The Rare Earths Monthly Metals Index (MMI) held flat this month, again hitting an MMI reading of 17.

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

China Denies Report it is Limiting Rare Earth Output

China’s dominance in the rare earths sector is well-documented.

The country’s sway in the market is significant — one should look no further than the U.S.’s $200 billion tariff list instituted in September.

An original list of Chinese products targeted for tariffs included rare earths — but when it came time to finalize the list, the rare earths were removed.

As such, as the world’s biggest producer and supplier of rare earths, China has considerable influence in the market; anything Beijing does with respect to output of rare earths is important.

According to a Reuters report citing the Shanghai Securities News, the Chinese government recently denied claims that it has slashed rare earth output in the second half of this year.

Reuters had previously reported data suggesting China was slowing exports in an effort to boost prices.

China’s Ministry of Industry and Information Technology, however, denied the claim, according to the recent report.

Lynas Gets a Boost

Meanwhile, outside of China, Australian rare earths miner Lynas saw its shares rise on news that it would be allowed to continue to store waste materials at a Malaysian facility, the Financial Times reported.

The company’s shares rose as high as 8.5% on the news before tracking back for a more modest 0.9% jump, according to the report.

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

Actual Metal Prices and Trends

The price of yttrium fell 1.5% to $32.26/kilogram. Terbium oxide also fell, dropping 2.0% to $417.27/kilogram.

Neodymium oxide fell 3.0% to $44,667.10/mt.

Europium oxide fell 3.2% to $41.58/kilogram. Dysprosium oxide fell 1.6% to $164.54/kilogram.

The Construction Monthly Metals Index (MMI) dropped one point this month, down to a November MMI reading of 89.

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

U.S. Construction Spending

The U.S. Census Bureau released data late last week on construction spending for September, showing spending held flat from the previous month.

Construction spending in September reached an estimated $1,329.5 billion, which was up 7.2% from September 2017.

Meanwhile, through the first nine months of 2018 spending was up 5.5% compared with the same time frame in 2017.

Broken down by type, private construction spending hit a seasonally adjusted annual rate of $1,020.4 billion, which marked a 0.3% increase from the revised August estimate of $1,016.9 billion. Within private construction, residential construction reached a seasonally adjusted annual rate of $556.4 billion in September, up 0.6% from the previous month. Nonresidential construction was at a seasonally adjusted annual rate of $463.9 billion in September, up 0.1% from August nonresidential construction spending.

Meanwhile, the estimated seasonally adjusted annual rate of public construction spending was $309.1 billion, a 0.9% drop from August. Educational construction was at a seasonally adjusted annual rate of $74.6 billion, up 1.2%. Highway construction was at a seasonally adjusted annual rate of $95.2 billion, 1.1% below the revised August estimate.

Architecture Billings Growth Slows but Remains Positive

The American Institute of Architects recently released its monthly Architecture Billings Index (ABI), which showed billings growth yet again for September.

The ABI hit a value of 51.1 for the month (anything above 50 indicates billings growth).

“Although the pace of billings growth slowed somewhat from August, billings have remained positive for the entire year so far, indicative of generally strong conditions at firms,” the ABI report states. “The value of new signed design contracts increased in September as well, after a modest decline in August, and inquiries into new projects remained strong.”

By region, the Midwest led the way with an ABI value of 59.7, trailed by the South (54.1), West (51.3) and Northeast (46.6).

The ABI report also includes a monthly survey of industry professionals on a particular topic, this month being revenue and profitability.

For 2018, the answers were mostly optimistic.

“Overall, responding architecture firms anticipate net revenue growth of an average of 7.5 percent for 2018, with more than half of firms (56 percent) reporting that their net revenue will increase from 2017 to 2018,” the report states. “An additional 23 percent expect net revenue to remain about the same as last year, and the remaining 21 percent expect a decline.”

Next year, however, might not be as rosy.

“Architecture firms project net revenue to grow by an average of 3.8 percent in 2019, about half as much as in 2018, with just 43 percent of firms expecting an increase in revenue for the year,” the report continues. “The share of firms expecting a decline in revenue in 2019 is about the same as in 2018 (23 percent versus 21 percent), but one third of firms (34 percent) expect revenue to be flat in 2019.”

Actual Metal Prices and Trends

Chinese rebar held flat at $682.55/mt. Chinese H-beam steel rose 0.2% to $615.16/mt. Chinese aluminum bar fell 3.6% to to $2,175.28/mt.

U.S. shredded scrap steel fell 2.3% to $342/st.

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

European aluminum sheet fell 2.7% to $2,753.30/mt.

buhanovskiy/AdobeStock

This morning in metals, U.S. imports of steel are down by 26%, metal prices have gotten a boost from a softer dollar and ArcelorMittal reported its third-quarter results.

