Articles on: Metal Prices

According to a Reuters article, China is on track to produce a staggering 600 million metric tons of steel this year, up from last year’s record 568 million metric tons and six times larger than the number two producer Japan. The worry is the market may not be there to take it. China’s steel mills appear to be churning out steel more in a fight for market share than to meet buyers demands. The big state steel mills in particular are the most reluctant to cut production fearing they will lose market share to competitors, so instead they are cutting prices just as the third quarter contract iron ore prices rises hit the balance sheet, pushing up raw material costs.

Output in the first half of 2010 surged 21% to 323 million tons and output in July fell only 3.7% to 51.74 million tons, still above a 600 million ton annual average. In the meantime, Shan Shanghua, secretary general of China’s Iron & Steel Association CISA is quoted as saying, “we will see the market busy with de-stocking in this half (H2, 2010) and a lot of small mills will shut down.”   Profits at the major steel mills fell 37.8% in June on the month and are expected to drop further in July. In fact other sources are quoted as saying at current prices perhaps only Baosteel will eke out a thin profit, the rest will be in a loss making position. Recent stockpiles have increased by 39% since the beginning of the year to 10.3 million tons at the end of June.

At the same time, exports are rising and western steel companies are finding themselves under pressure. Chinese exports to the Middle East are rising again as the   Silk Road Economy blog describes, graph courtesy of SRE.

SteelOrbis reported that China’s steel exports were up massively in the first half of this year, by 15.25 million tons or 153% year over year but also quoted CISA’s expectation that the change in export rebates may limit second half exports of low value steel items. Conversely this could encourage exports of higher value steel items that are right in the sweet spot of western producers.

Meanwhile the market is well ahead of developments. Share prices of Chinese steel mills have already dropped more than the 19.6% fall in the Shanghai Composite. Shares of Baosteel and Angang Group have both fallen by more than a third since the beginning of the year, while those of Wuhan Iron and Steel have almost halved.

With the removal of export rebates supposedly hindering exports, at least of lower value volume items, rising stocks and a softening domestic market, China’s steel mills have to cut capacity before a chronic rise in inventory pushes prices even further into the red. It would seem even in centrally controlled China, Beijing is not able to control the state steel mills as it would like. With such a lack of discipline, prices could fall further and then export rebates or not, more metal will come onto the world market.

–Stuart Burns

As the Big 3 iron ore producers have altered the way they manage contracts with key steel customers (going from annual to quarterly back to spot, most likely), steel producers have faced a challenge in aligning sales contracts with purchase contracts. According to a recent article, about 60% of ThyssenKrupp’s customers have long term or annual contracts. It appears as though Thyssen would like to move to annual contracts with formulas, adjusting on a quarterly basis to avoid a time-consuming negotiation process. Instead, Thyssen will rely upon raw material indexes and pre-agreed upon formulas with clients to set the annual contracts that will automatically adjust on a quarterly basis. Apparently, this represents the first time Thyssen has openly discussed its contracting process.

Of course, using price indexes as a means of contract negotiation is nothing new. In fact, many metal buying organizations regularly deploy index-based formulas as a means of not so much saving money but reducing risk. MetalMiner has written extensively about the use of price indexes as a basis for contract discussions we have re-linked to two posts which go one step further in laying out the contracting options for rising, falling and flat markets:

Metal Decision Trees: Sourcing Strategies and Risk Mitigation Methods

Metal Decision Trees: Sourcing Strategies and Risk Mitigation Methods Part 2

In the case of steel coming from integrated producers iron ore and coking coal represent the two largest cost factors in producing one ton of steel. Iron ore spot prices continue to rise, see chart below:

Source: Iron Ore and Steel Derivatives Association

In addition, our own models show a 39% increase in iron ore from the April July time frame. For coking coal, the numbers increased by 4% over the same time period (we used $167 as our iron ore input cost per ton and $117 per ton for coking coal those numbers based on IMF data and EIA data).

