Articles in Category: Non-ferrous Metals

The Copper MMI inched four points higher this month, returning to September levels. This comes as no surprise, as copper outperformed other base metals again.

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Source: MetalMiner analysis from FastMarkets

Copper prices look strong as they twice breached the $7,000/metric ton ceiling in October. Moreover, copper prices climbed over the previous peak (during the beginning of September, yet  below the $7,000/mt ceiling), which signals the continuation of the bullish sentiment.

Even if price pullbacks occur, the uptrend appears sustainable. Readers may notice the green dotted line in the chart above, which signals the start of the sharp copper rally. Copper prices today stand about $1,000/mt higher than prices in July.

Supply and demand indicators also point to a continuation of the copper rally. The International Copper Study Group forecast a of 151,000-ton deficit for this year. The deficit may continue next year, which would support copper prices.

What is the U.S. Dollar Doing?

Copper is commonly treated as an economic indicator (often referred to as Dr. Copper). Copper prices remain linked to the U.S. dollar. As with many other dollar backed  commodities, if the U.S. dollar is strong, copper prices often fall. In other words, copper prices and the U.S. dollar have a negative correlation.

The U.S. dollar in black. Copper prices (EOD) in blue. Source: MetalMiner analysis from StockCharts

Based on the chart above, for much of last year, the opposite dollar/copper correlation did not hold true. Copper prices, however, appear to fluctuate with dollar movements on a daily basis (when the dollar increases one day, copper prices decrease too, and the opposite also holds true), as well as on a long-term trend basis.

However, it may take some time for both to correlate negatively again.

Despite the latest short-term uptrend of the U.S. dollar, MetalMiner remains hesitant to call a bull market for the U.S. dollar.

Copper Scrap vs. LME Copper

The latest copper price increase came as a result of a Chinese copper scrap ban, hence the need to also analyze copper scrap prices.

Source: MetalMiner data from MetalMiner IndX(™)

Scrap prices increased this month by 3.2%, compared to a copper price increase of 4.6%. The Chinese government has imposed tougher copper scrap import requirements. The ban may result in tighter supply of copper scrap, forcing China to import more refined copper. Even if the percentage increase in prices between scrap and LME copper remains unequal, we expect them to still trend together.

What This Means for Industrial Buyers

As copper prices continue increasing, buying organizations may want to “buy on the dips.”

For LME copper prices, buying organizations can also read more about longer-term copper price trends with our free 2018 Annual Outlook, or take a free trial now.

You can also subscribe to the Monthly Outlook for a short-term analysis. Reacting to short-term movements in the market will reduce purchasing risks.

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Actual Copper Prices and Trends

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This morning in metals news, U.S. manufacturers are pleased that the U.S. Department of Commerce’s ruling in a recent antidumping case treats China as a non-market economy, BHP looks to meet copper demand with more drilling and U.S. Steel reports its third-quarter earnings.

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Manufacturing Group Praises DOC’s China Decision

The Manufacturers for Trade Enforcement (MTE) expressed their support for the Department of Commerce’s recent antidumping ruling on Chinese aluminum foil (for which dumping margins were assigned based on the department’s non-market economy dumping methodology).

“Fair international competition and a level playing field are essential for the global competitiveness of U.S. manufacturers,” said Thomas J. Gibson, president and CEO of the American Iron and Steel Institute and co-chairman of the MTE. “China has not met the statutory criteria to be treated as a market economy, and we applaud our government’s commitment to ensuring China is not prematurely awarded market economy status.

“Substantial state intervention in the Chinese economy has resulted in significant overcapacity in many manufacturing sectors in China while also distorting global markets and hurting American manufacturers. Jobs have been lost in all of our industries. China should not be afforded market economy status while still maintaining a state-controlled economic system that encourages unfair trade practices that injure multiple U.S. industries.”

BHP Aims to Meet Copper Demand

Miner BHP, in efforts to meet growing copper demand in an increasingly electrified automotive market, is turning to the drill, according to Reuters.

According to the report, BHP’s copper exploration budget has hovered at an annual average of $60 million the last 4-5 years.

U.S. Steel Posts Solid Third Quarter

U.S. Steel reported third-quarter net earnings of $147 million, or $0.83 per diluted share. Third quarter 2016 net earnings were $51 million, or $0.32 per diluted share.

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“Our third quarter results were modestly better than we expected, with stable operating performance at each of our segments and our Tubular segment producing positive EBITDA in the quarter,” said Dave Burritt, U.S. Steel’s president and CEO, in a release. “Our results for the first nine months of 2017 improved over the first nine months of 2016, with all three of our segments improving compared with 2016.”

