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This morning in metals news: Rio Tinto has committed $10 million toward its research partnership with China’s Baowu Steel Group; meanwhile, Freeport McMoRan completed the sale of an undeveloped project in the Democratic Republic of the Congo; and, lastly, copper remains at an over seven-year high.

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Rio Tinto commits $10M investment toward low-carbon steelmaking research

Miner Rio Tinto has announced a commitment of $10 million toward its low-carbon steelmaking research partnership with Chinese steelmaking giant Baowu Steel Group.

“Rio Tinto’s investment will fund the joint establishment of a Low Carbon Raw Materials Preparation R&D Centre, which will initially prioritise the development of lower carbon ore preparation processes,” Rio Tinto said in a release Wednesday. “This will include creating two ore preparation pilot plants, one to use biomass and the other exploring using microwave technology. The investment will also support work on carbon dioxide utilisation and conversion at the China Baowu Low Carbon Metallurgical Innovation Centre, which is a Baowu-led open platform for advancing metallurgical technologies to support the low-carbon transformation of the steel industry.”

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The Renewables Monthly Metals Index (MMI) gained 7.8% for this month’s index value. (Editor’s Note: This report also includes coverage of grain-oriented electrical steel, or GOES.)

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EIA: U.S. to add wind, solar capacity to electricity generation mix

While an overwhelming majority of U.S. power generation still comes from non-renewable sources, the renewables share of the mix will only continue to grow.

The U.S.’s share of electricity generation from renewables is forecast to rise from 18% in 2019 to 20% this year, the Energy Information Administration (EIA) reported in its recent Short-Term Energy Outlook. Meanwhile, the EIA forecast the figure to rise to 21% in 2021.

Furthermore, the EIA expects the U.S. electric power sector will add 23.0 gigawatts (GW) of new wind capacity in 2020. In addition, the sector will add 9.5 GW of new capacity in 2021.

Meanwhile, the sector will add 12.8 GW of solar power capacity in 2020 and 14.0 GW in 2021.

Glencore, GEM Co. extend cobalt supply partnership

Miner Glencore announced an extension of its cobalt supply agreement with Chinese recycler GEM Co. Ltd. 

The parties announced a five-year partnership in October 2019. Earlier this month, Glencore announced the two parties would extend the supply agreement an additional five years to 2029.

Under the agreement, Glencore will supply approximately 150,000 tonnes of cobalt contained in hydroxide between 2020 and 2029.

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The Global Precious Monthly Metals Index (MMI) gained 1.5% for this month’s index value, as the gold price has lost some of its gains from the summer.

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Gold price gains

MetalMiner’s Stuart Burns recently checked in on the gold price and where it might be expected to go in 2021.

As precious metals watchers know, the gold price has enjoyed a sharp rise this year amid the global pandemic.

“The bulls are predicting a resurgence in the price to U.S. $2,300 per troy ounce in 2021,” Burns wrote.

“Goldman Sachs stated last month they had a target of $2,300, as recovery from the coronavirus-related recession fuels higher inflation next year. Goldman’s economics team sees inflation rising to 3% next year before weakening through year-end. Further fuel could be added from a recovery in demand from India and China.”

However, in the short term, the gold price has retraced since its August peak.

“Investors rotated out of safe havens into riskier assets on hopes of a vaccine-induced economic boom next year,” Burns explained.

“The story here is more conflicting. Yes, vaccines appear to be coming faster than London buses in rush hour.

“However, so are infection rates and hospitalizations.”

So, as with most commodities and commercial sectors, much of what happens next depends on the the world’s ability to get the pandemic under control and begin to return to pre-pandemic routines of life.

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This morning in metals news: the MetalMiner December update to the Annual Outlook report is now out; the U.S. steel capacity utilization rate fell to 70.9% for the week ended Dec. 12; and Alcoa last month announced plans to sell its rolling mill business.

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December MetalMiner Annual Outlook update

In September, MetalMiner released its Annual Outlook report, which covers a wide range of price drivers and trends buyers could expect to see in the year ahead.

Of course, amid newsevents and data, that outlook gets updated throughout the year.