For steel coming from EAF producers, the major cost variable involves scrap. Although steel scrap prices have drifted down in recent months, they remain higher than 2009 price levels and in recent days have seen upward movement for both No. 1 HMS scrap and shredded scrap. We will post an article tomorrow covering metal scrap markets.

In the meantime, the tracking of key raw material cost inputs remains a primary function for most metal category sourcing managers. Combined with a strategic sourcing initiative to lower the value-add costs (the non-metal related cost elements), the use of price indexes can help mitigate price risk.

As many of you know, MetalMiner operates a global metals price index, MetalMiner IndX(SM) for a range of steel products and non-ferrous metals covering several Asian markets. The service is free. You may register for the service here.

–Lisa Reisman

As we finalize our Q3 report on steel for our Price Perspectives series we thought we would share some of the highlights of our research as well as some recent announcements from some of the largest domestic steel producers. Last week, Reuters ran a story entitled: Global Steelmakers Paint Gloomy Picture. According to the article, US Steel announced both lower shipments and slower order rates for the upcoming quarter as it idled one furnace in Serbia and put a second one on maintenance in Slovakia. For the US market, US Steel also announced 3rd quarter production rates will likely decline from second quarter rates. In addition, AK Steel also announced it would cut capacity in the US due to declining automotive and construction demand. According to the AISI, capacity utilization rates for much of the second quarter ran at 70-73%.

In our price perspectives research, we speculated back in February when we launched the first report, that steel producers may have brought too much capacity on stream too quickly. It appears as though others have recognized that now too. We will continue to closely monitor capacity utilization rates as the industry attempts to tightly manage supply with demand.

What signals or road signs do we pay close attention to? Actually, we examine over 28 general variables that impact all metals and 14 specific variables for steel but we can often pick up immediate pricing changes by examining these four variables below:

  • Lead times
  • Order books/shipments
  • Capacity utilization
  • *Rate and magnitude of price changes

The rate increases had come at a fast and furious pace during the first quarter of this year. The rate of increase started to slow by the middle of May and declines set in by the end of May. By the beginning of this month, prices fell by 3-5% across a range of steel products, quite substantially. So we might think that much of the data would suggest further price declines. But the public announcements speak to the contrary. AK Steel announced a price increase on Monday of $40/ton for carbon products. Severstal has also announced price increases in the $30-40/ton range for a range of carbon products as well including: hot rolled bands, cold rolled products, HDG products, galvalume etc. SteelMarketUpdate a steel flat products industry watcher has switched their pricing momentum indicator from falling to neutral.

But as we all know, the proof is in the pudding. The question to ask remains: will the price increases stick? Now that is the real question. Through mid-July, they didn’t. Will they now? Drop us a line.

–Lisa Reisman

A Reuters article this week covers an interesting development in the downstream aluminum market as it reports on discussions Norsk Hydro, Europe’s third largest aluminum producer, is having with automotive clients. According to the automotive OEM’s the long term trend of increasing aluminum use would accelerate if OEM’s could secure firm pricing for a number of years, giving them the confidence to design in greater use of key aluminum components. Consumers say they are under market and regulatory pressure to improve fuel economy and reduce emissions per mile but are hesitant to achieve those improvements by weight reduction by substituting aluminum for steel if that also exposes them to greater cost volatility. Ironically this comes as steel producers such as Thyssen have been complaining that the loss of the annual iron ore and coking coal pricing mechanism will hamper their attempts to provide long-term fixed prices to major consumers such as automotive OEM’s.

Some may think that aluminum producers should be in an ideal position to control costs. Many of them have long term power cost contracts, traditionally at fixed prices, and their raw material costs in the form of alumina are often at a fixed 13.5% of the finished metal price. But in reality they have little or no control over the ingot price and although their margin is largely protected, their ex factory gate sales price is totally at the mercy of the futures markets. As world aluminum prices rise, so do alumina costs and increasingly so do power costs as many producers negotiate in an uplift if metal prices break above certain thresholds. That doesn’t leave any room for producers to absorb losses on a fixed sales price. To fix sales prices, they have to hedge.

There are of course existing market hedging mechanisms to allow aluminum producers to hedge sales prices. The LME for example allows producers to fix prices forward, if not the actual cost of processing primary metal into finished coil or extrusion. To what extent they use these or over the counter swaps is unclear but the producers response to the expiry of sheet contracts with the can industry in the US this year suggests some do it more than others. Novelis complained that previous can stock contracts coming up for renewal last year had cost them dear because they were at fixed prices and presumably not hedged. According to a Bloomberg article, Alcoa said in April it purposely curtailed can-sheet volumes (to the tune of  75,000 tons in the first quarter) because of concerns over profitability. Alcoa Chief Executive Officer Klaus Kleinfeld said at that time the company decided to let a money-losing 10-year contract expire to focus on more profitable business. Novelis, on the other hand, has increased the amount of can stock business it is doing saying it finds such sales profitable, although he avoided saying how profitable. A recent article in MetalMiner late last month threw some light onto what may have been happening explaining that there has been a shift in power from consumer to producer allowing the producers to price for ingot, conversion premium and have agreed to pass-throughs with the consumer. Why Novelis could live with such a shift but Alcoa could not may come down to the acceptability of certain levels of margin than the willingness to hedge or not.

Traditionally we have found producers unwillingness to provide fixed prices is not because they cannot hedge their risk but because clients only honor such contracts in times of rising prices. If prices fall consumers will take a variety of steps from simply trying to renegotiate, to diversifying their spend with more spot buys at prevailing market prices, to sometimes walking away altogether. Novelis though do seem to be making the long term supply deal their specialty. In addition to their appetite for the can stock market they are steadily increasing the volume of metal they are supplying to the automotive market, recently announcing a major supply agreement with BMW for all aluminum one piece doors for the 5 Series. BMW would presumably not have taken such a commitment without security on costs. It is not a step that can be readily unwound if aluminum prices double.

So if anyone has further details of the extent to which producers are hedging or even just controlling prices of fixed price semis contracts we would be interested to hear, on or off the record.

–Stuart Burns

Two days ago we examined where our energy comes from (e.g. what sources) and how much we individually consume. The larger point we made related to the fact that the existing bills on carbon cap and trade (including the one that passed the US House of Representatives) do not actually do anything to reduce our dependency on foreign sources of energy. Today, we wanted to examine how energy is consumed and the role of electricity   used in primary metal production.

We’ll start with how energy is used. According to Storm Technologies a company that provides engineering and technology solutions to electric utility generating companies, in a recent report, energy consumption for the US breaks out as follows:

  • Residential 21.75%
  • Commercial 18.43%
  • Industrial 32.32%
  • Transportation 29.10%

As a reminder from our previous post, the US obtains approximately 71% of its energy from domestic sources and the rest comes from imports. Only 6.8% of our energy comes from renewable sources, primarily hydro dams, one owned by aluminum producer Alcoa.

Now we’ll spend a minute looking at the industrial portion of that 32.32% (please note that cap and trade only addresses this portion of energy consumption and not the other three “consumers of energy) and specifically energy within the metals industry. Electricity plays the largest role in the aluminum industry. According to industry consultant James King, electricity makes up approximately 25% of total primary aluminum smelting costs (as of this writing – clearly when prices increase they may/may not be attributable to rising electricity costs). At $505/ton according to a presentation King delivered at the June 2010 Harbor Aluminum Conference, electricity remains a significant factor in aluminum’s cost structure.

For steel, the numbers look quite a bit different. According to our own BOF and EAF models (published as part of our quarterly price perspective series) electricity equates to approximately 1% of current production costs for BOF steelmaking and 6% for EAF steelmaking. Both of those numbers may seem like small potatoes but any increase in electricity and/or regulatory compliance costs can have a very big and real impact on the domestic steel industry’s cost structure (and certainly make US steel less competitive from an export standpoint). Obviously if energy prices increase, they could comprise a greater percentage of overall steel production costs.