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Iran didn’t need to take a cue from its arch enemy Saudi Arabia’s success with its Alcoa joint venture Ma’aden Aluminium smelter and downstream operations — just about every Middle Eastern natural-gas producer with production to spare has invested in aluminum smelting as an easy win outlet for vast natural gas reserves.

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

Exporting natural gas as liquefied natural gas (LNG) is a profitable business, but building the infrastructure is costly. An alternative is building an aluminum smelter, which is also costly but arguably yields a higher value add.

According to AluminiumInsider, the Iranian Mines and Mining Industries Development and Renovation Organization’s (IMIDRO) Amir Sabagh told Platts the firm was in the midst of building a 300,000-metric-ton-per-annum aluminum smelter in the southern coastal province of Bushehr.

Funding is still problematic for Iranian firms, so it is no surprise the Chinese are involved, with China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. largely footing the bill.

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This afternoon in metals news, European steel demand is expected to grow 2.3% this year, Bloomberg takes a look at the Trump administration’s “Made in America” pledge and Freeport-McMoRan is working with the Indonesian government to resolve a mining permit dispute.

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European Steel Demand to Grow 2.3%: Eurofer

The European steel association Eurofer predicts 2.3% growth in 2017 for European steel demand, according to a Reuters report.

The European steel industry is worth about 170 billion euros a year, according to the report.

Made in America?

Among other things, President Donald Trump has pushed a “Made in America” agenda, aiming to boost domestic industry.

But, in practice, has there been a rise in U.S.-based production? A Bloomberg report outlines the reality of rising steel imports and pipeline contracts increasingly being won by Russia’s Evraz.

Freeport, Indonesia Look to Settle Permit Dispute

Richard Adkerson, chief executive of copper miner Freeport-McMoRan Inc., said on Wednesday that the miner wants to avoid arbitration vis-a-vis a mining dispute in Indonesia.

Free Download: The October 2017 MMI Report

Freeport is looking to renew the permit for its Grasberg copper and gold mine.

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This morning in metals news, the chairman of Chinalco says Chinese aluminum demand growth will stay ahead of the country’s GDP, a hedge fund is suing Barclays for over $850 million related to copper trading losses and a Chinese investor is placing big bets on copper.

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Chinese Aluminum Demand Growth

According to Chinalco, China’s biggest state-run aluminum producer, consumption of the metal will  grow 9-10% this year, Reuters reported.

According to the report, strong downstream demand is a primary factor behind the uptick.

Ge Honglin, chairman of Chinalco, told Reuters that demand growth is expected to rise faster than the country’s GDP in 2018. China is targeting GDP growth of around 6.5 percent this year, but has not yet set a 2018 goal, according to the report.

Red Kite Suing Barclays

A hedge fund is suing for over $850 million related to losses in copper trading, Reuters reported Monday.

The hedge fund, Red Kite, is suing Barclays, alleging that it manipulated the copper market and ultimately resulted in $850 million in losses for the hedge fund.

Futures of Chinese Copper

There has been a sharp rise in Chinese copper futures bets — why?

According to one source quoted by Kitco, a private coal mining industry investor in China, Gelin Dahua Futures Co Ltd, is behind the surge.

Free Download: The October 2017 MMI Report

Gelin Dahua holds more than 35% of the open interest in copper contracts for the first half of 2018 on Shanghai Futures Exchange (SHFE), per exchange data referenced by Kitco.

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Chinese steel output is falling, according to The New York Times.

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Crude steel output hit 71.83 million metric tons in September, the lowest since February and down from 74.59 million tons in August, according to National Bureau of Statistics data last week. September’s average daily output was 2.39 million tons, down 0.8% from August (but still 5.3% higher than in 2016).

After a year in which mills have been cranking out every ton they can muster and prices have been booming on the back of plant closures, the recent fall in output is telling.

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This morning in metals news, the Kobe Steel saga continues, an Indian steel firm’s stock is up amid acquisition buzz and London copper holds steady.

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Kobe Steel Faces Another Test

The fallout from Kobe Steel’s quality data falsification scandal continues, and according to Reuters there are concerns about the Japanese firm’s outstanding liabilities.

According to the Reuters report, the third-largest Japanese steelmaker has $3.3 billion cash in hand and $7.01 billion in debts as of the end of March.

Bhushan Steel Stock Surges

Indian firm Bhushan Steel saw its stock rise after news of a potential acquisition by ArcelorMittal, according to the Economic Times.

The Indian company’s stock rose 20% Monday amid buzz that ArcelorMittal joined the bidding, according to the report.

