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The Chinese government announced they have shut 42.39 million tons of crude steel capacity in the first half of this year.

According to a report from Reuters, this amounts to 84% of its target for the whole year, putting it well on track to meet its steel capacity reduction goals for 2017.

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This move also puts China very close to completing its 5-year target in reducing steel capacity, set just last year. That ultimate goal was to cut between 100 million and 150 million tons of excess steel capacity in less than two years.

According to Reuters: “China made the pledge in January 2016 as it bid to put an end to a price-sapping capacity glut that had left the country’s massive steel sector mired in debt and losses. The capacity cuts made this year do not include a nationwide campaign to shut down illegal low-grade steel production, believed to amount to around 100 million tonnes a year, which was completed by the end of June.”

Steel Market Moves Elsewhere in the World

Our own Irene Martinez Canorea wrote recently of the Brazilian steel market and where that is headed. Rising steel prices in the South American nation point toward a general uptrend, but more specific price movements depend on the steel.

Canorea wrote: “Brazil is the largest steel exporter in South America, with increasing production this year. Brazil exports primarily to the U.S. and Mexico, with Mexico serving as the second-largest steel producer in South America. According to preliminary U.S. Census Bureau for June 2017, the U.S. imported 590,473 metric tons of steel from Brazil, up significantly from the 259,285 metric tons imported in June 2016.”

How will steel and base metals fare in 2017? You can find a more in-depth steel price forecast and outlook in our brand-new Monthly Metal Buying Outlook report.

For a short- and long-term buying strategy with specific price thresholds:

Eramet, a prominent French nickel miner, recently announced additional cost cuts following its nickel division suffering more losses in the first half of this year.

According to a report from Reuters, this announcement comes after the mining company said it would alter its strategy to include the lower-grade nickel pig iron market with a new mining project in Indonesia.

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Nickel mining companies from across the globe are suffering the effects of a weakness in market prices, and Eramet is no exception. Pressure on nickel prices can be attributed to top producing nations Indonesia and the Philippines placing restrictions on their mining sectors.

According to Reuters, nickel prices were higher the first half of last year, but still less than production costs of Eramet’s nickel plant in New Caledonia.

“We’re working flat out to reach $4.50 which is still our cost target for the end of the year,” Chief Executive Christel Bories told the news source. “With a market price that languished below $4.50 in the first half and for some time before that, we’re convinced we have to go beyond $4.50 and pretty quickly.”

Nickel Price Outlook for the Remainder of 2017

How will nickel and base metals fare in 2017? You can find a more in-depth nickel price forecast and outlook in our brand-new Monthly Metal Buying Outlook report.

For a short- and long-term buying strategy with specific price thresholds:

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The International Lead and Zinc Study Group (ILZSG) released its first half of 2017 findings for zinc, which found the worldwide market for refined zinc metal was in deficit during the first five months of the year while total reported inventories declined over that same time frame.

The ILZSG reported that world zinc mine production grew by 6.3% despite reductions in the United States and Australia.

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“A significant 54.8% rise in Indian refined zinc metal output was largely offset by reductions in Canada, Japan, the Republic of Korea, Peru and Thailand resulting in an overall global increase of 0.4%,” the ILZSG report stated.

Furthermore, after a significant decrease in 2016, apparent demand for refined zinc metal in the United States grew 19%. In China, apparent usage declined by 2.8% and grew 1.8% in Europe. On a global basis, zinc demand grew 1.1%.

The ILZSG report on zinc concluded: “Chinese imports of zinc contained in zinc concentrates amounted to 477kt, a rise of 27.9% compared to the same period of 2016. The country’s net imports of refined zinc metal decreased by 48.4% to 129kt.”

Zinc Price Outlook for the Remainder of 2017

How will zinc and base metals fare in 2017? You can find a more in-depth zinc price forecast and outlook in our brand-new Monthly Metal Buying Outlook report.

For a short- and long-term buying strategy with specific price thresholds:

Macro photo of a piece of lead ore

The International Lead and Zinc Study Group (ILZSG) released its monthly report for July, which found that global refined lead metal demand outgrew supply during the first five months of the year.

Furthermore, total reported stock levels increased over this time, as well.

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The ILZSG report revealed an increase in global lead mine production of 12.7% when compared to the first five months of 2016. This was mostly attributed to increased output in China and India, which counterbalanced decreases in Peru and Australia.

According to the ILZSG: “A rise in world refined lead metal output of 7.2% was primarily influenced by increases in China, India, the Republic of Korea and the United States. An increase in US apparent demand for refined lead metal of 23.3% was principally a consequence of a sharp rise in net imports. Chinese apparent usage rose by 13.7% and in Europe by a more modest 1.7%. Overall global demand rose by 10.3%.”

