S. Treasury opened the door to the potential easing of said sanctions (including against Russian aluminum giant Rusal).
  • India is looking east for its exports.
  • President Donald Trump and Saudi Arabia are at odds over the oil price.
  • Following up on the earlier post, Burns covered the subsequent drop in aluminum prices on the heels of the Treasury’s announcement.
  • The European Steel Association hopes the E.U.’s steel safeguard measures prevent a “surge” in imports.
  • Like aluminum, the nickel price also dropped significantly earlier this week.
  • The Aluminum Association urged President Trump to grant quota-free tariff exemptions — with respect to Section 232 — to “responsible” trading partners, calling for specific action to address Chinese overcapacity.
  • MetalMiner’s Sohrab Darabshaw offered the latest update on the bidding process for the bankrupt Indian firm Essar Steel.

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MetalMiner’s Stuart Burns touched on the rapid swing back downward for the aluminum price, which surged on news of U.S. sanctions on Russian oligarchs and companies but quickly dropped when the U.S. Treasury opened the door to potential easing of sanctions.

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But aluminum wasn’t the only metal to see its price drop precipitously in the last week.

LME nickel rose 15.8% between April 3 and April 19, from $13,555/mt to $15,700/mt. That surge has reversed, however, in recent days.

From that $15,700/mt mark, the price has dropped 10.7%, down to $14,025/mt as of April 23.

LME nickel price. Source: LME

The nickel price jumped 10% in a single day last week, the Financial Times reported, marking the biggest one-day jump since 2008, on concerns regarding the potential for sanctions to spread to Russian firm Norilsk Nickel.

Norilsk, however, was not among the 12 companies listed in the sanctions announced by the U.S. Treasury April 6.

Nonetheless, with the U.S. Treasury opening the door for the easing of sanctions if Russian oligarch Oleg Deripaska steps down from his role with aluminum giant Rusal — one of the companies listed in the initial sanctions announcement — the price of aluminum and other metals, like nickel, have tracked back down.

Given Rusal’s stake in Norilsk, last week’s fears regarding a potential supply crunch have for now been somewhat allayed. As such, with the Treasury’s softened stance on sanctions, prices have come back down.

On Monday, the Treasury extended the deadline for U.S. individuals to wind down activities with Rusal to Oct. 23.

“RUSAL has felt the impact of U.S. sanctions because of its entanglement with Oleg Deripaska, but the U.S. government is not targeting the hardworking people who depend on RUSAL and its subsidiaries,” Treasury Secretary Steven Mnuchin said in a prepared statement. “RUSAL has approached us to petition for delisting.  Given the impact on our partners and allies, we are issuing a general license extending the maintenance and wind-down period while we consider RUSAL’s petition.”

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At least for now, that’s good news for electric vehicle manufacturers, who are increasingly looking to nickel for use in lithium-ion batteries.