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

Steel Imports in the U.S.

U.S. imports of steel were down 26% in September on a year-over-year basis, the Times of Northwest Indiana reported.

MetalMiner’s Take: The other half of the story regarding imports relates to U.S. steel production, which has increased.

In fact, the U.S. has produced 3.5 million more tons of steel this year through Oct. 27, as compared to the same time frame (Jan. 1-Oct. 27) last year, just as the U.S. has imported 3.5 million fewer tons. U.S. mills have finally achieved an 80% capacity utilization rate, the first time that has occurred since April 2012. The Department of Commerce report on tariffs pointed to 80% capacity utilization rates as the minimum level needed to maintain a healthy steel industry.

Metals Rise on Dollar’s Drop

As a result of a softening dollar, a number of metals saw upward price movement, Reuters reported.

LME aluminum, for example, was up 1.1%, according to the report.

MetalMiner’s Take: Some kind of bounce-back was inevitable, both to the ever-strengthening dollar and to the correspondingly weakening commodities.

All metals have drifted off in the last week or so as trade news has been generally bearish and the dollar has remained strong. It is fair to say the U.S. economy is in the driver’s seat as far as global growth and sentiment is concerned; as it is showing little sign of abating, we can expect commodities to be broadly supported by generally tight supply markets and continued solid demand. Short-term price falls have rebounded somewhat this week and should remain supported by the broadly positive supply-demand picture, despite the noise of tariffs and trade wars.

ArcelorMittal Releases Q3 Results

Steelmaker ArcelorMittal is optimistic about its financial prospects over the next few months, Reuters reported, as U.S. tariffs on steel continue to support higher prices of the metal.

“As anticipated market conditions in the third quarter remained favourable, resulting in significantly improved EBITDA for the first nine months compared with 2017. We continue to see robust real demand and healthy utilization rates across all steel segments,” said Lakshmi N. Mittal, ArcelorMittal chairman and CEO, in a release.

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

The firm reported Q3 2018 EBITDA of $2.73 billion, up from $1.92 billion in Q3 2017.

Zerophoto/Adobe Stock

This morning in metals news, Shanghai steel prices are down, Shanghai zinc and copper prices are also down, and U.S. steel prices are up by double-digit percentages this year.

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

Shanghai Steel Falls

Prices of Shanghai steel have dropped Wednesday for a third session in a row, Reuters reported.

The drop comes as manufacturing growth slows in the country, according to the report.

Copper, Zinc Also Down

The impact of a drop in manufacturing growth — and burgeoning trade tensions, in general — has not just been limited to steel in China.

According to Reuters, Shanghai copper and zinc prices have also dropped. China’s Purchasing Managers’ Index (PMI) dropped to 50.2 in October, down from 50.8.

U.S. Steel Prices Surge

On the other hand, prices of U.S. steel have been on the rise this year.

According to a research report by Business Forward Inc., prices of U.S. steel have surged by 11% since February, while prices of foreign steel fell 4.8% on average.

MetalMiner’s Take: It’s easy to blame tariffs for rising steel prices; certainly, tariffs provide price support.

However, most buying organizations MetalMiner has spoken to or worked with this year are having banner years with very healthy order books. The PMI data supports that assertion, as well. Strong demand, not just tariffs, provides price support.

In addition, as MetalMiner has written about extensively, commodities and industrial metals have been in a bull market since the end of July 2017. In bull markets, prices rise anyway, and that’s why buying organizations have also seen significant price increases for aluminum, zinc, nickel and, to a lesser extent, copper.

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

The world price of steel has been depressed because Chinese overcapacity has nowhere to go except elsewhere, and those trade flows have put a lid on European prices. Now, the Europeans have begun to reconsider their own trade strategy so as not to harm the little steel manufacturing capacity that remains.

Dmitry/Adobe Stock

This morning in metals news, another major tariff hammer could be set to fall on Chinese goods coming into the U.S., iron ore prices continue to rise and copper falls.

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

More Tariffs on the Way?

The U.S. has already imposed tariffs worth a total of $250 billion on imports from China.

Since last month’s imposition of $200 billion in tariffs, tensions between the countries have not abated. According to Bloomberg, the U.S. plans to impose an additional $257 billion in tariffs — essentially covering all imports from China – if talks between President Donald Trump and President Xi Jinping fail to reach a resolution.

Iron Ore on the Rise

Iron ore prices were up Monday despite lower Chinese steel prices, Business Insider Australia reported.

Tuesday Tumble

Copper and other metals dropped Tuesday, affected by ongoing trade tensions between the U.S. and China, Reuters reported.

