Articles on: Metal Prices

The September GOES MMI increased by a full 12 points, reaching 193. Market observers can note with interest that this rise comes on the back of increasing GOES imports, as noted by Roger Newport, CEO of AK Steel, on a recent earnings call.

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Unlike other steel markets, when sudden large volumes of imports begin to arrive typically a big spread exists (the price between the domestic and international markets).

In this case, something else appears to explain the volume of imports into the U.S.

When we examine the total volume of grain-oriented electrical steel (GOES) imports into the U.S., indeed, the assertion of increased import volumes appears correct:

But when we look at what is driving those imports, we come to a different conclusion – that Japanese GOES imports have led the increase (and in fact account for 55% of GOES imports):

One could argue these imports hardly appear “dumped” the average price for Japanese material at $2627/metric ton appears just under the MetalMiner domestic M3 spot price. In fact, by our own analysis of import prices, the average import price of Japanese material for the last six months has only diverged from our M3 spot index by no more than $68/mt, and in one month was more expensive by $64/mt!

It’s hard to see how GOES has been “dumped” into the U.S. market.

Moreover, the industry knows the Japanese produce the more technically advanced grades that allow manufacturing organizations to produce to higher efficiency standards.

Meanwhile, China’s Baoshan Iron & Steel increased GOES domestic prices seven times since the beginning of the year, according to a recent TEX Report. The same report indicates Japanese mills have held prices fairly steady.

The Section 232 investigation remains ongoing, with a report expected by mid- to late-January.

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Exact GOES Coil Price This Month

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Hurricane Harvey left a trail of destruction throughout southeastern Texas and southwestern Louisiana. Those impacted regions have a long road to recovery.

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But not long after Harvey, Hurricane Irma made landfall in the continental United States, compounding the havoc wreaked by Harvey.

According to Dr. Joel N. Myers, founder, president and chairman of AccuWeather, Irma will prove to have been the worst hurricane to hit Florida since Hurricane Andrew in 1992.

Millions of Floridians lost power because of Irma. According to the Department of Energy, there were 4,864,148 customer outages in Florida, or 49% of the state, as of Tuesday morning. That figure is down from the 6,117,024 reported customer outages as of Monday afternoon — or a whopping 59% of the state.

The storms, one after the other, marked the first time in 166 years of weather records that two Atlantic Category 4 hurricanes made landfall in the United States in the same year.

Like Harvey, the extent of Irma’s damages will become clear over time, but there will certainly be significant damages to homes and other properties, and even vehicles. Enki Research estimated damages may reach $49 billion.

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The Raw Steels MMI increased again this month by seven points, returning to 2014 levels.

The increase came as a result of rising Chinese steel prices, which have rallied since April 2017.

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Early September data reveal that Chinese hot-rolled coil (HRC) prices increased quicker than U.S. HRC prices.

Domestic steel prices, including HRC prices, mostly held steady in August. The spread between the two has fallen by 5% since the beginning of August. Rising Chinese prices typically lead to reduced imports overall, as U.S. prices become more competitive.

Chinese steel prices have been boosted by better-than-expected demand, together with supply concerns.

China Data Creates Uncertainty

China remains the dominant player in steel market.

Thus, Chinese economics serve as one of the most powerful indicators of the steel industry.

Chinese economic data, however, has created some uncertainty around the steel market. Even if the market expects a correction, economic indicators still reveal positive data.

Yet, some analysts believe China remains in a bubble set to explode at any time.

Raw Materials Show Some Weakeness

Steel prices also take their cues from raw material prices.

Steel prices commonly move together with iron ore, coking coal and steel scrap prices. Raw material price dynamics slowed in August. Both iron ore and coal prices have increased slightly, but showed some weaknesses during the middle of the month.

The previous uptrend for both iron ore and coal comes down to solid demand from China, as steel production has increased this year. However, July iron ore import data reveals a decrease of 8.9% from June’s reading, and 2.4% below last year’s reading. The lower import levels may signal possible future softness in the demand of this commodity. Chinese iron ore has increased by 2%, while Korean pig iron prices decreased by 0.44%.

What This Means for Industrial Buyers

Steel momentum appears to have lost some steam.

Buying organizations should watch commodities to analyze the signals for both the short- and long-term trend.

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Actual Raw Steels Prices and Trends

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This month’s Copper MMI beat its previous gain last month en route to a six-point increase.