Finally for copper, we have an entirely different set of issues, to some extent. Copper remains a key enabler of many emerging technologies thought to reduce CO2 emissions according to a recent Mineweb article and manifesto published by the European copper industry “The vision of a lower carbon transportation system, delivered by affordable, hybrid and electric vehicles, connected to smart grids, along with high-speed rail networks, requires copper. A hybrid passenger car contains 50 kg of copper for the electric motor, energy storage and transfer system.  The focus of the manifesto involves securing competitive copper production from European copper suppliers (subject to rigorous carbon cap and trade legislation). According to analyst Brooke Hunt, for the period 2004-2007, energy represents 10-25% of the value add.

The European copper industry has engaged in a number of activities to help influence regulators and keep the industry healthy. American producers have done and will need to do the same. Buying organizations will want to pay careful heed to any and all forthcoming regulatory actions to curb climate change as these regulatory and legislative changes may greatly impact key metal supply sources.

–Lisa Reisman

Postscript: Did you know that in 2003 the primary aluminum sector joined the U.S. Climate Vision program to further reduce PFC emissions. This goal of 53 percent reduction on direct CO2 emissions (a combined direct carbon emission from 1990 to 2010 based on PFC reductions and reduced anode carbon consumption) equates to an additional reduction of 25 percent since 2000. This goal was surpassed in 2005 with a 56 percent reduction from 1990. (Source: The Aluminum Association)

The “climate bill the one with cap and trade provisions covering electric utilities is dead in the water, according to one lobbyist MetalMiner spoke to. However, the bill could get resurrected during the lame duck session. The bill failed to garner the necessary 60 votes to prevent a Republican filibuster. Instead, Democratic leaders will focus on modest tweaks to US energy policy to include oil spill provisions, energy efficiency upgrades and “incentives for the conversion of trucking fleet to natural gas and the Land and Water Conservation Fund, according to Politico.com. So what to make of this development?

Some, like NY Times columnist Thomas Friedman claim, “we will be sorry for not passing this legislation. Friedman goes on to say, “When I first heard on Thursday that Senate Democrats were abandoning the effort to pass an energy/climate bill that would begin to cap greenhouse gases that cause global warming and promote renewable energy that could diminish our addiction to oil, I remembered something that Joe Romm, the climateprogress.org blogger, once said: The best thing about improvements in health care is that all the climate-change deniers are now going to live long enough to see how wrong they were. Now whether or not you are a supporter of climate change legislation or not, we thought MetalMiner readers might find it useful to put in context some important facts about how much energy a typical American consumes and where it comes from. According to Storm Technologies a company that provides engineering and technology solutions to electric utility generating companies, in a recent report, energy consumption on a per capital basis breaks down as follows: (300 million Americans used 101.605 quadrillion Btu’s in 2007)

  • Each US Resident uses an equivalent of 14 tons of Coal
  • Each US Resident uses an equivalent 64.5 barrels of Gasoline
  • Each US Resident uses an equivalent of 58 barrels of Diesel fuel
  • Each US Resident uses an equivalent of 52 barrels of #6 Oil
  • Each US Resident uses an equivalent of 105 barrels of Ethanol
  • Each US Resident uses an equivalent of 778 pounds of Propane
  • Each US Resident uses an equivalent of 325,000 cubic feet of Natural Gas
  • Each US Resident uses an equivalent of a (one) 75’x75′ Solar Panel

A few more facts are worthy of review, also provided by Storm Technologies:

US Energy currently comes from:

  • Coal 23.48%
  • Natural Gas 19.82%
  • Crude Oil 10.8%
  • NGPL 2.80%

These four sources, all “fossil fuels make up 56.50% of total energy production for the US.

