This morning in metals news, Colombia could look to make itself a factor in the copper market, Aus Tin announced that it had begun the first phase of its Taronga tin project and Rio Tinto announced its Q2 2019 production results.
“We saw a challenging operational performance across our portfolio in the first half, while also investing in future growth at Richards Bay Minerals and Resolution,” Rio Tinto CEO J-S Jacques said in a release. “Whilst we experienced operational and weather issues at our iron ore operations in Australia, pricing and market demand has remained robust.”
Since last week, nickel has reached an 11-month high, jumping 9% to above $14,000 a tonne, the article reports, extending gains since the start of the year to 30%.
In contrast, copper is up just 1.2% in 2019, while aluminum has gained only 2.5%.
Robust demand in China has helped nickel’s overall position this year, but the recent export ban has added fuel to the fire.
Indonesia is the world’s second-largest exporter of nickel ore after the Philippines. In an unexpected move, Jakarta pledged last week to stick with plans to stop exports of unprocessed nickel ore in 2022.
The ban is aimed at encouraging the domestic development of value-added industries, such as refined nickel and even stainless steel production, a policy that has had its ups and downs in recent years but broadly proved successful in encouraging domestic refined metal production.
The Philippines, the top nickel producer, and Indonesia are major ore suppliers to China’s nickel pig iron industry, which currently accounts for some 20% of global nickel production.
Much of the demand for nickel is being driven by stainless steel production in China. So far this year, that demand has been strong. However, as the Financial Times notes, inventories have also been rising, raising questions about the underlying strength of the Chinese market facing the headwinds of a trade war and slowing growth.
Maybe consumers should not be panicking too much about rising nickel prices — a pullback after such a strong rise is likely, especially coming into the summer season when demand in China and western Europe is likely to soften.
This morning in metals news, the U.S. steel sector continues to outproduce 2018 levels, copper prices are around two-week highs and President Donald Trump took to Twitter to tout the impact of the U.S.’s tariffs on China’s economy.
“China’s 2nd Quarter growth is the slowest it has been in more than 27 years,” he said. “The United States Tariffs are having a major effect on companies wanting to leave China for non-tariffed countries. Thousands of companies are leaving. This is why China wants to make a deal […] with the U.S., and wishes it had not broken the original deal in the first place. In the meantime, we are receiving Billions of Dollars in Tariffs from China, with possibly much more to come. These Tariffs are paid for by China devaluing & pumping, not by the U.S. taxpayer!”
In May, the Trump upped the tariff rate on $200 billion in Chinese goods from 10% to 25%. The president has also threatened to impose tariffs on an additional $325 billion in Chinese goods, effectively subjecting nearly all U.S. imports from China to tariffs.
The zinc market was in deficit by 123,000 tons over the first five months of the year, according to the ILZSG.
January-May zinc mine production hit 5.27 million tons, up 1.4% from 5.20 million tons during the equivalent five-month period in 2018. According to the report, the increase was paced by a “substantial” increase in Australian zinc mine production, in addition to increases seen in Namibia, South Africa and Sweden.
Meanwhile, zinc mine output fell in China, India, Peru, Turkey and the United States.
Mine production in May hit 1.12 million tons, down from 1.13 million tons the previous month.
Refined zinc metal production reached 5.39 million tons, down from 5.45 million tons the previous year. May production reached 1.12 million tons, up from 1.11 million tons in April. Refined production increases in Mexico and Peru were canceled out by declines in Canada, China, India and Russia.
Zinc usage fell 0.6%, paced by declines in China and the E.U. Usage increased, however, in Brazil, India, the Republic of Korea, South Africa and the United States.
Lead Deficit Hits 42 KT
Meanwhile, the lead market deficit for the first five months of the year reached 42,000 tons.
Lead mine production for the first five months of the year reached 1.94 million tons, up from 1.91 million tons for the same period in 2018. Canada, India, Mexico, Peru and Sweden saw increases, while production in Australia and China fell.