The ILZSG report concluded that Chinese imports of lead contained in lead concentrates dropped 4.9%. Meanwhile, net imports of refined lead metal grew substantially, from 12kt in 2016 to 41kt this year.

Lead Price Outlook for 2017

How will lead and base metals fare in 2017? You can find a more in-depth lead price forecast and outlook in our brand-new Monthly Metal Buying Outlook report.

For a short- and long-term buying strategy with specific price thresholds:

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Tin prices strengthened on the non-ferrous metals market this week as a result of stockist purchases due to firm demand from alloy industries.

According to a report from the Business Standard, tin joined copper cable scrap, zinc and copper wire bar as having also moved up due to growing demand from their industrial bases.

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This growth may only be temporary, as our own Irene Martinez Canorea wrote just last month that the outlook remains bearish for the tin metal market.

She wrote that, similar to its sister metals, tin prices declined starting from the beginning of June. A market analysis of tin prices and trading activity indicates a more bearish outcome for the metal.

Canorea wrote: “According to the International Tin Research Institute (ITRI), the fluctuation of tin stocks has varied based upon tin prices in the market. Indonesian exports remain robust, with an increase of 10% in May compared to April. However, Myanmar tin exports decreased slightly again in May. This reduction of Myanmar output is expected to continue until the end of this year, as analyzed in detail in our monthly forecast reports.”

China Influencing Tin Prices

Canorea also noted that tin prices may also be impacted by the approval of a new Chinese policy that will directly affect the largest tin-producing company in China.

She added: “This policy consists of the removal of the valued-added tax (VAT) structure, which taxes imports of tin concentrates and was supposed to provide a tax rebate of 17% on exports. The catch? Exporters were never able to collect the rebate, so they ended up buying tin exclusively from domestic sources.”

How will tin and base metals fare in 2017? You can find a more in-depth tin price forecast and outlook in our brand-new Monthly Metal Buying Outlook report.

For a short- and long-term buying strategy with specific price thresholds:

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What is already a global copper deficit could worsen this year with more mines expected to be affected by worker strikes in the coming months.

According to a report by Reuters, South American copper mines are bracing for additional strikes, but polls indicate price movements have already been taken this information into account.

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“We will mostly likely see more disruptions later this year … but they are not to be as severe, and the price impacts should be largely priced in,” economist Amy Li at National Australia Bank in Melbourne, told Reuters.

The previous strikes Li is referring to were earlier this year in the world’s largest copper mine at Chile’s Escondida and the No. 2 Grasberg mine in Indonesia.

Reuters also reported copper traded on the London Metal Exchange increased 8% this year, ranking fourth of the six main LME-traded metals.

Copper Prices to Fall?

Despite a perceived shortage in global production of the metal, numerous reports have copper at risk for a price shortfall. The reason? Slow Chinese economic growth, which could take 10% or more off copper prices in the next several months.

“We expect several of the recent drivers of industrial metals — especially stronger economic growth in China — to slow going into the second half of the year,” Seth Rosenfeld, senior research analyst at Jefferies told Fox Business.

How will copper and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand-new Monthly Metal Buying Outlook report.

For a short- and long-term buying strategy with specific price thresholds:

A major shake-up in the global aluminum industry as Norwegian firm Norsk Hydro will fully own aluminum products maker Sapa after buying a 50% stake from conglomerate Orkla.

According to a recent report from Reuters, this transaction values Sapa at $3.24 billion on a debt-free basis.

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Hydro produces primary aluminum from scratch, but by combining with Sapa, enhances its capabilities to become an integral supplier for automotive firms, aircraft makers and the construction sector.

“Sapa will enable us to assume global leadership, establish a platform for growth, and provide responsible operations and sustainable solutions for the future low-carbon economy,” Hydro Chief Executive Svein Richard Brandtzaeg told the news source.

He added: “The combination will make Hydro the only global company in the aluminum industry that is fully integrated across the value chain and markets.”

Automotive MMI Grows in June

The aluminum component remains a significant one for the automotive industry. According to recent analysis from our own Fouad Egbaria, the Automotive Monthly Metals Index rebounded from a reverse in May to move forward in June.

Egbaria wrote: “Although the increase was small, the one-point jump is an encouraging sign, as it marked the first increase for the sub-index since early this year, when it jumped from 82 to the February reading of 92. After that 92 mark, the sub-index posted four straight months of decreases.”

How will aluminum and base metals fare in 2017? You can find a more in-depth aluminum price forecast and outlook in our brand-new Monthly Metal Buying Outlook report.

For a short- and long-term buying strategy with specific price thresholds:

The Copper MMI inched two points higher in July, driven by the recovery of the LME Copper 3-month price, which has been bounced off its previous lows and has increased by 4.98%. The copper MMI is back to April’s levels.

Analysis of supply and demand might suggest quite a bullish outlook for copper. Supply and demand has indeed driven copper prices in June.

