Articles in Category: Non-ferrous Metals

The U.S. Department of Commerce. qingwa/Adobe Stock

Before we head into the weekend, let’s take a quick look back at the week that was here on MetalMiner:

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  • This week we wrapped up the latest round of posts for our January Monthly Metals Index (MMI) — check out this week’s posts on the following:
  • Oil and gas exploration is a topic that has both passionate supporters and detractors. President Trump’s recent proposal to open up new areas for drilling, not surprisingly, has both of those, as our Stuart Burns wrote earlier this week.
  • Sticking on the subject of oil, Burns surveyed the factors behind crude oil’s continuing rise in price. Political turmoil is one factor, among others, contributing to the increase.
  • The long wait is over … Secretary of Commerce Wilbur Ross has sent President Trump his Section 232 steel report (the statutory deadline was Jan. 15). Trump now has 90 days to decide what to do. A similar announcement for the Section 232 aluminum probe — which was launched last April, one week after the steel probe — should also be coming soon.

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This morning in metals news, U.S. steel imports rose significantly in 2017, Shanghai nickel hits a 2-month high and the Peruvian government is considering a $2.4 billion railway project in light of rising copper output.

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Steel Imports Up by 15.5%; 2017 Market Share Hits 27%

According to Steel Import Monitoring Analysis (SIMA) data reported by AISI, total and finished steel imports in the U.S. were 38,149,000 net tons (NT) and 29,534,000 NT, up 15.5% and 12.1%, respectively, from 2016.

The estimated import market share for December was 22%, according to the SIMA data, and 27% for 2017.

Shanghai Nickel Rises Amid Concerns About Output

According to a Reuters report, Shanghai Futures Exchange (ShFE) nickel rose by as much as 1% amid concerns about output levels and production outages.

As of Jan. 5, deliverable ShFE nickel warehouse stocks are approximately 54% of what they were last year (48,920 tons, down from 90,000 last year).

Peru Eyes Estimated $2.4 Billion Railway Project

With copper output on the rise, Peru is considering an ambitious railway project to facilitate the transport of the metal.

According to Reuters, the Peruvian government is evaluating a $2.4 billion railway project for transporting minerals from an Andean region rich in copper to the Pacific coast.

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The proposed railway would start in the highland region of Apurimac and stretch 373 miles to the coast, carrying concentrates from Chinese-owned MMG Ltd’s Las Bambas mine and other copper and iron projects, according to Deputy Mines Minister Ricardo Labo said.

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This morning in metals news, China has issued stricter rules on building new steel capacity, Chinese steel production is expected to slow down in 2018 and LME copper rises as the dollar loses ground.

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New Rules to Put the Squeeze on New Capacity in China

China has new, stricter rules on building new steel capacity, the Ministry of Industry and Information Technology said on Monday, Reuters reported.

According to the report, the rules dictate that China will allow one ton of new capacity to be built for a minimum of 1.25 tons of old capacity closed in environmentally sensitive regions.

Chinese Steel Production to Slow in 2018

 In the same vein, Chinese steel production is expected to slacken this year, the Financial Times reported.
According to a poll of analysts, steel output is expected to rise by just 0.6% this year, the Financial Times reported.

Copper Rises as Dollar Falls

London copper picked up some momentum Tuesday as the U.S. dollar fell, Reuters reported.

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That dynamic came on the heels of the metal hitting a two-week low overnight, in tandem with a previous upward run by the dollar.

After last month’s drop, the Aluminum MMI (Monthly Metals Index) index increased by three points. The current Aluminum MMI index reads 98 points, 3.2% higher than the December reading. 

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In December, MetalMiner anticipated a rise in aluminum prices … and that is exactly what happened.

Aluminum prices increased by 10.6% in December, reaching a more than two-year high.

Source: MetalMiner analysis of FastMarkets

Trading volumes appear strong and accompany the current uptrend. Moreover, aluminum’s latest peak has climbed over previous ones, signaling strength in its latest market rally. Other macroeconomic indicators, such as a weaker U.S. dollar and a stronger CRB index driven by higher oil prices, may continue to support aluminum prices.