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

Trump and Xi are expected to attend next month’s G20 meeting in Buenos Aires, the report notes.

Dmitry/Adobe Stock

This morning in metals news, President Trump is reviewing the U.S.’s steel and aluminum tariffs with respect to their application to Canada and Mexico, copper prices are up and the World Trade Organization (WTO) has set up a panel for a dispute between Japan and South Korea.

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

Could Metals Tariffs on Canada, Mexico be on the Way Out?

Kelly Craft, the Trump administration’s ambassador to Canada, said the president is reviewing the U.S.’s steel and aluminum tariffs on Canada and Mexico, according to a Bloomberg report.

Canada and Mexico initially secured a temporary exemption this spring, but that expired June 1. The countries hope that the U.S. will remove the tariffs before the signing of a finalized trade deal (the recently agreed upon United States-Mexico-Canada agreement, the successor to the North American Free Trade Agreement).

MetalMiner’s Take: Many readers believe Canada and Mexico will be exempt from the Section 232 tariffs with the passage of the new trade agreement. If the tough rules of origin language on USMCA is adopted, the lifting of the tariffs would certainly provide some relief, particularly for semi-finished aluminum products, which remain in short supply within the United States.

But it seems like passage of the deal remains contingent on the lifting of the sanctions, so it remains unclear who will win this game of chicken. Regardless, service center inventory levels have risen; rising inventory levels generally do not support prices.

Copper Prices Rise

LME copper prices were up Monday partially on account of shrinking LME inventories, Reuters reported.

LME copper jumped 1.1% on Monday.

MetalMiner’s Take: It is not just falling LME inventories that are supporting copper. Despite the impact on the Chinese stock market and much media hullabaloo around trade wars, copper consumption in China remains robust (both for refined and scrap).

The copper market is tight and continued global growth, permitting that lack of abundant supply, will continue to support the market.

WTO Launches Panel for South Korea-Japan Dispute

The WTO has set up a panel to deal with a dispute between Japan and South Korea over the latter’s anti-dumping duties on stainless steel bars, according to the Nikkei Asian Review.

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

The duty has been in place since 2004, according to the report.

Ford Motor Co. released its Q3 financial results on Wednesday, two days after President of Global Operations Joe Hinrichs said the U.S.’s tariff on steel have made U.S. steel more expensive than steel from anywhere else in the world.

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

The automaker posted third-quarter net income of $1.0 billion and $1.7 billion in adjusted EBIT. Net revenue rose 3% year over year in the quarter.

Following the automaker’s release of its third-quarter earnings results, Ford shares surged Thursday, marking Ford’s biggest one-day percentage increase since 2011, according to MarketWatch.

CEO Jim Hackett highlighted the automaker’s plans with respect to its lineup.

“By 2020, we expect 75% of our lineup in the U.S. to be new or refreshed,” Hackett said during the earnings call Wednesday.

Hackett later added that during the April earnings call, the automaker said it could hit an 8% EBIT margin and an ROIC in the “high teens,” assuming “reasonable economic conditions.”

“The news today is that the current external environment has driven higher costs and uncertainty for the entire sector,” he said. “As we said last quarter, we had an unexpected deterioration in our business in both Europe and China. As a result of these factors, our current forecast shows we will not reach our EBIT margin and ROIC targets by 2020.

“However, I tell you as I told the board, we’re not standing still. We are attacking everything that is in our control.”

Chief Financial Officer Bob Shanks also walked through the financial numbers, noting that revenue was down compared to previous quarters. Revenue in the third quarter reached $37.6 billion, down from $38.9 billion in Q2 and $42 billion in Q1; Shanks attributed the decline to lower volume.

Revenue in the third quarter, however, was up 3% compared with Q3 2017, when it hit $36.5 billion.

“Some of this is seasonal, reflecting the normal summer plant shutdowns that occur in Europe and North America,” Shanks said.

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

Ford’s EBIT and EBIT margins were flat in the third quarter compared with the previous quarter.

TTstudio/Adobe Stock

This morning in metals news, the LME copper price fell Thursday, miner Antofagasta downgraded its 2018 copper production guidance and Norsk Hydro says the global aluminum market is moving toward a deficit.

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

Copper Price Slides

The LME copper price dropped to a two-week low Thursday, Reuters reported.

MetalMiner’s Take: Despite the three-week downtrend in copper prices, LME copper prices remain over the $6,000/mt mark, which acted as a psychological ceiling for most of 2017.

The downtrend does not appear sharp. In fact, copper prices have traded sideways since the beginning of the month. Fundamentals support an increase in LME copper prices, as global stocks are decreasing and copper premiums are increasing globally.

