Articles in Category: Sourcing Strategies

The head of an Indian zinc company is using the surge in metal prices to the financial benefit of his shareholders in a major way.

According to a recent piece from Bloomberg, Anil Agarwal, the billionaire head of Hindustan Zinc Ltd., is parlaying metal price increases into a $4 billion dividend for shareholders in what is being called a record return for the company.

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The closest beneficiaries include Vedanta Ltd. (65% ownership) and the Indian government (30% ownership), Bloomberg stated. Hindustan Zinc is the largest zinc producer in India.

“Vedanta continues to be in a very good space given all its verticals are doing well and if they can reduce debt that would be a better ploy and would increase the returns for shareholders,” Sanjiv Bhasin, executive vice president at India Infoline Ltd., told the news source by phone. “Metals, as a proxy to global growth and given the stimulus announced in the U.S., have been the best asset class in the past one year, and it will continue to outperform.”

Zinc Price Rally Amps Up

Our own Raul de Frutos wrote earlier this week that zinc prices climbed the week prior and the metal is now trading near the milestone of $3,000 per metric ton, which is the last time prices have been at this point since September 2007.

de Frutos wrote: “Zinc has doubled in price since it hit bottom in January of last year. As prices climbed, many buyers probably made the mistake of thinking prices were too high, missing this spectacular rally. However, buyers that subscribe to our monthly outlook, didn’t miss this rally. We recommended buying forward starting in April of 2016. Ever since, prices have risen without looking back.”

How will zinc 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:

Tin cans. Cans are used for packing all sorts of goods – conserved food, chemical products such as paint, etc

Tin prices hit $20,459 a metric ton to begin the week, marking its highest point in nearly two months due in part to concern over shortages on the London Metal Exchange following cancelled warrants.

According to a report from Reuters, those shortages grew to nearly 50% of LME stocks.

Tin has been riding a high wave since January 2016 with global prices for the metal surging by nearly 40% since that time.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

According to a recent report from The Star Online, Malaysia Smelting Corp is anticipating better performance this year given the continued ascent of tin prices. MSC is the world’s second-biggest tin supplier and is counting on tin price growth, along with a strengthening of the U.S. dollar, to bring substantial improvement to the company’s profit over the course of the coming quarters.

“We will continue to make the necessary strategic decisions and adapt to the ever-changing marketplace,” CEO Datuk Dr. Patrick Yong told the Star.

How will tin 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:

If I was a copper miner, I would be rubbing my hands because copper prices are looking healthy as a horse.

Supply Disruptions

Workers at Cerro Verde mine in Peru put down there tools on Friday, halting output of 40,000 metric tons per month in a dispute over labor conditions (here’s a video interview and analysis I did about it for Swiss Financial Television). The strike stretched into its fourth day yesterday after a meeting between the union and management failed to resolve it on Monday. The mine is currently making about half as much copper as it normally does, because owner Freeport-McMoran hired contract workers to operate key areas.

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

The action adds to disruptions at the world’s two largest copper mines, Escondida in Chile and Grasberg in Indonesia, which are losing production daily due to a strike and an export ban respectively.

The Technical Picture

Three-month London Metal Exchange copper. Source:MetalMiner analysis of fastmarkets.com data.

The technical picture is important because it tells a lot about what buyers and sellers are doing. Copper rose nearly 30% in November. Usually, after such a huge run it’s normal to see some selling but we haven’t really seen that yet.

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Since November, prices are holding pretty well and that’s a sign that bulls are still in control. A sharp price decline in oil prices last week would normally bring other commodities down but copper held its ground well. The red metal continues to make higher highs and higher lows, a textbook definition of a healthy uptrend.

What This Means For Metal Buyers

The diagnosis is that while copper’s bull market doesn’t show real signs of weakness, we continue to expect further upside moves. Buyers should keep an eye on the ongoing supply disruptions because they could hurt your budget.

Set of copper pipes of different diameter lying in one heap

The newly opened Cobre Panama mine in Central America could begin copper production as early as 2018 and reach full throttle by the end of 2019, which would be a much needed supply boost for a copper market that is set for its first deficit in six years and could be in shortage through 2020.

According to a recent post from Bloomberg, mine disruptions led to copper prices growing roughly 25% over the past six months. Demand in China and a boost in U.S. infrastructure have made copper the biggest gainer in Bloomberg’s Commodity Index.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

“Good copper projects are scarce at these prices,” First Quantum President Clive Newall told Bloomberg in a phone interview Monday from London. “There is an incentive price to build new greenfield sites, which is significantly above the current price.”

A Citigroup report added that copper prices need to rise another 15% to about $6,700 a ton before mining companies commit to new greenfield projects, which translates to the industry not likely boosting capital spending until 2019.

Copper Prices Drop this Week

Hit by a supply overload, multiple sources are reporting that copper prices fell to a two-month low this week.

Wrote Leia Toovey for the Economic Calendar:

“Factors adding pressure to copper include a higher U.S. dollar, disappointing import data from China and a pile-up of LME-tracked inventories. Also, on Thursday BHP Billiton said it was considering bringing in temporary workers to bring some copper production back online that has been impacted by the strike at its Escondida copper mine.”

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:

With aluminum premiums on the rise in the U.S. and Europe, and Japanese inventories falling amid growing demand, producers are upping the ante by charging the Pacific Rim a higher premium for the second quarter in a row.

According to a recent report from Reuters, three global aluminum producers offered buyers in Japan a premium of $135 per metric ton for shipments of the metal in Q2. This would mark an increase of 42% quarter-over-quarter.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

“The producers claimed that the rise mainly reflected higher premiums in the U.S. market, but we think $135 is too high as we don’t feel much supply tightness here,” a source at an end-user told the news source, adding that his company would aim for premiums at around $120-125/mt.

Aluminum Leads the Charge in February

Our own Raul de Frutos wrote this week that of all the industrial metals, aluminum performed the best in February with prices on the London Metal Exchange growing above $1,9000 per metric ton. This marks the first time since May 2015 prices have been this high for the metal.

Wrote de Frutos: “In February, China finally approved its Air Pollution Control regulations, which came into effect on the March 1.The world’s largest nation-producer of the metal will force about a third of aluminum capacity in the provinces of Shandong, Henan, Hebei and Shanxi to be shut down over the winter season, which runs from the middle of November through the middle of March.”

How will aluminum 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 Washington, D.C. federal judge on Tuesday rejected the Cheyenne River Sioux Tribe’s bid to block operation of the Dakota Access pipeline on federal land in North Dakota, saying the tribe likely won’t be able to show that the federal government interfered with its exercise of religion on land outside the tribal reservation by allowing the project to go forward.

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

Judge James Boasberg of the U.S. District Court for the District of Columbia rejected the tribes’ request for an injunction to withdraw permission issued by the U.S. Army Corps of Engineers for the last, eight-mile link of the oil pipeline underneath Lake Oahe in North Dakota. Read more

February drew to a close with steel prices in the midst of a rally, following a slight reduction the week prior, with traders honing their focus on steel production cuts.

According to a recent piece from the Economic Calendar, Leia Toovey writes that China rebar futures grew 4% earlier in the week due to said cuts, but also due to seasonal demand.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

Citing a recent report from Reuters, Toovey added that steel producers in China have been tasked with scaling back production to reduce pollution in time for the start of the China’s National People’s Congress.

Toovey writes: “The cutback in production ahead of the Congress was anticipated, but it also brings back to the forefront the fact that the country is serious when it comes to reducing pollution. Previously, the country announced that it would crack down on industries that were heavy polluters in order to reduce emissions.”

A Cool February for Steel Prices

Our own Raul de Frutos wrote of the cool down in steel prices for February. He maintains that the slow down was just temporary and that, raw material prices, in addition to other factors are in full support of the ongoing steel price rally.

De Frutos concluded: “Steel prices have increased for three-consecutive months. The right time to buy steel was in November, now prices might need some time to digest last year’s gains. Steel buyers need to keep a close eye on China’s production, President Trump’s new policies and raw material price trends in order to identify new opportunities to buy steel in 2017.”

How will steel 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:

Gold prices have gained 9% this year, regaining much of the losses seen after the U.S. presidential election.

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

A stronger dollar and expectations for economic growth drove investors out of the safe-haven asset. What’s now sending investors back into gold? and, is this gold rally the beginning of gold’s revival or just a dead cat bounce?

Buying The Dip

Gold rises in 2017. Source:MetalMIner analysis of @stockcharts.com data.

Although a 9% increase might look impressive, it really isn’t. Gold previously lost $180 per ounce in less than two months. After such a big slump it’s normal see a price rebound since many investors will see the significant dip as an opportunity to buy gold at a discount.

To me, this doesn’t mean that gold’s underlying fundamentals have improved. Prices still have yet to test stiff resistance near $1,300 per ounce. This rally could lose steam in March.

The US Dollar

The US Dollar Index since March 2016. Source: MetalMiner analysis of @stockcharts.com data.

Perhaps, the single factor contributing most to this year’s gold rally is a weaker dollar. Weakness in the dollar also comes because the currency rose very fast in the last quarter of 2016. In addition, President DonaldTrump made comments that he desires a weaker dollar and that has also weighed down the currency.

Last week, Federal Reserve officials said they plan to raise rates “fairly soon,” but they left investors doubting that the central bank will act at its March meeting. The Fed raised interest rates in December and cited plans to raise rates as many as three times in 2017. Higher rates tend to weigh on gold, since the precious metal becomes less less attractive compared with yield-bearing assets when borrowing costs rise.

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This month the dollar seems to be finding some support. We’ll have to wait and see if the currency can resume its bull market run, which would be quite bearish for gold prices.

Stock Markets

The S&P 500 hits all-time highs. Source: @Stockcharts.com.

Trump has frequently told U.S. citizens he remains committed on both tax reform and regulatory cuts since entering the White House, which has created optimism among investors. We already presented the case for a bull stock market back in January.

A Trump administration for the next four years might be just what the doctor prescribed to keep this aging bull stock market going, even with seven-plus years of gains behind its back. At least that’s what it looks like thus far. U.S. stock indexes are trading at all-time highs, which is not helping gold as a safe haven.

What This Means For Metal Buyers

The recent strength in gold prices is something to keep an eye on. However, keep in mind that this rally might just be a dead cat bounce. A rising stock market, a healthy U.S. dollar and gold prices meeting resistance are factors that could keep a lid on gold’s rally.

The International Lead and Zinc Study Group released its February 2017 report on zinc, which found the global market for the refined metal was in deficit in 2016.

It’s reported that zinc inventories in warehouses operated by the London Metal Exchange, Shanghai Futures Exchange and Chinese State Reserve Bureau — along with those reported by producers, merchants and consumers — decreased last year.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

The ILZSG report stated: “A substantial 43.1% decline in Australian zinc mine output was primarily a consequence of the closure of MMG’s Century mine at the end of 2015 and a reduction in output at a number of Glencore’s mines. Production was also significantly lower in Ireland, due to the shutdown of Vedanta’s Lisheen operation, India and Peru. However, these reductions were offset by increases in Bolivia, Canada, China and the commissioning of new production in Eritrea. As a consequence overall world production was at a similar level to that in 2015.”

It’s also important to note the global output of refined zinc metal was on par with the total tallied in 2015, with China and the Republic of Korea leading the way.

Zinc Prices on the Rise

Our own Raul de Frutos covered the ILZSG findings earlier this week, and also noted that it is only a matter of time before Chinese zinc producers are forced to reduce their output of the refined metal.

He added: “As a result of this narrative of supply shortfall, zinc is trading at the highest levels in more than eight years. Bulls have been in such a powerful position that prices have barely retraced during this run.”

How will zinc 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:

When it comes to metal prices, is any one price really representative of the hundreds of transactions that happen every day? While market prices posted on exchanges are a good guide, isn’t it the transactions behind them actually move markets?

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Organizations have been tapping the potential of crowdsourcing, defined by the Tow Center for Digital Journalism as the act of specifically inviting a group of people to participate in a reporting task—such as newsgathering, data collection, or analysis—through a targeted, open call for input; personal experiences; documents; or other contributions.

The British Parliament used a primitive form of crowdsourcing in 1719 to find a way to measure a ship’s longitudinal position. The Crown offered the public a monetary prize to whoever came up with the best solution. In 1970 French amateur photo contest ‘C’était Paris en 1970’ (‘This Was Paris in 1970’) — sponsored by the city of Paris, France-Inter radio, and the Fnac — got 14,000 amateur photographers to produce 70,000 black-and-white prints and 30,000 color slides of the French capital to document the architectural changes of Paris. Photographs were donated to the Bibliothèque historique de la ville de Paris.

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The actual term crowdsourcing wouldn’t be coined until 2005 when Wired writer Jeff Howe used it. Some organizations have successfully mined its potential to create powerful e-businesses. Netflix used crowdsourcing to improve its recommendation engine by 10%, attracting over 44,000 submissions. Wikipedia’s content is entirely crowdsourced from contributors to create a “free-access, free content Internet encyclopedia. Wikipedia executives have said the non-profit service never could have worked without crowdsourcing.

MetalMiner Benchmark

We recently launched MetalMiner Benchmark. Source: MetalMiner.

Lego Ideas is a platform that lets individual Lego builders submit their ideas, like this Volkswagen Golf brick creation, to the company for production. Kickstarter, GoFundme and other platforms have branched out into crowdfunding, using crowdsourcing to solicit donations for specific projects or, as in the link above, even funding for zoo animals like giraffes.

What Does This Mean for Metal Buyers?

MetalMiner recently launched a new metal price benchmark service. You can currently use MetalMiner Benchmark to compare what you’re paying for raw materials against 31,384,272 price benchmarks from 1,232 companies in 22 Industries. By adding your prices to the MetalMiner Benchmark database, the crowdsourced price database will grow exponentially.

We will continue to offer the latest transactional price information to you, the metals buyer, to inform your decisions about several forms of carbon steel, stainless steel, aluminum, nickel alloy and alloy steel on our safe, secure and anonymous platform. All data entered is validated for its accuracy and then only used for price comparisons.