During this past month, strikes have eased and production ramped up again. Even the strike at Freeport mine in Indonesia, the world’s second-largest copper mine, is set to continue and production will likely remain the same.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

On July 4, mining company Antofagasta announced it, too, might face a strike. This strike could impact two copper mines: Zaldivar and Centinela. The decision will be made at the end of this week. Chilean mining company Antofagasta Minerals is one of the largest global copper producers, with a combined annual production at both mines of 160,000 tons.

The International Copper Study Group (ICSG) has announced a possible supply deficit for this year. This is based on June’s released data on copper world mine production, which is estimated to have decreased by 3.5%, and world refined production, which is estimated to remain unchanged.

However, LME copper prices have started July with a five consecutive days of drops. Although June suggested a slight uptrend for copper, MetalMiner does not believe the uptrend is sustainable, as I reported in last Monday’s copper article. 

Source: MetalMiner analysis of FastMarkets

The LME copper price has not been able to break its psychological ceiling of $6,0000/metric ton. Moreover, recent weakness at the beginning of July, combined with poor trading volumes, suggests further weakness. Unless trading volumes shift, they are not supportive of copper prices.

The U.S. dollar and Chinese PMI indicators have historically shown correlation with copper prices. Even the U.S. dollar has shown a little uptrend during June, but its downtrend may continue, which would negatively impact copper prices. The short uptrend that has boosted copper prices during May and June has been caused by supply concerns.

U.S. Dollar. Source: MetalMiner analysis of StockCharts

The Chinese Manufacturing PMI rose unexpectedly to 50.4 in June. But this small increase may just be a blip. Current sentiment suggests Chinese demand may once again fall, as authorities are still working to curb financial risks.

In addition, the construction sector has fallen during the first quarter of 2017 by 83% (measured by value).  

What This Means for Industrial Buyers

Though it’s tempting to assume that the two-point increase and the supply-and-demand narrative suggests a bullish outlook, we would like to see a stronger uptrend and increasing trading volumes to support a more bullish narrative.

Actual Copper Prices and Trends

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Steel stocks rose earlier this week following reports that President Donald Trump could soon place tariffs on foreign steel companies.

According to a report from CNBC, U.S. Steel climbed more than 2% while AK Steel and Nucor each traded at 3% and 1% higher, respectively.

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Meanwhile, steel companies from around the would wait with bated breath on the Department of Commerce’s findings into its Section 232 investigation, which will determine whether foreign-made steel imports impact U.S. national security.

“There is a lot of anticipation that there is going to be a statement by the Commerce Department today or later this week that suggests Trump impose something like the 232 tariffs,” Macquarie managing director Aldo Mazzaferro told CNBC.

Impacting Steel Stocks

Citing sources speaking to Reuters, Trump is impatient with China and is looking to impose tariffs on steel imports from the Far East nation. This is impacting steel stocks in a major way.

“Supportive trade policy actions such as Section 232, could be a catalyst to change investor perception,” research analyst Jorge Beristain wrote. “We now have Buys on all Steels & Service Center names as they should benefit from stronger U.S. economic growth and rising trade protectionism.”

Beristain added steel demand in the first five months of 2017 is up 4% compared to the same time frame last year. In addition, Trump’s proposed $1 trillion infrastructure plan will likely also increase demand for steel.

How will steel and base metals fare in 2017? You can find a more in-depth steel price forecast and outlook in our brand-new Monthly Metal Buying Outlook report.

For a short- and long-term buying strategy with specific price thresholds:

Nickel has been in the throes of a long bear market, but there are reasons to be optimistic about a price bounceback for this industrial metal.

According to a recent report from the Financial Times, demand from China and the electric car battery market heating up could spur a nickel price boost in the coming months.

However, investors should still exercise caution.

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“True, there are plenty of negatives out there,” writes Alan Livsey for the Financial Times. “Supply growth from smelters in China and Indonesia has yet to abate. Forced destocking from end users and traders has made matters worse. Goldman Sachs expects net supply growth will nearly triple in 2018 from the estimated 37,000 tonnes this year.”

Livsey added if supply can be curtailed and demand grows as projected, nickel’s once low reputation with investors could see a significant change in direction.

Are Commodities as a Whole ‘Losing their Roar’?

Our own Irene Martinez Canorea recently wrote how June has not been particularly kind to metal producers, beginning with the U.S. Federal Reserve spiking interest rates up by 0.25%.

She writes: “The most recent Fed rate hike breathed a little life into the dollar, which has fallen for most of this year. We believe this could have a direct impact on the metals industry — namely, causing prices to fall.”

How will nickel and base metals fare in 2017? You can find a more in-depth nickel price forecast and outlook in our brand-new Monthly Metal Buying Outlook report.

For a short- and long-term buying strategy with specific price thresholds: