Articles on: Metal Prices

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This morning in metals news, copper prices are buoyed by a softening U.S. dollar, Dalian iron ore drops and trade ministers from the U.S., Japan and the European Union met in Washington, D.C. yesterday.

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Copper Prices Rise

The price of copper has received some support this week, picking up steam on positive sentiment stemming from U.S.-China trade talks held Jan. 7-9.

On Thursday, the metal’s price rose for the fourth time in five sessions, Reuters reported, aided by a weakened dollar. The U.S. dollar and copper, like many metals, are inversely correlated.

The dollar index has been steadily declining over the last month and fell to 95.35 Thursday morning, down from 97.44 as of mid-December.

Dalian Iron Ore Falls

Chinese iron ore futures fell by 1% Thursday, according to another Reuters report.

According to the report, emergency anti-pollution measures announced in China this week impacted demand for steelmaking materials like iron ore.

U.S., Japan, E.U. Trade Ministers Meet

While the U.S.-China trade talks this week dominated the headlines, the U.S. also held talks with representatives from the E.U. and Japan in Washington, D.C. on Wednesday.

United States Trade Representative Robert Lighthizer, E.U. Trade Commissioner Cecilia Malmström and Hiroshige Seko, Japan’s minister of economy, trade and industry, discussed their “shared objective to address non market-oriented policies and practices of third countries that lead to severe overcapacity, create unfair competitive conditions for their workers and businesses, hinder the development and use of innovative technologies, and undermine the proper functioning of international trade, including where existing rules are not effective,” according to a USTR release.

Related to forced technology transfers — a central component of the U.S.’s Section 301 probe vis-a-vis Chinese trade practices — the ministers agreed to work together on the issue, according to the USTR release.

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“In the area of forced technology transfers, Ministers confirmed their agreement to cooperate on enforcement, on the development of new rules, on investment review for national security purposes and on export controls and further take stock of this cooperation by spring,” the release stated.

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This morning in metals news, trade delegations from the U.S. and China concluded talks this week, the E.U. is expected to impose steel import curbs and copper rises to a one-week high.

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U.S-China Trade Talks

The new year has begun with dialogue.

In 2018, trade tensions between the U.S. and China escalated, leading to the exchange of a total of $310 billion in tariffs on each other’s products. The tensions between the two economic giants has strained global markets.

This week, however, trade delegations from the two countries met for talks Jan. 7-9. The Office of the United States Trade Representative (USTR) released a statement today.

“On January 7-9, an official delegation from the United States led by Deputy U.S. Trade Representative Jeffrey Gerrish held meetings in Beijing with Chinese officials to discuss ways to achieve fairness, reciprocity, and balance in trade relations between our two countries. The officials also discussed the need for any agreement to provide for complete implementation subject to ongoing verification and effective enforcement,” the USTR statement read.

“The meetings were held as part of the agreement reached by President Donald J. Trump and President Xi Jinping in Buenos Aires to engage in 90 days of negotiations with a view to achieving needed structural changes in China with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft of trade secrets for commercial purposes, services, and agriculture.”

E.U. to Impose Steel Import Curbs

The European Union will vote Jan. 16 on a plan to limit imports of steel into the trading bloc, Reuters reported, in response to the Trump administration’s Section 232 tariffs on imported steel and aluminum last year.

In July 2018, the E.U. imposed provisional safeguard measures on 23 steel products, measures that are set to expire in February.

Copper Gets a Boost

The copper price rose Wednesday to a one-week high, Reuters reported.

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The LME copper price rose to $5,958 per ton, according to the report, buoyed by optimism surrounding the aforementioned U.S.-China trade talks and stimulus measures in China boosting demand.

The Stainless Steel Monthly Metals Index (MMI) dropped five points this month, losing 7.6% and currently standing at a value of 61. The current index sits just above the August 2017 level of 59 points, when LME nickel prices touched support and rebounded. The drop came as a result of lower LME nickel prices and lower U.S. stainless steel surcharges.

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LME Nickel

LME nickel prices decreased in December, following a short-term downtrend that started in June 2018. Nickel prices have increased slightly so far in January, showing some recovered momentum along with other LME base metals. However, given the current commodity outlook, price increases need careful monitoring.

Source: MetalMiner analysis of Fastmarkets

Domestic Stainless Steel Market

Domestic stainless steel surcharges fell again. This is the sixth consecutive monthly drop in stainless steel surcharges this year, starting in July 2018, after surcharges peaked. The 316/316L-coil NAS surcharge fell to $0.80/pound, while the 304/304L surcharge fell to $0.53/pound.