Copper Trades Steady

Copper has experienced a significant upward trend in October, rising from $6,518 on Sept. 20 to $7,008 on Oct. 20.

The metal did experience a dip last week, however, falling from $7,061 last Monday to $7,008 on Friday.

Free Download: The October 2017 MMI Report

On Monday, copper held steady, according to Reuters, trading at $6,950.

Copper prices bolstered their previous rally with a second sharp price increase this month. Trading volumes remain strong, albeit lower than the previous price spike.

Copper prices breached the $7,000/metric ton level, trading again at 2015 levels. The price breach is relevant, as copper prices have passed the previous peak in September.

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

Source: MetalMiner analysis of FastMarkets

Copper prices retraced during September, falling by 4.6%. After the last copper price rise, copper prices increased by 9.4% this month. As the uptrend appears sustainable, we could still expect more upward movements for copper.

Besides strong trading volumes and bullish prices, macro indicators also now support copper prices.

According to the International Copper Study Group (ICSG), copper faces a  75,000-ton deficit. The global copper supply has barely grown this year.

Meanwhile, Chinese demand remains strong. According to the Chinese Customs Department, Chinese copper imports rose by 430,000 metric tons in September. Copper imports increased by 26.5% on a year-to-year basis. The Chinese copper appetite also extends to copper concentrates, in which demand increased by 0.1 million metric tons this year.

Some analysts are calling copper “The Metal of the Future.” Copper demand will increase due to battery electric vehicles (BEVs). China serves as the world’s largest BEV market and appears to be  the most profitable one, too. According to Financial Times, Beijing has plans to reduce (and even ban) fossil fuel vehicles. Thus, demand for copper from BEVs will increase.

Industrial Metals Complex

The bullish trend applies not only to copper, but also for the base metals complex, in general. The DBB index remains in a clear uptrend. Both the short- and long-term trends suggest that base metals (and copper) remain bullish, and buying organizations may expect continued upward price movements.

Source: MetalMiner analysis of StockCharts

Free Download: The October 2017 MMI Report

MetalMiner recently published its free 2018 Annual Outlook that covers copper price trends, as well as an industry outlook (and all the other base metals and steel forms). Understanding how to react to price changes is vital in a bullish market.

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Before we head into the weekend, let’s take a look back at the week that was.

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  • Holidays in India mean an uptick in gold buying — our Sohrab Darabshaw covered India’s holiday gold surge.
  • The fourth round of renegotiation talks focused on the North American Free Trade Agreement (NAFTA) concluded earlier this week. We covered the latest round of talks, which by all accounts have the three negotiating teams at an impasse.
  • As the fallout continues from Kobe Steel’s quality data falsification scandal, our Stuart Burns wrote about what exactly might have gone wrong at Japan’s third-largest steelmaker.
  • The World Steel Association’s Short Range Outlook came out this week, predicting solid, albeit moderated growth for the global steel market.
  • Precious and base metals have been behaving similarly, our Irene Martinez Canorea wrote this week.
  • The U.S. International Trade Commission launched a new Section 337 probe related to automation systems.
  • The value of the U.S. dollar has a significant impact on the fortunes of a number of metals, our Stuart Burns explained.
  • And how about palladium? Burns also touched on the rise of the platinum group metal and its leapfrogging of platinum (for the time being).
  • It’s third-quarter earnings report time. Alcoa and Nucor were among the latest companies to announce their earnings for the latest quarter.

Free Download: The October 2017 MMI Report

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This morning in metals news, Japanese carmakers tested the safety of Kobe Steel products, palladium outshines gold and the global nickel deficit widened in August.

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

Kobe Steel Materials Pass Safety Checks

Toyota, Honda and Mazda gave Kobe Steel, Japan’s embattled third-largest steelmaker, a touch of good news Thursday by saying its products are safe, despite the recent data falsification scandal.

According to a report in The New York Times, the products fell short of advertised standards, but met with regulators’ standards (as well as those of the carmakers).

Palladium Continues Charmed Run

The palladium price recently eclipsed that of platinum for the first time since 2001 — and the metal’s rise has people taking notice.

The upward trend for palladium has even caught the eye of the gold industry, according to the Financial Times.

Our Stuart Burns covered palladium’s rise in his post earlier this morning.

Nickel Market Showed 6,700-Ton Deficit in August

The nickel market deficit deficit rose to 6,700 tons in August, according to data released by the International Nickel Study Institute.

Free Download: The October 2017 MMI Report

Global production was 176,800 tons, with demand at 183,500 tons.