The boost was primarily driven by an outperforming LME copper price, which has been seemingly unstoppable since the Chinese copper ban was announced July 24.

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Source: MetalMiner analysis of Fastmarkets

Copper tends to correlate with the U.S. dollar. As a dollar-denominated commodity, a weaker dollar can stimulate copper buyers. The U.S. dollar has not found a floor yet, and has continued falling, reaching a two-year low now.

Commodities, on the other hand, have increased again during the first week of September. A recovery in oil prices has led the increase.

Though it’s much too early to change the commodity outlook to bullish, we did expect the correlation between commodities and industrial metals to come back to a more normal state (where they both tend to move in the same direction).

If commodities start an uptrend, then copper prices may continue their bullish rally, too.

What About China?

As China is the main commodity consumer of the world, analysts pore over Chinese economic data. Chinese economic data released during this summer resulted in better-than-expected — that is, increasing manufacturing PMI — manufacturing data. This fact, together with the government’s environmental policies, has supported base metal prices.

One curious correlation involves the Chinese Yuan (represented by the blue line below) and the copper spot price (red line). Both have moved in a similar fashion recently.

Source: MetalMiner analysis of StockCharts

Does the Chinese Yuan serve as a guide to what copper prices might do in the future?

A deeper analysis of this and other drivers will appear in our upcoming free 2018 Annual Outlook Report, which will be released next month.

What This Means for Industrial Buyers

Even if the uptrend remains strong, we still expect high volatility for copper prices.

Thus, we expect a price retracement at some point in the upcoming months. The price retracement is normal and prices digest previous gains (in this case, a 15% increase).

Source: MetalMiner analysis of Fastmarkets

To better understand how to adapt the industrial metal buying strategies based on these dynamics,  take a look at our Monthly Metal Buying Outlooks.

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Actual Copper Prices and Trends

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The Rare Earths MMI ticked up one point for a September reading of 24.

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After hitting 29 in April 2015, the sub-index fell as low as 16 last year before slowly climbing back up this year with an uptrend that began in March.

For this MMI period, several of the sub-index’s heavy hitters posted strong months. Chinese terbium oxide rose 2% and Chinese dysprosium oxide rose 5.6%. Neodymium oxide rose a whopping 35% in the month.

An overwhelming majority of rare-earth metals production comes from China, and the metals are crucial for use in things like computers, phones and other electronic devices.

According to a recent report on nasdaq.com, China’s Rare Earth Industry Association recently proposed “releasing some of the country’s reserves and suspending the purchase and storage of additional volumes to ease price volatility for the raw materials that are crucial to mobile phones and electronics.”

Reuters’ Andy Home recently wrote about the topsy-turvy world of rare-earth metals prices.

“The prices of neodymium and praseodymium oxide are going stratospheric again, up by over 80 percent since the start of the year,” Home wrote. “As ever with rare earths, this is all about what is happening in China, the world’s dominant producer of these critical materials.”

Rare earths have come a long way since the market collapsed underneath them in 2012. The Financial Times reported last month that the price of two rare earths, neodymium and praseodymium, has jumped by more than 50% this year.

In short, Chinese policies significantly impact the direction of the global market.

The question, as it often is with the rare earths market’s peaks and valleys: when is the next valley?

Actual Metal Prices

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The Aluminum MMI increased eight points from last month’s reading, reaching its highest value since September 2014.

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This rise does not come as a surprise to MetalMiner, as aluminum was the strongest performer in August, increasing by 10.73% during the month.

Aluminum has awakened  from its previous sideways trend and now continues its previous uptrend.

Source: MetalMiner analysis of Fastmarkets

Some analysts do not expect more movements to the upside, as the supply and demand equation appears unclear. Positive data and increasing demand in China have supported aluminum prices so far.

However, Morningstar forecasts a decrease in Chinese demand. Meanwhile, Indian demand may not increase quickly enough to balance global demand.

On the supply side, Chinese curtailment of capacity remains uncertain. Similar to steel, the real impact of curtailments on production remain to be seen.

“Green” aluminum appears to be a new trend  among buying organizations. The difference lies in the use of renewable energy instead of fossil fuels in the smelting process. Premium prices have risen for this type of aluminum as demand continues to rise due to pressure on buying organizations to lower their carbon footprint.