Now a few more points:

  • Nuclear makes up an additional 8.41%
  • Renewable energy makes up 6.8% (and we’d like to clarify that the bulk of that 6.8% does not come from wind and solar, it comes from old hydro electric dams such as the Alcoa (yes, you read that right a metals company supplies a big chunk of what can be classified as renewable energy) and Progress Energy dams.

All of these data points mean that the US produces (these are not imports) 71.70% of its total energy needs. The balance of what we need comes in the form of imports, primarily petroleum (that’s the part that Thomas Friedman is after).

To date, the bill the House passed on cap and trade and the bill that just failed in the Senate focuses on the 71.70% of what we produce already. There aren’t and weren’t any provisions to move us away from imports (which we rely upon). So let’s think this through – when you cap electricity emissions from domestic sources what you save in the form of carbon emissions must in reality shift toward “other sources. (It’s not like the cap and trade legislation actually imposed limits on energy usage)

Those other sources are potentially alternative fuel sources (but again, look at the numbers on where we get energy today) they also obviously include imports. In short, we can’t see how climate legislation focused on limiting emissions (which is what cap and trade will do, remember the British were burning books this past winter because of these renewable energy regulatory mandates and subsequent power shortages), will reduce our dependence on foreign sources. In fact, we could assume the cost of energy would increase, thereby further opening up alternative sources of supply to fill the gap (e.g. imports).

How does this all relate to the metals industry you may ask? Metals producers that rely on electricity (which last time I checked, they all do) would have found themselves in a serious international competitive disadvantage. Moreover, every manufacturer buying metal would also be subject to cost increases. In a follow-up post, we’ll examine how energy is consumed and the role of energy, specifically electricity in the metals industry from an overall cost perspective.

–Lisa Reisman

Postscript: Did you know that the US steel industry has ALREADY EXCEEDED VOLUNTARILY Kyoto’s greenhouse gas targets by more than 300%? (Source: Nucor Steel)

Two separate reports appearing in a Reuters publication support comments made in MetalMiner over recent weeks regarding the aluminum market. The first report was a review of Alcoa’s second quarter earnings which surprised the market on the upside with stronger than expected results. Alcoa Chairman and Chief Executive Klaus Kleinfeld increased his estimate of 2010 global aluminum consumption growth from 10% to 12%.

“We’ve raised the demand projection, but at the same time we’ve seen that additional production came online so we continue to believe that we’re going to have a surplus this year of roughly about 1.2 million tons,” he said. That did not include China, which he said has halved its surplus from 400,000 tons in the past month. Production capacity is again being cut around the world as the primary ingot price has slumped. Kleinfeld observed that at the depressed Shanghai pricing level, “roughly 6 million tons of aluminum capacity in China is below the waterline. “We expect that very soon, most likely in the third quarter, we will see 1 million to 1.5 million tons coming offline.”

So good news for aluminum producers but a hint perhaps to consumers that prices this summer could be at the low point going forward. If as Kleinfeld suggests the market goes into deficit next year, aided some think by a one million ton ETF fund being launched later this year, prices are likely to rise back above $2000 per metric ton.

China’s producers are being squeezed by a double whammy. On the one side, ingot prices have fallen from $2400 per ton in April to $1950 per ton now, but on the other side costs have risen significantly, particularly power costs. When Klaus Kleinfled says roughly 6 million tons of capacity is below the waterline it is as much due to recent rises in electricity costs as anything. China has vowed to cut energy intensity (energy consumption per unit of gross domestic product) by 20% by end 2010 from the levels in 2005 and to cut two key pollution measures, sulfur dioxide and chemical oxygen demand by 10% during the same period. But energy intensity actually rose by an annual 3.2% in the first three months of this year after falling 14.38% in the previous four years, because of fast growth in energy intensive sectors including electricity, steel, non-ferrous metals, construction materials and petrochemicals. The government has therefore raised power tariffs by 50-100% for some energy intensive firms from June 1 and cut or even ended power price discounts for many others, notably aluminum smelters. At the same time, task forces have been dispatched around the country to monitor compliance a problem with past edicts from Beijing being quietly ignored by provincial governments. Smelters have already started closing in central Henan province as we previously reported while others have been idled on a rolling program disrupting output. Heavy industry will have to take the brunt of government efforts to curb energy efficiency consuming as it does 60% of electricity produced in China compared to just 12.5% in residential consumption.

China is not alone in facing closure of significant portions of its aluminum industry. In most other markets constraints to supply will be more due to the current low aluminum price than rising power costs but with China being such a major producer and consumer, Kleinfeld is probably right in saying the impact of rapidly rising power costs in China will have a special dynamic on the wider aluminum market as a whole.

–Stuart Burns

All eyes are on China it seems. Certainly for the metals markets the health of the Chinese economy and likely Chinese demand are high on the agenda for buyers trying to gauge where prices are going in coming months. The steel market is no different, although the US is not as reliant on the spot iron ore market as consumers in Europe and Asia. China’s exports of steel products have almost as profound an impact on the finished steel market as their purchases of iron ore do on the raw material costs for the industry. Either way you look at it, China matters.

So a recent report by Credit Suisse deserves more than a casual glance coming as it does from one of the originators and largest players in the iron ore swaps market. Credit Suisse has a significant role in setting price and risk management for the seaborne iron ore market and knowledge in depth as to what drives demand and price. Whether you agree with all their findings or not the analysis is interesting.

Not surprisingly the bank is anxious about what they term China’s “negative growth first half 2010 macro and micro policy adjustments which are only just beginning to be felt and will certainly feed through into the second half of the year. Specifically they highlight the following:

  • Reserve ratio tightening
  • Reduced property lending availability
  • Currency appreciation
  • Steel export rebate cuts

In addition there is the possibility of an interest rate increase to curb wage and food inflation, and a tail off in the 2008/9 local government spending which has now peaked.

On the plus side the government has recently announced:

  • Various social housing stimulus measures, particularly for the western provinces
  • A reduction in corporation tax for businesses in western provinces
  • A continuation of the car scrapage scheme
  • Rural white goods incentives
  • State Bank re-capitalizations reducing concerns about bank balance sheets

Balancing these various drivers the bank has drawn up a projection for likely growth which shows a welcome drop from the breakneck growth of Q4, 2009 and Q1, 2010 to a more sustainable sub 10% level through to the second half of next year.

If they are correct then iron ore demand should hold up reasonably well and steel prices will be set more by the ability of the mills to manage supply than the risk of a collapse or surge in demand. So far the mills have managed steel inventories relatively well, but stockpiles have still increased up to 10.4 days of cover, still below March’s 11.17 days but the mills will need to reduce production further to prevent this from rising more. Steel mill production has fallen this year. The bank estimates by 4 million tons/month during June, largely due to earlier over production forcing up inventory levels. This has resulted in sharp cut backs in iron ore which have driven down prices. Fortunately for the mills, margins have held up well as a result as iron ore prices tumbled. If steel demand picks up as expected after the summer slow down then iron ore prices could rally again in the latter part of the year.

The most important developments observers should watch in the bank’s opinion are, on the upside Chinese construction industry activity once the seasonal monsoons over southern China abate, and on the negative side the extent of infrastructure spending cuts. The bank feels residential property is actually quite robust with housing supply more limited than the 2008 peaks and western regions in particular receiving a lot of government support. A fall in eastern tier one city prices may actually increase overall demand as it brings affordability within reach of more potential buyers. More of a risk in the bank’s opinion is a reduction in the level of lending to provinces, municipalities and counties through shell companies, known as Urban Development Investment Corporations. These were a major conduit for investment in and source of construction lead growth in 2009, amounting to some $450 billion according to this article. New restrictions by Beijing could reign in this source of funding and probably represents the greatest potential risk to continued strong steel demand in China.