Source: MetalMiner data from MetalMiner IndX(™). Note: Y-axis values represent $/lb.

The stainless steel surcharge has started a short-term downtrend, driven by the general price slowdown for steel and stainless steel markets. Stainless steel surcharges now appear to be moving toward 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 and in industrial metals markets. Buying organizations may want to follow the market closely for opportunities to buy on the dips.

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Actual Stainless Steel Prices and Trends

Chinese 304 stainless steel coil decreased by 1.9%, while Chinese 316 stainless steel coil prices slid this month by 10.8%. Meanwhile, Chinese Ferrochrome prices fell by 3.9%, to $1,780/mt. Meanwhile, FerroMolybdenum lumps prices fell 13%, moving to $16,282/mt. Nickel prices also fell this month by 4.9% to $10,725/mt.

The January Aluminum Monthly Metals Index (MMI) fell 3.4% this month, coming in at a value of 85. The index fell 3 points from December’s reading and has returned to a low not seen since February 2017 when the index hit a value of 84.

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So far in January, LME aluminum prices have increased. LME aluminum prices fell below the $1,970/mt level, which has acted as support for most of 2018.

Source: MetalMiner analysis of Fastmarkets

LME aluminum prices seem to have found a new support at $1,795/mt. Prices have rebounded from that level and seem to have gained some momentum. The politics of trade and financial uncertainty in China, rather than supply and demand in the aluminum market have moved LME price levels in 2018.

Chinese Aluminum Scrap

The Chinese environment ministry announced restrictions of imports of scrap steel and aluminum starting July 1 of this year. Scrap steel and aluminum will be moved from an unrestricted import list of solid waste products used as raw materials, to a restricted import list.

SHFE aluminum prices also increased this month, following LME aluminum price dynamics. SHFE aluminum prices however, remain a short-term downtrend since August 2018.

Source: MetalMiner analysis of Fastmarkets

China’s Chalco (Aluminum Corporation of China Ltd.), the largest state-owned aluminum producer in the country, announced at the end of December that it would cut output as a result of falling aluminum prices. In 2017, China’s Chalco shut 470,000 tons of aluminum capacity, or 12% of their 3.93 million tons of primary aluminum capacity.

Production cuts come as a result of falling aluminum prices, ample supply in the country and weaker local demand. Chalco did not cut aluminum production due to environmental concerns, as their smelters remain outside the 28 northern Chinese cities that face special restrictions during the heating season. 

U.S. Domestic Aluminum

The current U.S. aluminum Midwest Premium has also traded sideways in January. The current price stands at $0.18/lb, the third straight month at that level. Despite the sideways trend for the premium, the current premium remains high.

Source: MetalMiner data from MetalMiner IndX(™)

Canada and the U.S. discussed tariffs on Canadian steel and aluminum this week. However, it does not seem that sanctions will be lifted for now. While the sanctions remain in place, domestic aluminum prices remain supported.

What This Means for Industrial Buyers

Despite the recent price increases, LME aluminum prices appear weaker. Tariffs, sanctions and supply concerns may act as a support to aluminum prices, both for LME aluminum and the U.S. Midwest Premium. However, the current base metals complex appears to have lost momentum. Therefore, adapting the “right” buying strategy becomes crucial to reduce risks. Only the MetalMiner Monthly Outlook reports provide a continuously updated snapshot of the market from which buying organizations can determine when and how much of the underlying metal to buy.

Click here for more info on how to mitigate price risk all year round — take a free trial of our Monthly Metal Buying Outlook.

Actual Aluminum Prices and Trends

LME aluminum prices fell this month, with a closing price in December of $1,849/mt. Meanwhile, Korean commercial grade 1050 sheet fell by 3.8% to $3.28/kilogram. Chinese aluminum primary cash prices fell by 2.5%, while Chinese aluminum bar prices fell by 2.4%. Chinese aluminum billet prices rose 2.2% this month, to $2,087/mt. The Indian primary cash price decreased by 6.6% to $1.85/kilogram.

The Raw Steels Monthly Metals Index (MMI) fell again this month, dropping to 79 points. The current MMI index has fallen toward October 2017 levels of 79, before global steel prices started to rise sharply.

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The recent slowdown in domestic steel price momentum led to the decline. Domestic steel prices recently fell fairly sharply, driven by slower Chinese demand and ample steel availability.

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

Source: MetalMiner data from MetalMiner IndX(™)

However, steel prices have showed slower momentum recently and prices appear to have started a sharp downtrend. MetalMiner does not expect prices to increase in the short term, although mills may try to shore up prices with price increase announcements.

Meanwhile, plate prices have decreased at a slower pace. Plate price movements are commonly sharper. In other words, plate prices tend to move in one direction and then change sharply. Lower availability has kept domestic plate prices from falling too far, but domestic prices fell in December.

Source: MetalMiner data from MetalMiner IndX(™)

Historically, steel prices in general tend to drift lower during the beginning of Q4 and then rise. In 2017, HRC domestic prices started to increase in December, then skyrocketed during the first quarter of 2018. In 2018, prices did not increase in Q4. MetalMiner does not expect domestic steel prices to increase in the short term.

Chinese Steel Prices

So far in January, prices for all forms of Chinese steel have also fallen. 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, and a slower Chinese economy has driven the recent price decline.

The yuan traded sideways this month. However, current levels are back at 2016 levels, or 0.14 U.S. dollar/yuan. A weaker yuan makes Chinese goods more appealing, despite the U.S. tariffs. Meanwhile, the Chinese stock market (FXI Shares) fell again this month. The Chinese stock market 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 appear in a downtrend. Adapting the “right” buying strategy becomes crucial to reduce risks. Only the MetalMiner monthly outlooks provide a continuously updated snapshot of the market from which buying organizations can determine when and how much of the underlying metal to buy.

Click here for more info on how to mitigate price risk all year round – and take a free trial of our Monthly Metal Buying Outlook.

Actual Raw Steel Prices and Trends

The U.S. Midwest HRC 3-month futures price fell again this month by 6.31%, moving to $712/st. Chinese steel billet prices fell this month by 3%, while Chinese slab prices fell by 1.27% to $529/mt. The U.S. shredded scrap price closed the month at $353/st, dropping by 1.4% from last month.

In January, the Copper Monthly Metals Index (MMI) dropped 3.9%, falling back 3 points to the November 2018 level of 74. Lower LME copper prices drove the index lower.

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Similar to other base metals, LME copper prices fell in December. LME copper prices fell below 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. This level has represented a psychological signal for “Doctor Copper” since 2017.  

LME Copper prices. Source: MetalMiner analysis of Fastmarkets

So far in January, LME copper prices have increased. However, current levels remain below that $6,000/mt psychological ceiling. Trading volume also appears weaker, which does not support a sharp uptrend.

Global Copper Outlook

According to data released in January, Chilean copper production reached 540,720 tons in November, the highest level in 13 years. The increase was driven by higher ore grades and more efficient processes. As reported by Chile’s national statistics agency INE, copper production increased 7% in November versus October. Production reached its highest levels  since December 2005.

Anglo American announced that overall production will increase more than expected between 2018-2021. Forecasts suggest 2018 production increased by 2%, driven by increases in copper output. 2019 production could increase by another 3%, and 2020-2021 production by an additional 5%.

Despite this forecast by Anglo American, the International Copper Study Group (ICSG) announced a wider deficit in September. The global refined copper deficit increased to 168,000 tons in September from the previous 43,000 tons in August. For the first nine months of 2018, the market saw a 595,000-ton deficit versus the previous year’s deficit of 226,000 tons.

Chinese Scrap Copper

LME copper prices and Chinese copper scrap prices tend to follow the same trend. However, this month they traded differently. LME copper prices fell while Chinese copper scrap prices increased. The divergence between LME copper prices and Chinese copper scrap has become more notable recently, driven by lower scrap availability in China.

Source: MetalMiner data from MetalMiner IndX(™)

The spread has become smaller this month. The wider the spread, the higher the copper scrap consumption, and therefore, the price.

What This Means for Industrial Buyers

LME copper prices fell this month, moving below the $6,000/mt level. Buying organizations will want to understand how to react to the latest copper price movements. Adapting the “right” buying strategy becomes crucial to reduce risks. Only MetalMiner’s Monthly Outlook reports provide a continuously updated snapshot of the market from which buying organizations can determine when and how much of the underlying metal to buy.

Click here for more info on how to mitigate price risk all year round — and get a free 2-month trial to our Monthly Metal Buying Outlook.

Actual Copper Prices and Trends

In December, most of the prices that comprise the Copper MMI basket fell. LME copper decreased by 4.87% this month. Indian copper prices also fell by 5.91%, while Chinese cash primary copper prices decreased by 3.83%. Prices of U.S. copper producer grades 110 and 122 fell by 3.36%. Meanwhile, the price of U.S. copper producer grade 102 decreased by 3.2%, to $3.64/pound.

It looks as though the winter is just heating up for the Global Precious Monthly Metals Index (MMI).