What This Means for Industrial Buyers

MetalMiner believes that aluminum has broken a ceiling that it previously could not break.

The sideways trend that started at the beginning of this year served as a pause in a bullish market, which has just restarted. Trading volumes have supported this late uptrend, which makes the uptrend stronger.

Thus, buying organizations might expect more upward movements in the upcoming months.

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Actual Aluminum Prices and Trends

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This afternoon in metals news, steel imports are up 21.4% through the first eight months of the year, a report considers whether copper’s run will last and China has agreed to loan Guinea $20 billion in exchange for concessions on the country’s bauxite reserves.

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Steel Imports Up 21.4% This Year

The American Iron and Steel Institute (AISI) released steel import data earlier this week showing that total steel imports have risen 21.4% through the first eight months of this year compared with the same time frame in 2016.

According to the report, steel import permit applications in August totaled 3,572,000 net tons (NT).

The largest finished steel import permit applications for offshore countries in August were for: South Korea (418,000 NT, up 24% from July preliminary), Germany (141,000 NT, down 5%), Turkey (132,000 NT, down 48%), Taiwan (115,000 NT, down 4%) and Japan (107,000 NT, down 22%).  Through the first eight months of 2017, the largest offshore suppliers were South Korea (2,683,000 NT, down 1% from the same period in 2016), Turkey (1,855,000 NT, up 9%) and Japan (1,044,000 NT, down 18%).

Can Copper Keep Up the Pace?

Copper has been on a tear, earlier this week hitting a three-year high.

But can it last? Is the metal due for a market correction?

A report on nasdaq.com speculated about the future of the metal.

“While copper has lately been enjoying a stellar run, analysts are skeptical about the sustainability of the recent price rally,” the report states. “Many believe that prices of the metal will come under pressure as the market remains adequately supplied and demand is not strong enough.”

China Makes Deal on West African Nation’s Aluminum Ore

On Wednesday, China agreed to loan Guinea $20 billion over 20 years in exchange for concessions on the country’s bauxite reserves, Reuters reported.

Guinea is Africa’s leading bauxite producer.

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According to Guinean Mines Minister Abdoulaye Magassouba, the revenues generated from the mines would be used to pay for infrastructure in the country.

The Construction MMI jumped eight points for our September reading, rising from 83 to 91.

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According to U.S. Census Bureau data released Sept. 1 for the month of July (the most recently available data), U.S. construction spending amounted to $1,211.5 billion, down from the revised June total of $1,219.2 billion.

However, construction spending from January-July amounted to $691.2 billion, up 4.7% from the $659.9 billion for the same period in 2016.

Spending on private construction dipped 0.4% to a seasonally adjusted annual rate of $945.5 billion, down from the revised June estimate of $949.4 billion.

As for public construction, the estimated seasonally adjusted annual rate of spending was $266.0 billion, 1.4% below the revised June estimate of $269.8 billion.

As for the individual metals in this particular basket, every single one posted a price increase for the month. Chinese rebar steel, H-beam steel, and aluminum bars all posted sizable price increases. The European 1050 aluminum sheet price also rose, as did U.S. shredded scrap steel.

ABI Shows Continued Upward Trend

Although overall spending was down in July, the Architecture Billings Index (ABI) painted a positive picture for the month.

The ABI, put out by the American Institute of Architects, showed architecture firms continued to grow. All four regions included in the ABI — South, Midwest, West and Northeast — posted an uptick in architecture billings on the month. With a score of 50 indicating no movement, the South and Midwest led the way with scores of 53.8, followed by the Northeast at 53.6 and the West at 50.9.

Another major takeaway from the survey was the increased interest in 3D printing.

“Almost 30 percent of architecture firms have some experience with the applications of this technology,” the ABI report read. “About half of these have used it in-house on billable projects, while others are testing it, outsourcing it, or have design partners, subcontractors, or construction firms that are using the technology. When last surveyed on this topic a little over a year ago, about 20 percent of architecture firms had some involvement with 3D printing, so adoption seems to be increasing at a brisk pace.”

NAFTA and Section 232

The Trump administration’s Section 232 probes into steel and aluminum imports have yet to be publicly concluded. As the world’s No. 1 steel importer, imposition of tariffs (or quotas) on imports would certainly have a ripple effect across all industries, including construction.