We just recently published the Q4 update to our Annual Outlook report – where we discuss the current state of the metals market and what it means for your buying behavior. Visit the Annual Outlook landing page for more details and information on how to subscribe.

U.S. steel capacity utilization falls to 70.9%

The U.S. steel sector’s capacity utilization rate dropped to 70.9% for the week ended Dec. 12, the American Iron and Steel Institute (AISI) reported.

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The Rare Earths Monthly Metals Index (MMI) surged 26.9% for this month’s reading.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

European Raw Materials Alliance initiative aims to strengthen supply chain

The European Commission recently launched the new European Raw Materials Alliance (ERMA) earlier this year.

Last week, ERMA kicked off the first “cluster” aimed at strengthening the domestic supply of rare earths magnets and motors.

“The first Cluster of ERMA deals with one of the most critical value chains for many key EU industrial ecosystems: rare earth elements (REE) used in high performance magnets and motors,” ERMA said in a Dec. 9 release. “ERMA supports a multi-sourcing strategy of REEs from feasible, responsible sources (primary and secondary) to ensure resilient supply chains and increase European industrial competitiveness. In addition, Europe’s capacities need to increase in magnet making as well as resource efficient and smart product design for the Circular Economy.”

Over 100 ERMA partners participated in the first meeting — held online — of the Rare Earth Magnets and Motors Cluster.

“The first draft of a rare earth action plan for Europe developed over the last months by a group of stakeholders from the REE sector was also presented during the meeting,” the ERMA release continued. “The work on this action plan continues within the ERMA Rare Earth Magnets and Motors Cluster through specific task forces that will identify challenges and regulatory bottlenecks along the value chain and develop recommendations and actions for Europe.”

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The gold price has been on the rise during the pandemic this year. As infections rise, vaccines loom on the horizon and economies gradually recover, what do we expect from the gold price in 2021?

Gold price bulls

The bulls are predicting a resurgence in the price to U.S. $2,300 per troy ounce in 2021.

Goldman Sachs stated last month they had a target of $2,300, as recovery from the the coronavirus-related recession fuels higher inflation next year. Goldman’s economics team sees inflation rising to 3% next year before weakening through year-end. Further fuel could be added from a recovery in demand from India and China.

Punchy, you may think.

The gold price rose strongly in the first half of 2020, in large part due to the fall in both nominal and real yields. An increase in safe-haven investment demand in the wake of the virus-induced economic slump also contributed, Capital Economics wrote recently. The research house explained the the price rise has been strong since the start of 2019, riding an 18-month surge in demand for ETF holdings as a safe-haven investment. That is a process that gathered pace in the face of the pandemic.

Gold price retraces after August peak

However, the gold price has dipped from its August peak. Investors rotated out of safe havens into riskier assets on hopes of a vaccine-induced economic boom next year.

The story here is more conflicting. Yes, vaccines appear to be coming faster than London buses in rush hour.

However, so are infection rates and hospitalizations.

It will be a dark winter, as actual vaccination rates fail to live up to expectations and people continue to die. However, markets generally look forward, not at the present. The expectation remains that, sooner or later, markets will recover as vaccinated immunity spreads through the population.

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Before we head into the weekend, let’s take a look back at the week that was and the metals storylines here on MetalMiner, including industrial metals bouncing back, iron ore’s roaring 2020 and much more:

Week of Dec. 7-11 (industrial metals, iron ore and more)

• Stuart Burns overviews industrial metals trends this year and looks ahead to 2021.
• Maria Rosa Gobitz on China’s new copper futures contract.
• Burns on what appears to be a zinc bull narrative — at least on the surface.
• Steel prices continued to surge last month as demand recovers.
• U.S. Steel announced it will acquire the remaining equity in Arkansas-based Big River Steel for approximately $774 million.
• Like much of the metals complex, China’s economic recovery has boosted aluminum.
• Meanwhile, iron ore has proved to be the strongest performer of 2020.
• While announced earlier this year, ArcelorMittal officially completed the sale of ArcelorMittal USA to Cleveland-Cliffs.
• U.S. automotive sales in November were down slightly on a year-over-year basis when adjusting for selling days.
• Gobitz checked in on stainless steel for this month’s Stainless MMI.
• Finished steel import market share reached 18% in November.
• Christopher Rivituso outlined the agreement reached between NLMK USA and the U.S. government over the refund of Section 232 duties paid.
• U.S. construction spending increased by 3.7% year over year in October, according to recently reported U.S. Census Bureau data.

The Construction Monthly Metals Index (MMI) rose 4.9% for this month’s index value, as U.S. construction spending showed recent gains.

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U.S. construction spending

U.S. construction spending in October 2020 reached a seasonally adjusted annual rate of $1,438.50 billion, the Census Bureau reported.

The October rate marked a 1.3% increase compared with the previous month.

Furthermore, the October spending rate marked a 3.7% year-over-year increase.

Meanwhile, spending during the first 10 months of this year totaled $1,189.6 billion, or up 4.3% year over year.

Spending on private construction reached a seasonally adjusted annual rate of $1,093.7 billion, or up 1.4% from the previous month. Under the umbrella of private construction, residential construction reached a rate of $637.1 billion, up 2.9% from the previous month. The nonresidential construction rate dropped 0.7% to $456.6 billion in October.

Meanwhile, the estimated seasonally adjusted annual rate of public construction spending reached $344.8 billion, up 1.0% from the previous month. Under public construction, educational construction reached a rate of $86.4 billion, or up 1.1%. Highway construction rose 1.6% to $92.6 billion.

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The Stainless Monthly Metals Index (MMI) increased by 3.8% for this month’s index value.

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U.S. producers wary to ramp up capacity

Demand from automotive and white goods manufacturers has been strong in the past few months.

For this reason, mill sales have increased. However, mills are not operating at full capacity. Rather, mills have kept long lead times.

This is leading to declining inventory levels across the U.S. stainless steel market. The trend follows several months of destocking in the distribution sector, as well as at manufacturers’ warehouses.

This mix could create challenges for manufacturers to replenish their depleted stock levels in upcoming months. Nevertheless, mills remain hesitant to ramp up capacity to pre-pandemic levels given current unstable market conditions.

In the meantime, these dynamics may continue to support stainless steel prices.

Chinese market

Reported sales of household appliances in China this October showed a nearly 10% year-over-year increase.

Meanwhile, demand for stainless steel increased approximately 13% year over year.

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The Automotive Monthly Metals Index (MMI) gained 9.6% for this month’s index value, as U.S. auto sales continue to show resilience.

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U.S. auto sales

General Motors switched from monthly to quarterly sales reporting in 2018; Ford followed suit in early 2019.

However, despite the industry trending toward quarterly reporting, Ford has apparently had a change of heart.

The automaker last month announced it would return to quarterly reporting. Ford reported November U.S. sales of 149,931 vehicles, down 20.9% year over year.

Ford truck sales fell 20.9%, while SUV and car sales fell 16.4% and 39.1%, respectively.

Among other monthly reporters, Honda reported November sales fell 23.4% year over year. Honda car sales fell 26.9% and truck sales fell 21%.

Hyundai sales fell 9% year over year in November.

“We were able to maintain our industry-beating sales momentum despite quirks in the reporting calendar and added COVID-19 challenges,” said Randy Parker, vice president of national sales at Hyundai Motor America.

U.S. auto sales forecast to nearly match 2019 levels in November

According to the most recent automotive forecast released by J.D. Power and LMC Automotive, new-vehicle retail sales were forecast to drop 0.7% in November when accounting for changes in selling days.

Meanwhile, for total U.S. auto sales, the forecast included a 3.5% decrease when adjusted for selling days.

“November 2020 is a prime example of why accounting for selling day differences is important in measuring comparable sales performance,” said Thomas King, president of the data and analytics division at J.D. Power. “After two consecutive months of year-over-year retail sales gains, a quirk in the November sales calendar will result in new-vehicle retail sales appearing to fall 12%. This year, November has three fewer selling days and one less selling weekend compared with 2019. When these calendar quirks are accounted for, new-vehicle retail sales are expected to almost match 2019 levels.”

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