Moreover, the Department of Commerce’s Section 232 investigation should see a report released mid-January, which will also impact prices. The U.S. Department of Commerce announced a new self-initiated anti-dumping and countervailing duty investigation on imports of Chinese common aluminum alloy sheet at the end of November. The U.S. has launched several anti-dumping campaigns for aluminum products this past year.

Crude Oil

As oil prices serve as a critical part of the CRB index, together with other base metals, buying organizations need to monitor oil price trends.

Moreover, there are some base metals, such as aluminum, that are strongly influenced by oil prices.

Crude Oil prices. Source: MetalMiner analysis of Trading Economics

Oil prices have increased again this month. Current oil prices remain above our bullish level signal, meaning that we could  expect some more upward movement for oil.

Similarly, increasing oil prices will continue to provide support to base metals prices.

Aluminum Scrap

Chinese aluminum scrap prices increased sharply this month and appear in a long-term uptrend since 2016.

The latest rally in both LME and SHFE aluminum prices also results in a jump in aluminum scrap prices. Chinese scrap prices increased by 4.9% this month.

Source: MetalMiner data from MetalMiner IndX(™)

What This Means for Industrial Buyers

Aluminum prices jumped sharply again this month. After sharp price increases, base metal prices sometimes pull back to digest the previous gains. Aluminum prices may lack some price momentum this month, although that continues signaling bullishness for the light metal.

Therefore, adapting the “right” buying strategy becomes crucial to reduce risks by knowing when to buy.

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Actual Aluminum Prices and Trends

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The Copper MMI (Monthly Metals Index) jumped five points to 88, driven by skyrocketing LME copper prices. LME copper prices increased by 6.4% in December.

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LME copper prices are back again over the $7,000/metric ton level. Moreover, copper prices breached a previous peak, signaling strength in the rally. Trading volume also remains heavy, supporting the uptrend.

Source: MetalMiner analysis of Fast Markets

Despite skyrocketing in December, copper prices fell slightly during the first few days of January. However, that does not signal any weakness for the rally yet, as prices increased for the entire previous month. Therefore, copper prices may take a little breather this month to digest previous gains.

The U.S. Dollar

Copper and the U.S. dollar have a negative correlation. This means when the the U.S. dollar appears high, copper prices tend to trade lower.

Right now, we see just the opposite.

The U.S. dollar. Source: MetalMiner analysis of Trading Economics

Some analysts believed that the U.S. dollar had turned the corner and had started to recover. Despite the Fed rate hike in December, the U.S. dollar has continued to fall. The U.S. dollar has also seen heavy selling volume, which suggests more weakness.

Typically, the U.S. dollar trades lower when commodities and base metals trade higher. Copper (Dr. if you will) tells us much about commodities because the dollar has such a great influence on its price (direction).

Therefore, buying organizations will want to follow U.S. dollar price trends closely.

Copper Scrap vs. LME Copper

The price divergence between copper scrap and LME remains wider than historical spreads; though, this month, both moved in tandem.

Chinese copper scrap prices increased by 5.76% this month, compared to the 6.4% jump in LME prices.

Although these two don’t increase by the same amount, they tend to follow a similar trend. Data from both reflects a clear uptrend that appears sustainable, at least for the short term.

Source: MetalMiner data from MetalMiner IndX(™)

What This Means for Industrial Buyers

During December, buying organizations had opportunities to buy some volume. The relevance of the price jumps increases when the U.S. dollar shows weaknesses and all the base metals show strength.

Therefore, as copper prices remain bullish, buying organizations may want to “buy on the dips.”  For those who want to understand how to reduce risks, take a free trial now to MetalMiner Monthly Outlook.

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Actual Copper Prices and Trends

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Now that the New Year has begun, we’re getting ever closer (hopefully) to the Commerce Department’s final recommendations on the Section 232 investigation.

Today we continue our podcast series that we’re calling “Manufacturing Trade Policy Confidential,” in which we turn our focus to the aluminum industry. Our guest is Heidi Brock, the president and CEO of the Aluminum Association, whom we spoke with just before the winter holidays. She works tirelessly on behalf of the association’s members, which span the entire value chain. Heidi does find moments, however, to take a step back and see the bigger picture.