As for the North American Free Trade Agreement (NAFTA), the second round of negotiations concluded earlier this week, with the parties having reached very little in the way of breakthroughs, according to Bloomberg.

From a metal perspective, as mentioned before, an overwhelming majority of Canadian steel exports go to the U.S. As with Section 232, if Trump follows through on numerous threats to withdraw the U.S. from the 23-year-old trilateral trade deal, supply chains would be impacted.

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The Automotive MMI jumped four points to 94, up from 90.

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Major price jumps in the basket of metals relevant to the automotive sector, particularly copper, paced a strong month for the sub-index.

LME copper jumped 6.8%, as the metal hit a three-year high in August. U.S. shredded scrap steel rose 4.5%, while U.S. hot-dip galvanized (HDG) steel jumped 1.1%. U.S. platinum and palladium bars also posted sizable price jumps.

U.S. Auto Sales

Auto sales in 2017 have trended downward, which hasn’t exactly been a surprise given the record sales figures posted in 2016. Sustaining last year’s sales totals would have been a tall task.

However, the news hasn’t been all bad.

According to Autodata Corp sales data released Sept. 1, General Motors had a good month, selling 275,326 units — a 7.4% increase from sales in August 2016. GM’s light truck sales carried the day, rising by 16.5% compared with August 2016. In the year to date, however, sales overall remain down by 2.4% compared with the same time frame last year.

Ford sold 209,029 units, down 2.1% compared with August 2016. Ford’s year-to-date sales are down 4% compared with the same time frame in 2016.

Fiat Chrysler posted a 10.6% drop in sales in August compared with the same month last year, and a 7.7% year-over-year decline.

Tesla, meanwhile, albeit in much smaller volumes, posted a 6.8% sales jump in August compared with August 2016, selling 227,625 units last month. Year-over-year, however, sales are down 1.3%.

Meanwhile, down the sales list, it continues to be a good year for Subaru (8.1% year-to-date increase) and Mitsubishi (5.4% year-to-date increase).

Automakers See Sales Growth in China

Meanwhile, automakers had a strong month in the massive Chinese market, continuing a solid multimonth sales run.

According to Reuters, GM’s sales in China were up 12% in August compared with August 2016, and its January-August sales (2.38 million vehicles) are up 0.3% compared with the same period last year.

August was also a good month for Toyota and and Honda. Honda’s August sales in China jumped 20.6% and Toyota’s jumped 13.2%, according to the report.

Impact of Hurricane Harvey

In addition to the large-scale humanitarian crisis inflicted by Hurricane Harvey in southeast Texas and southwest Louisiana, the storm also will have an impact on the automotive market.

As our Stuart Burns wrote earlier this week, many in the regions impacted by the storm will, eventually, need to replace their damaged vehicles — or, in some cases, some might be looking to go with models more capable of traversing through high levels of standing water.

Unfortunately, there is precedent for just this sort of sales spike on the heels of a natural disaster.

Burns wrote: “By way of a comparison, Reuters cites the experience of auto sales in New York following Hurricane Sandy in October 2012. The following month, auto sales rose 49% compared to the previous year, with all the replacement sales caused by the widespread flooding of the New York metropolitan area arising in the few months following the disaster.”

An uptick in sales in the Houston market, already one of the most robust auto markets in the country, is expected.

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This morning in metals news, U.S. steel production is up for the year, copper backed off its three-year high and a U.S. firm extended its merger deal with a Chinese company.

Steel Production Up 3.2%

According to data released by the American Iron and Steel Institute (AISI), U.S. raw steel production is up 3.2% in the year to date (through Sept. 2) compared with the same time frame in 2016.

Adjusted production through Sept. 2 amounted to 60,900,000 net tons, up from the 59,025,000 net tons last year to the same point last year.

For the week ending Sept. 2, domestic raw steel production was 1,747,000 net tons, up 8.6% for the same week in 2016 and up 0.4% from the previous week (ending Aug. 26).

Copper Falls Back

After hitting a three-year high, copper fell back slightly from that Wednesday.

LME copper fell 0.3% to $6,880 a ton by 0155 GMT, according to Reuters.

Staying Together

Aluminum and rolled products producer Aleris International extended a merger agreement with Chinese firm Zhongwang USA LLC, according to Platts.

The deal was extended to Sept. 15, according to the report. The deal was previously set to expire Aug. 31.