Lead metal production increased 2.6%, up to 4.83 million tons, up from 4.71 million tons.
Lead usage surged 2.8% during the five-month period to 4.88 million tons, powered by increases in China, India and Taiwan.
This morning in metals news, China’s copper import levels fell in June, the U.S.-China trade war saw China’s imports of U.S. goods plunge in June and BHP has long-term designs on mine expansion over the next century.
This morning in metals news, Bosnia’s only aluminum smelter is closing, President Donald Trump comments on U.S.-China trade talks and the United States Trade Representative (USTR) is pursuing competition-related concerns with respect to the U.S.-Korea Free Trade Agreement (KORUS).
According to the report, the closure could impact a total of 10,000 jobs.
Trump Criticizes China on Agriculture
With U.S.-China trade talks underway again this week, Trump commented on Twitter this morning on the proceedings to say China is “letting us down” with respect to promises to purchase U.S. agricultural goods.
Trump and Chinese President Xi Jinping recently met during the G20 Summit in Japan, on the heels of the two countries’ trading of tariffs during a rocky May.
“The United States is calling for actions by Korea to improve procedures in competition hearings held by the Korea Fair Trade Commission (KFTC),” the USTR said in a release. “These shortcomings have denied U.S. parties certain rights, including the opportunity to review and rebut the evidence against them.”
The U.S. Department of Commerce. qingwa/Adobe Stock
This morning in metals news, the U.S. Department of Commerce made affirmative determinations in two of three countervailing duty investigations regarding fabricated structural steel, Chinese copper smelters inked deals with Chile’s Antofagasta and India is investigating dumping claims vis-a-vis flat-rolled steel imports from 15 countries.
Domestic entities Indian Stainless Steel Development Association, Jindal Stainless, Jindal Stainless (Hisar) and Jindal Stainless Steelway filed petitions with India’s Directorate General of Trade Remedies (DGTR) alleging dumping of flat-rolled steel from the 15 countries.
LME copper prices dropped by nearly $100/mt around the first of July after gaining strength in June, then traded sideways during the first week of the month.
Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets
Meanwhile, LME warehouse stocks increased.
Source: MetalMiner analysis of FastMarkets
However, copper mining disruptions continue to impact mine output. According to Reuters, Chile’s exports of copper declined by 14% in June compared with June of 2018, coming on the heels of extremely rainy weather early in 2019. Additionally, falling ore grades continue to hurt Chilean mining production.
The Congo army recently evicted illegal miners working at Kamoto Copper Company (KCC), a Glencore subsidiary in the Kolwezi area. According to the company, around 2,000 illegal, small-scale miners intruded illegally daily, on average. The move followed a landslide that killed 43 people at the KCC concession.
Zambia announced plans for a law that will compel miners to procure locally, according to the country’s mine minister, as reported by Reuters. Zambia continues to take a greater role in the mining sector. Zambia ranks second in Africa in copper export volume, with the metal dominating the country’s exports.
Chinese Copper Scrap vs. LME Copper
The price gap between Chinese copper scrap and LME copper narrowed last month considerably due to the steep LME price drop. This month, however, the slight LME price increase exceeded the slight increase in Chinese copper scrap prices.
Notably, China’s refined copper output in May dropped by 5.2% compared with May 2018. Output totaled 711,000 tons, marking a 3.9% decrease compared with the previous month.
The recent crackdown on scrap imports has likely caused the production decline. Further restrictions impacting high-grade copper scrap came down in early July as the Chinese government continues to ramp up its crackdown on scrap.
Given that scrap imports fueled about 10% of production last year, producers need to find alternative sources of raw material. According to China Minmetals Corporation in press reports, copper imports made by the company from a preferred Chilean trading partner look set to increase this year to a value of $900 million.
What This Means for Industrial Buyers
With copper prices showing some strength in June, industrial buying organizations will need to pay careful attention to macroeconomic growth, which could continue to support prices.
Copper prices strengthened this month across the index with the exception of Korean copper strip, which dropped 0.4% to $8.29 per kilogram.
The Indian copper cash price increased by 10.9%, the largest increase in the index this month, to $6.53 per kilogram.
Chinese prices turned around this month, as all of the Chinese prices in the index increased. China’s primary cash price and copper wire price increased by 2.7% to $6,898/mt and $6,892/mt, respectively. Copper bar increased 2.8% to $6,885/mt.
Chinese scrap copper #2 increased by 0.6% to $5,592/mt.
U.S. prices in the index all increased by 1.7%. U.S. copper producer copper grade 110 increased to $3.49 per pound, grade 102 priced at $3.68 per pound and grade 122 at $3.49 per pound.
The Aluminum Monthly Metals Index (MMI) held steady at 86 this month based on mixed price movements. While prices in China dropped in the 1% to 2% range, all other prices in the Aluminum MMI basket rose slightly.
LME aluminum prices continued to fall into June, but recovered toward the end of the month. LME prices are currently moving sideways at around $1,800/mt, with the present price slightly higher at $1,807/mt.
Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets
Due to lower LME prices, a recent forecast for Indian production projects a slowdown in output growth. Domestic production costs increased by around 25% during the past three to five years, putting break-even costs above the current LME price, which was at $1,777/mt in late June.
According to Reuters, Japanese aluminum premiums increased 3% to $108/ton for Q3 due to tighter aluminum supplies in Asia. Japanese producers initially sought increases to the $115-$120 per ton range. Weakness in the semiconductors market and trade worries capped gains.
Chinese Aluminum Prices
SHFE aluminum prices weakened during the past month, reversing the upward trend evident since around February 2019. Demand appears seasonally weaker at this time; therefore, market observers will want to watch prices carefully during the next month or two to see if the downtrend continues.
Source: MetalMiner analysis of Fastmarkets
In a normal cycle, prices might rise again as China moves away from seasonally hot and rainy weather.
According to a recent Reuters report, China’s aluminum production increased by 2.4% in May compared with May 2018 because of smelter restarts in response to higher prices, which could also contribute to the recent weakness.
Price weakness appears to be temporary. If prices do not increase, this will indicate a weaker-than-expected Chinese economy and/or that output continues to increase, with increased supply capping price gains.
Increased Aluminum Use on the Horizon Across Sectors
Aluminum prices may also receive future support from innovations beyond just the automotive sector, based on the metal’s flexibility and lightweight profile.
The Indian government announced that railway coach cars will transition to aluminum, while older conventional stock will begin a phaseout.
Coca-Cola announced its AQUAFINA® water brand will see an aluminum can package in U.S. food service outlets. The announcement comes as part of the company’s greater move to reduce the use of plastic packaging.
U.S. Aluminum Premiums
The U.S. Midwest Premium finally dropped, but only slightly, to $0.18/lb. With aluminum prices rising in most countries, supply tightness may continue to support the premium. The U.S. Midwest Premium still remains stubbornly high since the the U.S. removed its aluminum tariffs on Canadian and Mexican aluminum in May.
What This Means for Industrial Buyers
Price signals were mixed this month, with weaker Chinese prices contrasting with higher prices in the rest of the world. Global production increased, but not enough to offset overall tightness in terms of supply.
Chinese prices dropped again this month, in the range of 1-2%. The Chinese primary cash price dropped 1.6% to $2,013/mt, while Chinese aluminum scrap fell 1.7% to $1,835/mt. Billet and bar prices dropped by 1.6% and 1.5%, respectively, to $2,080/mt and $2,177/mt.
This month, European prices increased. European commercial 1050 sheet increased by 2.3% to $2,553/mt, while the 5083 plate price increased by 2% to $3,011/mt.
Korean commercial 1050 sheet, 5052 coil premium over 1050, and 1050 all increased by around 2% to $3.1, $3.14 and $3.27 per kilogram, respectively.
India’s primary cash price increased 1% to $2.09 per kilogram.