On balance though the bank is relatively bullish on both steady GDP growth sub 10% per year and on iron ore demand on the basis of solid if no longer spectacular steel production growth.

–Stuart Burns

For the vast majority of metals buyers, the analysis of chartists or technical analysts are so much black magic, unfathomable and therefore largely ignored. For many (although not all) professional investors though the technical analysts charts provide an important supplementary source of advice, for a few they are the sole basis of investment decisions. Empirical evidence as to the accuracy of chart predictions is difficult to come by. Wikipedia assuming you set store by its statements says that of 95 modern studies, 56 concluded that technical analysis had positive results. The technique has been around for hundreds of years, starting at least in 17th century Dutch trading markets, if not before. The basic premise is that investors collectively repeat the behavior of the investors that preceded them. As such price curves follow predictable shapes based on the sum total of many individual investor choices.

Whether technical analysis actually works however remains a matter of controversy. Warren Buffett famously said, “I realized technical analysis didn’t work when I turned the charts upside down and didn’t get a different answer” and “If past history was all there was to the game, the richest people would be librarians.”

OK flippancy aside while the ability of charts to predict the future can be debated, it does seems they can be good at identifying trends and a lot of investors over the years have made a lot of money by following the simple mantra a trend is your friend. In addition if enough decision makers follow chart trends and make similar decisions based on those charts the results will not surprisingly become self-fulfilling. So we thought a recent analysts summary published (with all the usual caveats) by Reuters was worthy of a review to see what the charts are suggesting for H2, 2010.

First, copper is heading towards US$4,818 per metric ton according to the analysis. Providing prices in the short term do not breach $6,885 on the upside (in which case the curve shape change and hence the prediction) the analysis is suggesting copper is on a bearish trend and is heading below $5,000 over the next six months.

Looking purely at the technical trends, aluminum is expected to fall to US$1,556 per metric ton over the next six months. The rally from last year’s low of $1,275 is viewed as nothing more than a rebound within a long term bearish trend and the metal could test this level again.

There are several wave theories. Some practioners of technical analysis hold to one or two, other hold to different theories, most consider nearly all of them and look for correlation between the different results. According to pattern theory and wave theory, gold is expected to peak at US$1,300 per ounce before starting a bearish downward trend. When gold breaks below $1,180 it is expected to establish a long term downward trend driving the price down to $680 over the next six months.

Last, oil is seen dropping below US$57 per barrel over the next six months with the possibility of a fall to $42 under certain circumstances.

Whether these predictions come to pass will be very interesting to see – we would be staggered if they did but never say never. Although in not quite six months time, MetalMiner will again write in late December to report on how accurate the technical analysis has proved to be. Let’s hope for anyone sitting on significant resting orders or long positions the chartists have got it wrong!

–Stuart Burns

Due to the sheer number of steel buyers and volumes consumed throughout the world, steel remains the largest metals market by far. Our coverage of the steel market has evolved over time yet we have consistently presented information covering the global metals markets (a necessity in today’s environment when over 50% of world steel production occurs in China). Our price forecasts include detailed cost of production models for both BOF and EAF steel making operations. Those forecasts are updated quarterly.

2010 has proven an exciting year for steel markets. We’ve seen the demise of the annual iron ore contracts and probably the demise of the quarterly iron ore contracts. Trade cases, cap and trade (cap and tax) legislation and health care legislation have altered the manufacturing landscape, particularly for steel companies. The US economy will play a big role in determining the fate of steel demand here. China’s economy will do the same for its supply/demand balance. We re-post several pieces covering the steel market:

US Domestic Steel Collusion Case: Will it Change the Sourcing Landscape Part Three

Severstal Closes Sparrows Point in Favor of Imported Slabs and Running Down Surplus Inventory

Four Steel News Items on Demand and Steel Price Direction

Top Steelmakers Re-Shuffle the Pecking Order

End of the Quarterly Iron Ore Contracts: That Was Easy!

–Lisa Reisman

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