Articles in Category: Sourcing Strategies

For metals industry professionals looking to plan out their purchases — especially as Section 232 investigations continue to loom — there can be an almost dizzying number of factors to consider.

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

MetalMiner’s Budgeting Workshop on Wednesday, July 26, in Chicago aimed to bring a little clarity to the decision-making process.

The workshop, attended by 16 metals industry professionals, featured expert advice from MetalMiner Founder and Executive Editor Lisa Reisman, Editor-at-Large Stuart Burns, stainless steel expert Katie Benchina Olsen and Procurement Forecast Analyst Irene Martinez Canorea.

Many of the event attendees were looking for the same thing: information to improve their company’s forecasting abilities. Luis Velez, for example, the strategic sourcing and supply chain director of the Welding Group at ITW, said he hoped for a “better way of forecasting and outlooking prices on metals,” citing inconsistency of other forecasting tools.

Reisman began the workshop with a presentation covering everything from the genesis of MetalMiner, the state of various markets — in a snapshot, commodities are bullish, industrial metals are bearish — and MetalMiner’s Benchmark service.

MetalMiner’s Benchmark service, launched in February, allows prospective metal buyers to tap into a database that includes: data from 1,300-plus companies in 21 industries; more than 31 million actual price points of industrial metals; and the ability to compare metals by type, grade, form and size. The application offers self-service and an enterprise versions.

Reisman also discussed the framing of MetalMiner’s forecasting approach. In short, she reviewed the reasons for not engaging in long-term forecasting — the time frame lends itself to unreliable predictions. Rather than focusing on trying to predict what the specific price of something will be at a specific time — somewhat of a fool’s errand — MetalMiner aims to find out how those in the metals industry can source, buy and procure with greater confidence by understanding market trends. 

Moving away from a macroeconomic approach focused on demand factors (GDP, China PMI and others), MetalMiner zeroed in on statistical regression models, starting with aluminum.

“We reframed the challenge,” Reisman said. “It’s not predicting what the price is going to be at a specific point of time. That’s irrelevant. And guess what? All of us would be multimillionaires sipping margaritas on the beach because we wouldn’t be doing metal-buying if we had that information or figured out how to do that.

“The challenge is having the confidence to say ‘should I buy long now?’ or ‘should I be buying on the spot market? Should I enter into a volume contract, should I use an index, should I not use an index?’. … That’s the challenge we want to seek to address.”

In short, the approach is about behaviors, not specific numbers at specific times.

“When we look at our track record, our track record is not based on predicting the price of metal, it’s based on ‘did we call the right behavior at the right time?'” Reisman said.

So what does go into the analytical approach for the short term? Surveying commodities trends, industrial metals by class, individual metals, and price and volume all factor into the outlook.

“One of the things that we find that there’s been a disconnect in our industry is there’s a lot of fundamental analysis — supply and demand — and not a lot of quantitative analysis looking at what the markets are doing,” Reisman said. “Hedge funds and traders are taking more of a quantitative approach to looking at markets and I think we as industrial buyers also need to have a similar approach.”

Before breaking up into small discussion groups by metal class, the workshop invariably turned to Section 232 — that is, the Trump administration’s still-pending investigations of steel and aluminum imports on the grounds of national security — and the North American Free Trade Agreement (NAFTA).

In terms of Section 232, trade policy measures that have been suggested include tariffs, quotas or a hybrid approach combining the two.

“I think 232 scares most people only if quotas are put in,” said Jack Bellissimo, sourcing manager for Hubbell, Inc. “So if they put a quota in and say you are able to ship 20,000 tons a year in, and now you can only ship 1,000 tons, now tube and pipe business is able to really come out and be aggressive.”

Many expected Secretary of Commerce Wilbur Ross to announce the findings of the steel investigation by the end of June. That didn’t happen, however, and comments from President Trump earlier this week indicated steel trade policy might not be at the top of the administration’s to-do list at the moment.

Other questions that need to be resolved, aside from which specific measure (tariff, quota or a combination) could be employed, include designation of a baseline year for the policy and potential carveouts for certain metals, like grain-oriented electrical steel (GOES), Reisman said.

As for NAFTA, the Trump administration is looking to renegotiate the 23-year-old trilateral trade agreement in order to reduce long-standing trade deficits with Mexico and Canada. The Office of the United States Trade Representative recently announced negotiations on NAFTA will begin Aug. 16 in Washington, D.C.

Following the conclusion of the presentation, the workshop attendees split up into groups to trade notes on a number of industry issues, including ways of measuring performance, cost-saving, indexes and more.

The stainless steel sub-group talked amongst each other about contract length (six months was the most common length discussed), surcharges and how weights are determined.

“Are you billed on actual weight or theoretical weight, or are your requiring that you’re billed on minimum thickness of the material,” Olsen said, recapping the questions posed.

The consensus was that they were billed theoretically, Olsen said.

Free Download: The July 2017 MMI Report

“But the best practice, I think, that we all agreed was if you can get away with it, [is] minimum,” said Trevor Stansbury, president of Supply Dynamics.

For more information about MetalMiner’s Benchmark service, visit the Benchmark page at benchmark.metalminer.com

Eramet, a prominent French nickel miner, recently announced additional cost cuts following its nickel division suffering more losses in the first half of this year.

According to a report from Reuters, this announcement comes after the mining company said it would alter its strategy to include the lower-grade nickel pig iron market with a new mining project in Indonesia.

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!

Nickel mining companies from across the globe are suffering the effects of a weakness in market prices, and Eramet is no exception. Pressure on nickel prices can be attributed to top producing nations Indonesia and the Philippines placing restrictions on their mining sectors.

According to Reuters, nickel prices were higher the first half of last year, but still less than production costs of Eramet’s nickel plant in New Caledonia.

“We’re working flat out to reach $4.50 which is still our cost target for the end of the year,” Chief Executive Christel Bories told the news source. “With a market price that languished below $4.50 in the first half and for some time before that, we’re convinced we have to go beyond $4.50 and pretty quickly.”

Nickel Price Outlook for the Remainder of 2017

How will nickel and base metals fare in 2017? You can find a more in-depth nickel 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:

AdobeStock/vvoe

The International Lead and Zinc Study Group (ILZSG) released its first half of 2017 findings for zinc, which found the worldwide market for refined zinc metal was in deficit during the first five months of the year while total reported inventories declined over that same time frame.

The ILZSG reported that world zinc mine production grew by 6.3% despite reductions in the United States and Australia.

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!

“A significant 54.8% rise in Indian refined zinc metal output was largely offset by reductions in Canada, Japan, the Republic of Korea, Peru and Thailand resulting in an overall global increase of 0.4%,” the ILZSG report stated.

Furthermore, after a significant decrease in 2016, apparent demand for refined zinc metal in the United States grew 19%. In China, apparent usage declined by 2.8% and grew 1.8% in Europe. On a global basis, zinc demand grew 1.1%.

The ILZSG report on zinc concluded: “Chinese imports of zinc contained in zinc concentrates amounted to 477kt, a rise of 27.9% compared to the same period of 2016. The country’s net imports of refined zinc metal decreased by 48.4% to 129kt.”

Zinc Price Outlook for the Remainder of 2017

How will zinc and base metals fare in 2017? You can find a more in-depth zinc 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:

Macro photo of a piece of lead ore

The International Lead and Zinc Study Group (ILZSG) released its monthly report for July, which found that global refined lead metal demand outgrew supply during the first five months of the year.

Furthermore, total reported stock levels increased over this time, as well.

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 revealed an increase in global lead mine production of 12.7% when compared to the first five months of 2016. This was mostly attributed to increased output in China and India, which counterbalanced decreases in Peru and Australia.

According to the ILZSG: “A rise in world refined lead metal output of 7.2% was primarily influenced by increases in China, India, the Republic of Korea and the United States. An increase in US apparent demand for refined lead metal of 23.3% was principally a consequence of a sharp rise in net imports. Chinese apparent usage rose by 13.7% and in Europe by a more modest 1.7%. Overall global demand rose by 10.3%.”

The ILZSG report concluded that Chinese imports of lead contained in lead concentrates dropped 4.9%. Meanwhile, net imports of refined lead metal grew substantially, from 12kt in 2016 to 41kt this year.

Lead Price Outlook for 2017

How will lead and base metals fare in 2017? You can find a more in-depth lead 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:

 

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Tin prices strengthened on the non-ferrous metals market this week as a result of stockist purchases due to firm demand from alloy industries.

According to a report from the Business Standard, tin joined copper cable scrap, zinc and copper wire bar as having also moved up due to growing demand from their industrial bases.

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!

This growth may only be temporary, as our own Irene Martinez Canorea wrote just last month that the outlook remains bearish for the tin metal market.

She wrote that, similar to its sister metals, tin prices declined starting from the beginning of June. A market analysis of tin prices and trading activity indicates a more bearish outcome for the metal.

Canorea wrote: “According to the International Tin Research Institute (ITRI), the fluctuation of tin stocks has varied based upon tin prices in the market. Indonesian exports remain robust, with an increase of 10% in May compared to April. However, Myanmar tin exports decreased slightly again in May. This reduction of Myanmar output is expected to continue until the end of this year, as analyzed in detail in our monthly forecast reports.”

China Influencing Tin Prices

Canorea also noted that tin prices may also be impacted by the approval of a new Chinese policy that will directly affect the largest tin-producing company in China.

She added: “This policy consists of the removal of the valued-added tax (VAT) structure, which taxes imports of tin concentrates and was supposed to provide a tax rebate of 17% on exports. The catch? Exporters were never able to collect the rebate, so they ended up buying tin exclusively from domestic sources.”

How will tin and base metals fare in 2017? You can find a more in-depth tin 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:

TTstudio/Adobe Stock

What is already a global copper deficit could worsen this year with more mines expected to be affected by worker strikes in the coming months.

According to a report by Reuters, South American copper mines are bracing for additional strikes, but polls indicate price movements have already been taken this information into account.

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!

“We will mostly likely see more disruptions later this year … but they are not to be as severe, and the price impacts should be largely priced in,” economist Amy Li at National Australia Bank in Melbourne, told Reuters.

The previous strikes Li is referring to were earlier this year in the world’s largest copper mine at Chile’s Escondida and the No. 2 Grasberg mine in Indonesia.

Reuters also reported copper traded on the London Metal Exchange increased 8% this year, ranking fourth of the six main LME-traded metals.

Copper Prices to Fall?

Despite a perceived shortage in global production of the metal, numerous reports have copper at risk for a price shortfall. The reason? Slow Chinese economic growth, which could take 10% or more off copper prices in the next several months.

“We expect several of the recent drivers of industrial metals — especially stronger economic growth in China — to slow going into the second half of the year,” Seth Rosenfeld, senior research analyst at Jefferies told Fox Business.

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:

A major shake-up in the global aluminum industry as Norwegian firm Norsk Hydro will fully own aluminum products maker Sapa after buying a 50% stake from conglomerate Orkla.

According to a recent report from Reuters, this transaction values Sapa at $3.24 billion on a debt-free basis.

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!

Hydro produces primary aluminum from scratch, but by combining with Sapa, enhances its capabilities to become an integral supplier for automotive firms, aircraft makers and the construction sector.

“Sapa will enable us to assume global leadership, establish a platform for growth, and provide responsible operations and sustainable solutions for the future low-carbon economy,” Hydro Chief Executive Svein Richard Brandtzaeg told the news source.

He added: “The combination will make Hydro the only global company in the aluminum industry that is fully integrated across the value chain and markets.”

Automotive MMI Grows in June

The aluminum component remains a significant one for the automotive industry. According to recent analysis from our own Fouad Egbaria, the Automotive Monthly Metals Index rebounded from a reverse in May to move forward in June.

Egbaria wrote: “Although the increase was small, the one-point jump is an encouraging sign, as it marked the first increase for the sub-index since early this year, when it jumped from 82 to the February reading of 92. After that 92 mark, the sub-index posted four straight months of decreases.”

How will aluminum and base metals fare in 2017? You can find a more in-depth aluminum 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:

gui yong nian/Adobe Stock

Steel stocks rose earlier this week following reports that President Donald Trump could soon place tariffs on foreign steel companies.

According to a report from CNBC, U.S. Steel climbed more than 2% while AK Steel and Nucor each traded at 3% and 1% higher, respectively.

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!

Meanwhile, steel companies from around the would wait with bated breath on the Department of Commerce’s findings into its Section 232 investigation, which will determine whether foreign-made steel imports impact U.S. national security.

“There is a lot of anticipation that there is going to be a statement by the Commerce Department today or later this week that suggests Trump impose something like the 232 tariffs,” Macquarie managing director Aldo Mazzaferro told CNBC.

Impacting Steel Stocks

Citing sources speaking to Reuters, Trump is impatient with China and is looking to impose tariffs on steel imports from the Far East nation. This is impacting steel stocks in a major way.

“Supportive trade policy actions such as Section 232, could be a catalyst to change investor perception,” research analyst Jorge Beristain wrote. “We now have Buys on all Steels & Service Center names as they should benefit from stronger U.S. economic growth and rising trade protectionism.”

Beristain added steel demand in the first five months of 2017 is up 4% compared to the same time frame last year. In addition, Trump’s proposed $1 trillion infrastructure plan will likely also increase demand for steel.

How will steel and base metals fare in 2017? You can find a more in-depth steel 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:

Nickel has been in the throes of a long bear market, but there are reasons to be optimistic about a price bounceback for this industrial metal.

According to a recent report from the Financial Times, demand from China and the electric car battery market heating up could spur a nickel price boost in the coming months.

However, investors should still exercise caution.

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!

“True, there are plenty of negatives out there,” writes Alan Livsey for the Financial Times. “Supply growth from smelters in China and Indonesia has yet to abate. Forced destocking from end users and traders has made matters worse. Goldman Sachs expects net supply growth will nearly triple in 2018 from the estimated 37,000 tonnes this year.”

Livsey added if supply can be curtailed and demand grows as projected, nickel’s once low reputation with investors could see a significant change in direction.

Are Commodities as a Whole ‘Losing their Roar’?

Our own Irene Martinez Canorea recently wrote how June has not been particularly kind to metal producers, beginning with the U.S. Federal Reserve spiking interest rates up by 0.25%.

She writes: “The most recent Fed rate hike breathed a little life into the dollar, which has fallen for most of this year. We believe this could have a direct impact on the metals industry — namely, causing prices to fall.”

How will nickel and base metals fare in 2017? You can find a more in-depth nickel 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:

Join MetalMiner‘s Lisa Reisman, Ecovadis‘ Daniel Perry and Jaggaer‘s Roger Blumberg as they share how to bolster your organization in these times of uncertainty in the following ways:

  • Quickly drawing up a model of a company’s parts and bill of materials to identify areas in need of support and glean insight into the negotiation process
  • Managing the lifecycle relationship of parts, products, and suppliers
  • Reducing risk and improve agility in the MRO supply chain while more reining in small dollar spend

And much more — Join us on June 27th at 12pm EDT/9am PDT for the FREE WEBINAR: