Articles in Category: Premium

The Stainless MMI has inched eight points higher this month, reaching July 2015 levels. The increase was driven by higher nickel prices, together with an increase in stainless steel surcharges.

Stainless steel surcharges have increased this month after decreasing month-over-month since April.

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Source: MetalMiner data from MetalMiner IndX(SM)

Despite the uptick in the Stainless MMI, however, many analysts believe stainless steel will fall  in the upcoming months.

Even if the increase in prices for global stainless steel flat products increased by 6% during the first months of 2017, Oliver Spaltman, senior market analyst for Steel & Metals Market Research (SMMR), estimates that the full-year demand growth in 2017 will be 4%.

In early September, the U.S. Department of Commerce launched anti-dumping and countervailing duty investigations on stainless steel flange products from China and India. The U.S. International Trade Commission (ITC) is scheduled to make its preliminary determinations in the investigations Oct. 2.

Source: MetalMiner analysis of FastMarkets

Nickel prices began falling in early September from their previous peak. However, the uptrend remains clear and strong; we could see upward movements in the coming months.

Higher demand, boosted by Asian battery makers, has aided nickel’s rally. The Chinese electric vehicle market has grown during 2016 and 2017, producing 43% of the worldwide electric vehicle fleet in 2016. If this trend continues, Asian automotive Original Equipment Manufacturers (OEMs) might support nickel prices with their higher battery demand. Also, the latest increases for nickel prices come down to trader sentiment around nickel deficit concerns.

What This Means for Industrial Buyers

Both steel and stainless steel do not appear to follow the same recent increase in industrial metals prices as other base metals.

Every steel form has lost some of its price momentum, but has still notched some increases this month.

To understand how to adapt the buying strategy to your needs, dive into our deeper analysis in our Monthly Metal Buying Outlook.

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Actual Stainless Steel Prices and Trends

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Here’s What Happened

  • MetalMiner’s Global Precious MMI, tracking a basket of precious metals from across the globe, tore itself away from a one-month downward trend to rise 4.7% for a reading of 89. That value was up from 85 at the beginning of August.
  • Palladium continues its steady yet undeniable march upward. The platinum-group metal (PGM) crushed it with yet another recent high, ending up above the $900 per ounce level as of Sept. 1. As of this writing, palladium is holding on to that increase, still hovering near that level.
  • Platinum is no slouch either, creeping upward even closer to its recent high of March 2017, when it landed above $1,000 per ounce.
  • The U.S. gold price broke — and held above — the $1,300 per ounce threshold at the beginning of the month for the first time since October 2016.

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What’s Going On in the Background?

  • Unless you’ve been living in a cave, you would’ve been hard-pressed to miss the hurricane and tropical storm news of the past couple weeks. No sooner did Hurricane Harvey slam into the Texas Gulf Coast region, Hurricane Irma made her way up into the center of Florida soon after.
  • Aside from natural disasters, other price drivers, such as political uncertainty surrounding North Korea and the U.S. Congress’ tussle over how to deal with the debt ceiling — and potential government shutdown — certainly have taken their toll on investor sentiment.

What Metal Buyers Should Look Out For

  • How will the recent storm disasters affect precious metals prices? It could hit gold and silver refiners especially hard, as South Florida is home to one of the biggest precious refiners in the country and is also a hub for “assaying, refining, logistics and financing operations,” according to this article citing, ultimately, reporting done by the Miami Herald. If you’re in the market for those two metals, keeping an eye on the short-to-medium term aftermath of Hurricane Irma looks to be crucial.
  • As for the PGMs, platinum prices may turn around to the downside soon, if the recent outlook of the World Platinum Investment Council (WPIC) is to be believed. The WPIC foresees a stalling of supply out of South Africa for the balance of 2017, while demand will equally stall, according to the council. In terms of palladium’s future, analysts at Commerzbank told DigitalLook “the metal used by the auto industry in emissions-controlling catalytic converters was benefiting from strong Chinese car sales data but that sales there are likely to weaken.”
  • Of course, vehicle replacement in Texas and Florida post-hurricanes could do their part to support platinum and palladium prices. Be sure to check out how MetalMiner’s Automotive MMI fared.

Key Price Movers and Shakers

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The September GOES MMI increased by a full 12 points, reaching 193. Market observers can note with interest that this rise comes on the back of increasing GOES imports, as noted by Roger Newport, CEO of AK Steel, on a recent earnings call.

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Unlike other steel markets, when sudden large volumes of imports begin to arrive typically a big spread exists (the price between the domestic and international markets).

In this case, something else appears to explain the volume of imports into the U.S.

When we examine the total volume of grain-oriented electrical steel (GOES) imports into the U.S., indeed, the assertion of increased import volumes appears correct:

But when we look at what is driving those imports, we come to a different conclusion – that Japanese GOES imports have led the increase (and in fact account for 55% of GOES imports):

One could argue these imports hardly appear “dumped” the average price for Japanese material at $2627/metric ton appears just under the MetalMiner domestic M3 spot price. In fact, by our own analysis of import prices, the average import price of Japanese material for the last six months has only diverged from our M3 spot index by no more than $68/mt, and in one month was more expensive by $64/mt!

It’s hard to see how GOES has been “dumped” into the U.S. market.

Moreover, the industry knows the Japanese produce the more technically advanced grades that allow manufacturing organizations to produce to higher efficiency standards.

Meanwhile, China’s Baoshan Iron & Steel increased GOES domestic prices seven times since the beginning of the year, according to a recent TEX Report. The same report indicates Japanese mills have held prices fairly steady.

The Section 232 investigation remains ongoing, with a report expected by mid- to late-January.

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Exact GOES Coil Price This Month

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The Raw Steels MMI increased again this month by seven points, returning to 2014 levels.

The increase came as a result of rising Chinese steel prices, which have rallied since April 2017.

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Early September data reveal that Chinese hot-rolled coil (HRC) prices increased quicker than U.S. HRC prices.

Domestic steel prices, including HRC prices, mostly held steady in August. The spread between the two has fallen by 5% since the beginning of August. Rising Chinese prices typically lead to reduced imports overall, as U.S. prices become more competitive.

Chinese steel prices have been boosted by better-than-expected demand, together with supply concerns.

China Data Creates Uncertainty

China remains the dominant player in steel market.

Thus, Chinese economics serve as one of the most powerful indicators of the steel industry.

Chinese economic data, however, has created some uncertainty around the steel market. Even if the market expects a correction, economic indicators still reveal positive data.

Yet, some analysts believe China remains in a bubble set to explode at any time.

Raw Materials Show Some Weakeness

Steel prices also take their cues from raw material prices.

Steel prices commonly move together with iron ore, coking coal and steel scrap prices. Raw material price dynamics slowed in August. Both iron ore and coal prices have increased slightly, but showed some weaknesses during the middle of the month.

The previous uptrend for both iron ore and coal comes down to solid demand from China, as steel production has increased this year. However, July iron ore import data reveals a decrease of 8.9% from June’s reading, and 2.4% below last year’s reading. The lower import levels may signal possible future softness in the demand of this commodity. Chinese iron ore has increased by 2%, while Korean pig iron prices decreased by 0.44%.

What This Means for Industrial Buyers

Steel momentum appears to have lost some steam.

Buying organizations should watch commodities to analyze the signals for both the short- and long-term trend.

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Actual Raw Steels Prices and Trends

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The Renewables MMI rose seven points in August, reaching a reading of 84.

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The basket of metals in this sub-index posted a strong month. Steel plate from Japan, Korea and China rose in the month. U.S. steel plate, however, fell 4.6%.

Meanwhile, in the topsy-turvy world of grain-oriented electrical steel (GOES), the U.S. GOES price jumped 7.3%.

Of the nine metals in the sub-index, only one (U.S. steel plate) posted a drop in price as of Sept. 1. Chinese silicon, cobalt and neodymium all also posted price gains.

Charged Up for Cobalt

Last month, we wrote about cobalt, which is in high demand for its application in electric vehicle batteries. Cobalt is mined predominantly in the Democratic Republic of Congo, which has been shaken by violence and political instability this year.

The instability there has seen production in the DRC decrease this year, yielding significant price increases in the metal. As we wrote last month, the instability of cobalt (not to mention growing ethical concerns vis-a-vis child labor at mines) has some battery makers looking to adjust their metal formulas, in some cases suggesting the use of more nickel, instead.

According to a Reuters report, however, cobalt has been boosted by projections touting a rise in purchases of electric vehicles. According to the report, UBS forecasted electric vehicles will account for 3.1% of global car sales in 2021 and 13.7% in 2025, up from 1% this year.

In addition, cobalt listings have skyrocketed, the report says. As of the end of July, 100 companies that explore or mine for cobalt were listed on the Toronto Stock Exchange and TSX Venture Exchange, up from fewer than 30 in 2015, according to SNL Financial.

In short, despite issues of supply volatility — and, thus, material cost — cobalt’s profile continues to rise in tandem with the rise of electric vehicles.

What About U.S. Steel Plate?

Like the rest of the U.S. steel industry, steel plate producers are anxiously awaiting the Trump administration’s determination in its Section 232 investigation of steel imports.

The investigation, announced in April, has a January deadline. The investigation picked up steam earlier on in the summer, but has seemingly been put on the backburner for the time being. As such, initial optimism from U.S. steel producers regarding potentially imminent trade action stemming from the investigation began to wane.

In a letter to the Trump administration last week, the American Line Pipe Producers Association (ALPPA) urged the president to take action, also mentioning steel plate in the process.

“The ALPPA strongly supports the imposition of tariffs to address this crisis,” wrote Timothy Brightbill, counsel to the ALPPA. “With tariffs in place, we could quickly return to full capacity, adding hundreds of direct jobs in addition to upstream and downstream jobs as well.

“However, in order for tariffs to be effective for our industry, steel pipe must be included in any tariff covering steel coil and plate, as failure to do so would be devastating for domestic large diameter line pipe producers and workers.”

Actual Metal Prices and Trends

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This month’s Copper MMI beat its previous gain last month en route to a six-point increase.

The boost was primarily driven by an outperforming LME copper price, which has been seemingly unstoppable since the Chinese copper ban was announced July 24.

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Source: MetalMiner analysis of Fastmarkets

Copper tends to correlate with the U.S. dollar. As a dollar-denominated commodity, a weaker dollar can stimulate copper buyers. The U.S. dollar has not found a floor yet, and has continued falling, reaching a two-year low now.

Commodities, on the other hand, have increased again during the first week of September. A recovery in oil prices has led the increase.

Though it’s much too early to change the commodity outlook to bullish, we did expect the correlation between commodities and industrial metals to come back to a more normal state (where they both tend to move in the same direction).

If commodities start an uptrend, then copper prices may continue their bullish rally, too.

What About China?

As China is the main commodity consumer of the world, analysts pore over Chinese economic data. Chinese economic data released during this summer resulted in better-than-expected — that is, increasing manufacturing PMI — manufacturing data. This fact, together with the government’s environmental policies, has supported base metal prices.

One curious correlation involves the Chinese Yuan (represented by the blue line below) and the copper spot price (red line). Both have moved in a similar fashion recently.

Source: MetalMiner analysis of StockCharts

Does the Chinese Yuan serve as a guide to what copper prices might do in the future?

A deeper analysis of this and other drivers will appear in our upcoming free 2018 Annual Outlook Report, which will be released next month.

What This Means for Industrial Buyers

Even if the uptrend remains strong, we still expect high volatility for copper prices.

Thus, we expect a price retracement at some point in the upcoming months. The price retracement is normal and prices digest previous gains (in this case, a 15% increase).

Source: MetalMiner analysis of Fastmarkets

To better understand how to adapt the industrial metal buying strategies based on these dynamics,  take a look at our Monthly Metal Buying Outlooks.

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Actual Copper Prices and Trends

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The Rare Earths MMI ticked up one point for a September reading of 24.

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After hitting 29 in April 2015, the sub-index fell as low as 16 last year before slowly climbing back up this year with an uptrend that began in March.

For this MMI period, several of the sub-index’s heavy hitters posted strong months. Chinese terbium oxide rose 2% and Chinese dysprosium oxide rose 5.6%. Neodymium oxide rose a whopping 35% in the month.

An overwhelming majority of rare-earth metals production comes from China, and the metals are crucial for use in things like computers, phones and other electronic devices.

According to a recent report on nasdaq.com, China’s Rare Earth Industry Association recently proposed “releasing some of the country’s reserves and suspending the purchase and storage of additional volumes to ease price volatility for the raw materials that are crucial to mobile phones and electronics.”

Reuters’ Andy Home recently wrote about the topsy-turvy world of rare-earth metals prices.

“The prices of neodymium and praseodymium oxide are going stratospheric again, up by over 80 percent since the start of the year,” Home wrote. “As ever with rare earths, this is all about what is happening in China, the world’s dominant producer of these critical materials.”

Rare earths have come a long way since the market collapsed underneath them in 2012. The Financial Times reported last month that the price of two rare earths, neodymium and praseodymium, has jumped by more than 50% this year.

In short, Chinese policies significantly impact the direction of the global market.

The question, as it often is with the rare earths market’s peaks and valleys: when is the next valley?

Actual Metal Prices

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The Aluminum MMI increased eight points from last month’s reading, reaching its highest value since September 2014.

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This rise does not come as a surprise to MetalMiner, as aluminum was the strongest performer in August, increasing by 10.73% during the month.

Aluminum has awakened  from its previous sideways trend and now continues its previous uptrend.

Source: MetalMiner analysis of Fastmarkets

Some analysts do not expect more movements to the upside, as the supply and demand equation appears unclear. Positive data and increasing demand in China have supported aluminum prices so far.

However, Morningstar forecasts a decrease in Chinese demand. Meanwhile, Indian demand may not increase quickly enough to balance global demand.

On the supply side, Chinese curtailment of capacity remains uncertain. Similar to steel, the real impact of curtailments on production remain to be seen.

“Green” aluminum appears to be a new trend  among buying organizations. The difference lies in the use of renewable energy instead of fossil fuels in the smelting process. Premium prices have risen for this type of aluminum as demand continues to rise due to pressure on buying organizations to lower their carbon footprint.

What This Means for Industrial Buyers

MetalMiner believes that aluminum has broken a ceiling that it previously could not break.

The sideways trend that started at the beginning of this year served as a pause in a bullish market, which has just restarted. Trading volumes have supported this late uptrend, which makes the uptrend stronger.

Thus, buying organizations might expect more upward movements in the upcoming months.

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Actual Aluminum Prices and Trends

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The Construction MMI jumped eight points for our September reading, rising from 83 to 91.

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According to U.S. Census Bureau data released Sept. 1 for the month of July (the most recently available data), U.S. construction spending amounted to $1,211.5 billion, down from the revised June total of $1,219.2 billion.

However, construction spending from January-July amounted to $691.2 billion, up 4.7% from the $659.9 billion for the same period in 2016.

Spending on private construction dipped 0.4% to a seasonally adjusted annual rate of $945.5 billion, down from the revised June estimate of $949.4 billion.

As for public construction, the estimated seasonally adjusted annual rate of spending was $266.0 billion, 1.4% below the revised June estimate of $269.8 billion.

As for the individual metals in this particular basket, every single one posted a price increase for the month. Chinese rebar steel, H-beam steel, and aluminum bars all posted sizable price increases. The European 1050 aluminum sheet price also rose, as did U.S. shredded scrap steel.

ABI Shows Continued Upward Trend

Although overall spending was down in July, the Architecture Billings Index (ABI) painted a positive picture for the month.

The ABI, put out by the American Institute of Architects, showed architecture firms continued to grow. All four regions included in the ABI — South, Midwest, West and Northeast — posted an uptick in architecture billings on the month. With a score of 50 indicating no movement, the South and Midwest led the way with scores of 53.8, followed by the Northeast at 53.6 and the West at 50.9.

Another major takeaway from the survey was the increased interest in 3D printing.

“Almost 30 percent of architecture firms have some experience with the applications of this technology,” the ABI report read. “About half of these have used it in-house on billable projects, while others are testing it, outsourcing it, or have design partners, subcontractors, or construction firms that are using the technology. When last surveyed on this topic a little over a year ago, about 20 percent of architecture firms had some involvement with 3D printing, so adoption seems to be increasing at a brisk pace.”

NAFTA and Section 232

The Trump administration’s Section 232 probes into steel and aluminum imports have yet to be publicly concluded. As the world’s No. 1 steel importer, imposition of tariffs (or quotas) on imports would certainly have a ripple effect across all industries, including construction.

As for the North American Free Trade Agreement (NAFTA), the second round of negotiations concluded earlier this week, with the parties having reached very little in the way of breakthroughs, according to Bloomberg.

From a metal perspective, as mentioned before, an overwhelming majority of Canadian steel exports go to the U.S. As with Section 232, if Trump follows through on numerous threats to withdraw the U.S. from the 23-year-old trilateral trade deal, supply chains would be impacted.

Actual Metal Prices

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The Automotive MMI jumped four points to 94, up from 90.

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Major price jumps in the basket of metals relevant to the automotive sector, particularly copper, paced a strong month for the sub-index.

LME copper jumped 6.8%, as the metal hit a three-year high in August. U.S. shredded scrap steel rose 4.5%, while U.S. hot-dip galvanized (HDG) steel jumped 1.1%. U.S. platinum and palladium bars also posted sizable price jumps.

U.S. Auto Sales

Auto sales in 2017 have trended downward, which hasn’t exactly been a surprise given the record sales figures posted in 2016. Sustaining last year’s sales totals would have been a tall task.

However, the news hasn’t been all bad.

According to Autodata Corp sales data released Sept. 1, General Motors had a good month, selling 275,326 units — a 7.4% increase from sales in August 2016. GM’s light truck sales carried the day, rising by 16.5% compared with August 2016. In the year to date, however, sales overall remain down by 2.4% compared with the same time frame last year.

Ford sold 209,029 units, down 2.1% compared with August 2016. Ford’s year-to-date sales are down 4% compared with the same time frame in 2016.

Fiat Chrysler posted a 10.6% drop in sales in August compared with the same month last year, and a 7.7% year-over-year decline.

Tesla, meanwhile, albeit in much smaller volumes, posted a 6.8% sales jump in August compared with August 2016, selling 227,625 units last month. Year-over-year, however, sales are down 1.3%.

Meanwhile, down the sales list, it continues to be a good year for Subaru (8.1% year-to-date increase) and Mitsubishi (5.4% year-to-date increase).

Automakers See Sales Growth in China

Meanwhile, automakers had a strong month in the massive Chinese market, continuing a solid multimonth sales run.

According to Reuters, GM’s sales in China were up 12% in August compared with August 2016, and its January-August sales (2.38 million vehicles) are up 0.3% compared with the same period last year.

August was also a good month for Toyota and and Honda. Honda’s August sales in China jumped 20.6% and Toyota’s jumped 13.2%, according to the report.

Impact of Hurricane Harvey

In addition to the large-scale humanitarian crisis inflicted by Hurricane Harvey in southeast Texas and southwest Louisiana, the storm also will have an impact on the automotive market.

As our Stuart Burns wrote earlier this week, many in the regions impacted by the storm will, eventually, need to replace their damaged vehicles — or, in some cases, some might be looking to go with models more capable of traversing through high levels of standing water.

Unfortunately, there is precedent for just this sort of sales spike on the heels of a natural disaster.

Burns wrote: “By way of a comparison, Reuters cites the experience of auto sales in New York following Hurricane Sandy in October 2012. The following month, auto sales rose 49% compared to the previous year, with all the replacement sales caused by the widespread flooding of the New York metropolitan area arising in the few months following the disaster.”

An uptick in sales in the Houston market, already one of the most robust auto markets in the country, is expected.

Actual Metal Prices

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