The copper supply and demand balance calls for a deficit in both 2018 and 2019. In fact, copper ore grade is starting to deteriorate in some big mines, such as Codelco, creating expectations of shortages over the following years.

Up and Down

Chilean miner Antofagasta announced downgraded cooper production guidance for 2018 but forecast an increase in production for 2019.

“The physical copper market continues to look tight and the outlook for next year remains positive despite ongoing fears about disruptions to global trade,” Antofagasta plc CEO Iván Arriagada said in a release. “We have narrowed our copper production guidance for the full year to 705-725,000 tonnes and looking ahead we expect production in 2019 to increase to 750-790,000 tonnes, driven by higher average grades at Centinela Concentrates and Zaldívar.”

Aluminum at Deficit?

According to Norwegian firm Norsk Hydro, the global aluminum market is moving towards a deficit.

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

“The third quarter reflected our continued challenges at Alunorte and increased raw material costs, while higher aluminium and alumina prices, as well as strong Energy results, contributed positively. The market for aluminium is tightening, and we expect the 2018 global primary market in deficit,” President and CEO Svein Richard Brandtzæg said in a release announcing the aluminum and renewable energy firms third-quarter financial results.

With just over two months left in the calendar year, one can look back and see what a bumpy road it has been for some metals.

Buying Aluminum in 2018? Download MetalMiner’s free annual price outlook

Not so for palladium.

The platinum-group metal (PGM) hit a record high Tuesday, Reuters reported, on account of tight supplies and, to some extent, worries over a potential increase in tensions between the U.S. and Russia.

As we’ve noted in this space in the past, fellow PGM platinum has historically traded at a premium to palladium. That has changed in the last year.

As MetalMiner’s Taras Berezowsky noted earlier this month, palladium breached the $1,000 per ounce mark for the first time in eight months.

In the ensuing weeks, the price has continued to rise, hitting $1,090 on Monday, according to London Platinum and Palladium Market data.

On Tuesday, the price surged to $1,150.50 per ounce, breaching the 2018 high set in January ($1,128).

Palladium is used, among other applications, in automotive catalytic converters, used in car exhaust systems to process polluting gases into less harmful gases.

According to Reuters, some analysts indicated the U.S.’s plans to withdraw from the Intermediate-Range Nuclear Forces Treaty could result in Russia restricting supply of the metal (Russia is the world’s top palladium producer).

In terms of U.S. production, in 2017 “one domestic company produced about 16,900 kilograms of platinum-group metals (PGMs) with an estimated value of about $480 million from its two mines in south-central Montana,” according to the U.S. Geological Survey (USGS). 

Furthermore, according to the USGS, 25% of the U.S.’s palladium imports from 2013-2016 came from Russia, just behind South Africa (30%), which has been the U.S.’s leading source of the metal. Russia produced an estimated 81,000 kg of palladium in 2017.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Given palladium’s sharp upturn, however, it bears watching, as a correction could be on the way.

Pavel Ignatov/Adobe Stock

This morning in metals, Ford Motor Co. says prices of U.S. steel are higher than anywhere else in the world, China’s alumina exports surged in September and the LME copper price dropped Tuesday.

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

High Prices

U.S. automaker Ford has been vocal about what it views as the negative impact of the U.S.’s steel and aluminum tariffs.

According to a Detroit News report, Ford’s president of global operations on Monday said “U.S. steel is costing more than anywhere else in the world” as a result of the tariffs.

MetalMiner’s Take: It’s a bit difficult to understand what has driven the public complaints from Ford about steel and aluminum tariffs, particularly when most OEMs take long positions on their metal spend.

Some OEMs have locked-in contract prices that simply do not fluctuate, according to MetalMiner benchmark data. The manufacturing organizations that make stronger arguments against tariffs are those that remain subject to spot-price movements, have a corporate policy that forbids hedging or lack the buying power to demand fixed prices.

Perhaps the vocalization of the complaints have heated up because many OEMs have entered the fourth quarter contract negotiation season and the producers want to open discussions at much higher price levels. In defense of Ford’s complaints, the multi-tier extended supply chain remains far more exposed to metal price volatility than a company like Ford.

In this environment, OEMs will need to work double time to create programs and opportunities for aggregating volumes across supply chains, developing directed buy and enablement programs, aggregation opportunities and using technology to better support the entire extended global supply chain.

China’s Alumina Exports Rise in September

China’s exports of alumina hit a 2018 high in September, Reuters reported.

Exports of alumina in September hit 165,839 tons, up from 29,722 tons in August.

LME Copper Falls

The LME copper price fell 1.1% on Tuesday, Reuters reported.

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

The drop comes a day after London copper had reached a one-week high.