Recently, she got to see the newly commissioned USS Gabrielle Giffords, a warship named after the former Arizona congresswoman, and it left her with a sense of awe. “I just can’t tell you what an amazing experience it was,” she said.

To hear more on what a strong domestic aluminum sector has to do with national security, and how the aluminum sector views other hot trade issues of the moment and why, listen in to Lisa Reisman’s conversation with Heidi Brock.

Here’s Heidi in front of the U.S. Navy littoral combat ship USS Gabrielle Giffords:

Courtesy of Heidi Brock

For an additional sense of scale, here’s an “aerial view of the ship during its launch sequence at the Austal USA shipyard, Mobile, Alabama,” according to Wikipedia, from a photo provided by the U.S. Navy:

Source: U.S. Navy/Wikipedia

Manufacturing Trade Policy Confidential: Background

With everything that’s been happening on the international trade policy front over the past year, we wanted to give metal buying organizations more insight into the issues they may not be reading or hearing enough about — or at all — in the mainstream B2C media.

What better way to do so than go straight to the source — or sources — and interview some key movers and shakers on the manufacturing and policy fronts? So we’ve started a brand-new series called “Manufacturing Trade Policy Confidential.”

If you’ve visited MetalMiner’s digital pages over the past several months, you’re no stranger to the phrase “Section 232” — shorthand for the U.S. Department of Commerce investigation into whether certain steel imports constitute a national security risk, under the namesake section of the U.S. Trade Expansion Act of 1962.

The outcome of the investigation (findings from which were slated to come down last summer but have been delayed) could have significant effects on upstream and downstream manufacturing organizations, ranging from metal producers to buying organizations – even the mom-and-pops.

But Section 232 is only one small part. Trade circumvention, China’s non-market economy status, domestic uncertainty amidst proposed tax plans and many other issues have pushed us to start this new podcast series.

We’ll be publishing several more interviews in the coming weeks and months – stay tuned!

Listen to more episodes and follow the MetalMiner Podcast on SoundCloud.

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Copper is on a tear.

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Copper rose to its highest point in nearly four years last week following further curbs on domestic production in China, closing at new year-to-date high for 2017. LME and Comex copper continued its longest bull run in more than a year, after closing at its highest level since January 2014 on Dec. 22.

Analysts suggest prices are being lifted by hopes that a stronger U.S. economy under a lighter tax regime will fuel demand for the metal. Maybe of more importance is the largest copper producer in China, Jiangxi Copper, was rumored to have been ordered on Monday to halt output for at least a week before a further assessment based on local pollution levels. The effect has been to boost support for Shanghai copper, which rose to a 2-month high. The firm disputes it has been ordered to halt production, but so bullish is sentiment the market has shrugged it off and continued to buy copper.

Following years of oversupply, robust demand for copper, particularly from buildout of charging networks required for electric cars and infrastructure for the integration of renewable energy investments, is driving expectations of further price rises, according to the Financial Times. As a result, prices hit U.S.$7,312/metric ton last week, the highest level since January 2014, as import data for China showed November refined metal imports jumped 19% to 329,168 metric tons.

While demand appears robust, the impression is developing that the supply market will be squeezed next year.

The Financial Times reports that analysts at Citibank estimate that nearly 30 labor contract negotiations are set to take place in copper-mining countries next year, potentially affecting 25% of global mine supply.

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Q1 could see prices take a breather and may present a time to buy forward if prices come off a little. Chinese New Year holidays often see a run-up in demand before the holidays, but overall the quarter suffers from the prolonged closedowns.

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This morning in metals news, imports of steel into the U.S. are up 18% through the first 11 months of the year, Rio Tinto completed a $1.5 billion buyback of its shares, and Japan’s biggest copper smelter expects copper price to continue to rise in 2018 and beyond.

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Imports Up 18% Through November

Imports of steel in the U.S. are up 18% through the first 11 months of the year, according to preliminary Census Bureau data cited by the American Iron and Steel Institute (AISI).

The U.S. imported a total of 2,718,000 net tons (NT) of steel in November 2017, including 2,126,000 net tons (NT) of finished steel (down 14.6% and 16.8, respectively, versus October final data).

Total and finished steel imports through 11 months are 35,632,000 and 27,637,000 net tons (NT), up 17.5% and 14.3%, respectively, versus the same period in 2016. 

Rio Tinto Finishes Major Buyback

Mining firm Rio Tinto said it had completed a $1.5 billion share buyback, with more to come, according to a Nasdaq report.

According to the report, Rio Tinto said today that it will commence a further $1.925 billion on-market buyback of Rio Tinto plc shares, to be completed no later than Dec. 31, 2018.

Copper on the Rise

According to a Japanese copper smelter, 2018 offers a healthy diagnosis for “Dr. Copper.”

The largest copper smelter in Japan, Pan Pacific, says copper prices will continue to rise next year, according to a Reuters report.

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Executive officer Satoshi Arai said the firm expects copper prices to average $7,280 a ton in 2018 and $7,720 a ton in 2019 (compared with $6,100 a ton this year).

Some base metals are poised to become hot commodities for their anticipated use in electric vehicles (EVs).

As demand increases and technology presses forward, certain metals could become big winners.

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Steel remains one of the most important industrial metals for the automotive industry. Currently, steel goes into the vehicle structure, such as the main body structure, hang-on panels (such as the door and hood), wheels, chassis and a variety of internal structures, such as seats. This means that most of the structure of the vehicle comes from steel.

Although some automakers have moved toward aluminum due to its lightweight properties, aluminum has a long way to go before it starts to eat into steel’s share.

The Demand for Steel

Steel also has a new life in the EVs revolution related to the electric propulsion system.

Despite the mania over the battery market, batteries are not the only relevant part of the electric propulsion system in EVs. Electrical steels get the power from the battery and transform it into mechanical energy (which allows the movement on the road).

Tata Steel forecasted steel demand based upon different scenarios regarding the growth of EVs in its report, titled “Charging towards a sustainable future?”According to the report, forecasted steel demand for structural steel, plated steel and electrical steels will grow considerably through 2050.

Source: “Charging towards a sustainable future?” Tata Steel

Structural steel takes the lion’s share, and will continue growing with the introduction of EVs. Moreover, electrical steel and plated steel demand will become stronger with the EVs.

This year, plate prices have performed the worst compared to other steel forms. However, prices increased this week and the increase appears sharp, partly due to low service center volumes.

Source: MetalMiner data from MetalMiner IndX(™)

U.S. plate exports increased by 18.8% in October, and are up by 53.3% compared to last year’s levels.

As For Today’s Steel Prices…

Despite the EV market sentiment, domestic steel momentum held flat during Q3.

Steel momentum has shifted and prices now show some upward momentum (MetalMiner recently assessed steel prices).

Source: MetalMiner data from MetalMiner IndX(™)

Free Download: The December 2017 MMI Report

HRC prices increased again this week, together with the other steel forms. The latest prices released also show a continuation of the uptrend.

Could this be the beginning of a new rally for steel? Buying organizations may want to subscribe to our Monthly Outlook or take a free two-month trial to identify buying opportunities.

Wondering why aluminum prices have pulled back from highs of $2,200 per metric ton on the LME?

After all the hype about environmentally driven smelter closures in China this year and the additional curtailments to be forced on the market in certain provinces during the winter heating seasons, most were expecting the run up in prices to hold steady (at least during the winter period).

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In practice, although prices have made impressive gains from lows of $1,700 per ton earlier this year to five-year highs of over $2,200 per metric ton, it was largely on the pretext of constrained primary metal supply that it is beginning to become apparent is not happening.

According to China’s National Bureau of Statistics (admittedly not the most reliable of sources) Reuters reports China’s aluminum smelters churned out 2.35 million metric tons of the metal in November, down 7.8% from 2.55 million tons in October and down 16.8% from a year ago.

In reality, while headline smelter capacity has been closed, new planned capacity has continued to quietly come onstream.

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