The sub-index tracking a basket of gold, silver, platinum and palladium prices from four different geographies rose three points to hit 90 for the January reading — a 3.4% increase — driven by a still-hot palladium price.

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The U.S. palladium bar price broke the 1,200-per-ounce barrier to start the month, ending at $1,252 per ounce to begin 2019. That represents a three-month uptrend. Meanwhile, the gold price reclaimed its premium over palladium, settling at $1,282 per ounce to begin the month.

U.S. silver also rose, while platinum dropped in the U.S. and Japan.

Palladium Outlook Looking Even Better With Hybrid Vehicle Demand

As we wrote last month, while supply from major producers including Russia and South Africa is not growing, global automotive palladium demand is expected to achieve a new record high in 2018 of around 8.5 million ounces, according to precious metals consultancy Metals Focus as reported by Reuters.

That conspires for the high price bubble of the formerly junior PGM of late. However, that may not last.

“This increases the potential for correction,” Commerzbank is quoted as stating in a recent outlook report. “We expect a price correction [for palladium] to begin in the course of the first quarter of 2019.”

After correcting, the bank expects the price should to “resume its upswing,” forecasting a price of $1,100 per troy ounce by the end of 2019, it is quoted as saying.

Other analysts agree with that general take, but that doesn’t mean that the longer-term demand outlook isn’t still strong.

According to Anton Berlin, head of analysis and market development at Norilsk Nickel PJSC, as quoted by Bloomberg, “combined palladium use in hybrid and plug-in hybrid — or rechargeable — vehicles next year will be nearly triple that of 2016.”

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Analysts at JPMorgan Chase & Co. agree. “Hybrids are forecast to grow from just 3 percent of global market share in 2016 to 23 percent of sales by 2025,” stated a late-2018 report by the bank, according to Bloomberg.

The Rare Earths Monthly Metals Index (MMI) fell 5.5% to land at 17, just one point shy of its all-time historical low (16).

Certain constituent metal prices rose, such as cerium oxide and europium oxide.

However, several others fell, including neodymium oxide (falling 0.6% to $45,649 per metric ton) and terbium metal (falling 0.7% to $566 per kilogram).

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The China Front

China is doubling down on illegal mining and traceability of rare earth metals and minerals, according to new guidelines published by the country’s Ministry of Industry and Information Technology (MIIT) late last week, as reported by Reuters.

As readers know, China’s been attempting to clean up its rare earths production sector for about a decade already, and it’s made strides toward its goals, but there’s still a way to go.

Even after launching a crackdown on the rare earths sector in 2009 and being forced by the WTO to get rid of export controls in 2014, “illegal mining and production continued to disrupt ‘market order’ and damage the interests of legitimate enterprises,” the ministry stated in their notice, according to Reuters.

The ministry is also committed to establishing a traceability system to prevent buyers from snapping up illegal material and will suspend licenses of companies that break the law, according to the news service.

Meanwhile, In Korea…

Across the Yellow Sea, patent applications for uses of rare earths have been going strong.

According to the Korean Intellectual Property Office (KIPO) on Dec. 30, as reported by BusinessKorea, “the number of patent applications related to the use of rare earth materials for permanent magnets and batteries totaled 2,356 over the past five years from 2011 to 2016.”

High-tech heavyweights Samsung led the way, with Hyundai and LG not far behind.

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The Automotive Monthly Metals Index (MMI) fell 3.2% to a value of 92 this month, its lowest level in 17 months.

After riding high during mid-2017, above the baseline of 100, the Automotive MMI sub-index — tracking a basket of industrial metals and materials crucial to the automotive sector — has been in a continued overall downtrend since mid-summer of last year.

With both the commodities and base metals sectors ending 2018 on sustained downtrends, and a weak U.S. dollar, there don’t appear to be any immediate signs of the Auto MMI’s slide letting up.

Actual Metal Prices and Trends

The sub-index’s overall descent, however, hasn’t stopped palladium’s scorching rise. Platinum’s ‘little brother’ is in a solid two-month uptrend, beginning the new year at $1,252 per ounce, by far the best single-metal performer.

All other constituent price points that comprise the Automotive MMI — including U.S. HDG steel, LME copper, and the Korea price of 5052 coil premium over 1050 aluminum — fell over the past month.

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Auto Sales Trends

G.M. recently named Mark Reuss, the company’s former “product development guru,” as its new president, but that was couched in a near-simultaneous release of Q4 2018 sales figures — which weren’t great, according to an article in Industry Week.

The U.S. automaker announced that fourth quarter sales were down 2.7% from the same time last year, the article stated. Ford and Toyota also lost ground in December, while Fiat Chrysler posted a double-digit percentage gain for last month.

Overall, preliminary expectations put the overall 2018 U.S auto sales number at about 17.2 million vehicles, according to the WSJ (paywall), which would be about even with 2017’s total and “marks the fourth straight year of at least 17 million vehicles sold, a resilient showing for an industry prone to boom-and-bust cycles.”

However, in China, the latest available data show that “a total of 2.55 million vehicles were sold in November, down 13.9 percent year-on-year, according to the China Association of Automobile Manufacturers (CAAM),” cited in China Daily — which, as Reuters reported, is the steepest plunge since 2012.

Automotive Demand Outlook: 2019 and Beyond

So where does this leave the future of automotive demand?

Certain industry watchers, such as former Reuters European automotive correspondent Neil Winton, expect 2019 to be the year that the growing interest and investment in the EV market squeeze traditional automakers and the sales of their product.

Writing in Forbes, Winton notes that Morgan Stanley “expects global auto sales to slip 0.3% in 2019 to 82.1 million. The Center for Automotive Research in Duisberg-Essen, Germany, puts 2019 sales slightly higher at 82.9 million. Fitch Solutions does still expect some growth in sales – a [minuscule] 2.0%.”

However, the tiny slips could give way to bigger sea changes down the line. The days of healthy profitability for the makers of traditional gas-powered cars are numbered, he writes. “Demand for autos is at a dangerous tipping point, according to Morgan Stanley, as buyers put off purchases waiting for the new technology in the form of electric cars to take the stage,” writes Winton.

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

The Construction Monthly Metals Index (MMI) stemmed last month’s seven-point loss by leveling out for the January 2019 reading.

Our Construction MMI sub-index — tracking a basket of industrial metals, materials and other indicators crucial to the construction sector — stayed at a value of 82, holding steady from December’s reading.

The constituent metal and material price changes, like the overall reading, held relatively steady over the month. Tracked by our MetalMiner IndX, the U.S. shredded scrap price dropped only a few dollars this month ending up at $353 per short ton, while the China H-beam steel price lost about the same ground per metric ton. Chinese rebar, on the other hand, rose by about $12, reaching nearly $557 per metric ton.

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Latest Construction Spending Data Is…Still TBA

Perhaps the biggest story of the moment — the U.S. government shutdown, a result of the stalemate between President Donald Trump and Congressional Democrats — turns out to have a construction angle, as well as a direct effect on construction-sector data delays.

The sticking point keeping President Trump from capitulating to re-opening government business is his steadfast demand for about $5 billion in funding for the U.S.-Mexico border wall that he promised during his campaign. First indicated to be constructed of concrete, Trump has since pivoted to a steel-slat design, and most recently, a setup of “see-through” materials.

All of which is to say, the U.S. Census Bureau, which reports the monthly construction spending data, is not reporting updates during the shutdown. We will update this story, or publish a separate post, with the January data when it becomes available.

Architecture Billings Forthcoming As Well, But Last Reading Looked Strong

The next ABI reading is scheduled to arrive on January 23, but the last available numbers from November indicate growth and confidence in the sector.

Billings increased to a reading of healthy 54.7 in November — the highest since last January — up from 50.4 the previous month. (A reading over 50, like the ISM PMI, indicates positive expansion.)

Top Business Concerns for 2019

Industry folks also voiced their top business concerns for 2019 to the AIA via a survey.

“The largest share (30 percent) reported that identifying new qualified staff with appropriate technical and project management skills was one of their top three concerns for 2019, surpassing concerns about firm profitability for the first time in three years,” according to the November ABI release page. “Increasing firm profitability was still selected as one of the top concerns by the second largest share of respondents (26 percent) but that share was well below the 31 percent that selected it as a top concern last year.”

“Coping with an unpredictable economy had the largest increase from 2018 to 2019: 25 percent of firm leaders reported it as a top concern for 2019, compared to just 15 percent that reported the same for 2018,” according to the release.

About That Economy…China May Have Something to Say About That

“The slump in China’s Purchasing Managers’ Index (PMI) is likely to prove an unwelcome New Year’s gift to the world’s major exporters of bulk commodities such as iron ore and coal,” according to Reuters’ daily newsletter, referring to a column by Clyde Russell. “The manufacturing gauge compiled by Beijing’s National Bureau of Statistics dropped to 49.4 in December, dropping below the 50-level that demarcates growth from contraction, for the first time since July 2016.”

The Caixin Manufacturing PMI also dropped on the month, leading to worries over consumption slowdowns in China.

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