Articles in Category: Supply & Demand

photonewman/Adobe Stock

Some commentators were calling the imminent collapse of the aluminum price last month — certainly, it tested the bottom of its recent range, at just below $2,000 per metric ton on the LME.

Buying Aluminum in 2018? Download MetalMiner’s free annual price outlook

But the price has since rallied and is currently range bound between $2,000-$2,075, seemingly suppressed by a strong dollar and the general depression of commodity prices by fears of a trade war. Yet, it is supported by the net deficit position the Western world’s aluminum market has been in last year and this year.

One dynamic that has not featured greatly — but is fast becoming a major concern — is the alumina price.

Read more

Have you set your 2019 metals budget?

Make sure your purchasing strategy is sound with MetalMiner’s free 2019 Annual Metals Outlook!

Arriving just in time for budgeting season, this report contains the unique insight, analysis and tools you need as a metal buyer or manufacturer to know when and how to make the buying decision — including expected average prices, support and resistance levels.

This free, downloadable PDF is one of MetalMiner’s most valuable pieces of content and includes coverage of commodities markets, industrial metals markets and key price drivers for aluminum, copper, nickel, lead, zinc, tin and steel (HRC, CRC, HDG, Plate).

By understanding these price drivers, you can pinpoint exact price levels and make the appropriate changes to your sourcing strategy for that particular metal. You will be also be able to react when the market gives clear signs that a new trend is developing, and stay hedged as long as that trend lasts.

The Annual Outlook Report continues to examine three variables which have underpinned metal markets in recent years:

  • Demand from China (and China’s overall economic outlook)
  • The strength of the U.S. Dollar
  • Oil prices and trends

While the 2019 Annual Metals Outlook report is free of charge, we do recommend you pair it with a subscription to our Monthly Metal Buying Outlook report in order to get the most valuable, up-to-date information and analysis of market conditions.

Download your report today!

Tomasz Zajda/Adobe Stock

Before we head into the weekend, let’s take a look back at the week that was and some of the metals-related storylines here on MetalMiner:

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

  • MetalMiner’s Stuart Burns took a look at the natural gas sector, which make be in for a shakeup as the summer winds down.
  • The rise in global trade tensions has involved tariffs, tariffs and more tariffs…but what about the impacts on currencies, especially emerging-market currencies?
  • The International Lead and Zinc Study Group this week released preliminary first-half numbers for the global lead and zinc markets.
  • Turkey has filed a request with the World Trade Organization (WTO) for consultations with the U.S. over the recently increased steel and aluminum tariffs.
  • The U.S. dollar has come off a bit recently, which is good news for commodities prices.
  • The Aluminum Association, ahead of the U.S.’s planned meetings with Chinese officials on trade, asked the Trump administration to focus its trade remedies on Chinese overcapacity.
  • India is importing more coal as domestic supply has not been able to meet demand.
  • MetalMiner this week released a new white paper on the “farm-to-table” movement coming to manufacturing — check it out here via free download.
  • A Canadian company, Petroteq Energy, is touting what it claims is a clean extraction process in the hunt for oil under Utah’s Asphalt Ridge.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Björn Wylezich/Adobe Stock

According to data released Monday by the International Lead and Zinc Study Group (ILZSG), both lead and zinc were in deficit through the first six months of the year.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

According to the ILZSG report, Chinese data for the months of April, May and June are still unavailable; as such, revisions may be made as that data becomes available.

Global Lead Market

Global lead demand outpaced supply by 39 kt in the first half of the year, according to the report. Meanwhile, reported lead stock levels fell by 41 kt.

Global lead mine production fell 4.2% from the first half of 2017, down to 2,258 kt from 2,386 kt, which was “primarily due to lower output in Australia, Kazakhstan, Peru and the United States that more than offset increases in Europe, Cuba and Morocco,” according to ILZSG. Mine production in June hit 358.3 kt, down 3.4% from 371.0 kt in May.

Lead usage ticked up just 0.5% for the six-month period, aided by usage increases in the U.S. and Germany, according to the report.

Global Zinc Market

As for zinc, the global refined zinc market finished the first half with a 17-kt deficit, according to ILZSG. In that span, reported inventories increased by 77 kt.

Mine production in the first half dropped 2.4% year over year, with reductions in China, India and Australia offsetting a 5.6% rise in European zinc mine production.

Global zinc usage dropped 0.6% year over year, a trend led by apparent demand decreases in South Africa, Taiwan and the U.S., according to the report.

The LME lead price fell 8.7% in the last month, closing at $1,975/mt as of Friday, Aug. 17.

Want to a see Cold Rolled price forecast? Get two monthly reports for free!

LME zinc, meanwhile, traded mostly sideways for much of the past month before dropping 12.1% since Aug. 9, closing at $2,359/mt as of Friday, Aug. 17.

Charles/Adobe Stock

The breaking news this week is that Chile’s Escondida mine operator BHP has announced it looks like a strike has been averted and that a settlement plan is being put to the workers.

That is good news for a market widely expected to go into deficit this year, according to Mining.com.

Wondering how your stainless steel prices compare to the market? Benchmark with MetalMiner

But the prospect of a strike was all that was holding up the copper price, which promptly fell 5% on the news, touching a low of $2.55 a pound ($5,622 a metric ton) in New York and down more than 20% from a nearly four-year high struck a little over two months ago, according to Mining.com.

Production in the world’s largest copper producer, Chile, has been plagued this year by a number of issues (in addition to BHP’s problems).

Competitor Antofagasta announced this week a disappointing set of first-half results. The miner reported production was down 8.5% in the first six months of the year compared to last, due to poor ore grades and infrastructure issues at its biggest mine. Revenue rose on higher prices earlier in the year, but profitability still fell 32%.

The copper price has taken a beating recently on widespread fears about global trade and political turmoil in places like Turkey, but a recent S&P Global report paints a rosy picture for producers regarding future prices, saying new discoveries are falling way below historical standards.

Producers have increasingly focused on developing their existing resources, the report states. This may be due to lack of faith in future prices — the end of the super cycle, or a more cautious post-financial-crash investment climate.

Chinese growth is slowing and producers are more inclined to maximize existing resources than bet the farm on new exploration and invest in new greenfield projects.

S&P reports Latin America hosts over half of copper discovered. Chile and Peru alone account for 83% of copper discovered in Latin America and 46% of the global total found since 1990. Of the 139.9 Mt of copper contained in the 29 discoveries made over the past 10 years, almost two-thirds is contained in the four largest deposits, S&P reports, illustrating the somewhat precarious nature of the copper supply market.

The pool of projects likely to come to market over the next decade is limited by the low level of investment and the long, up to 20-year lead in from discovery to production.

Although prices are currently under pressure from trade fears and a strong dollar, global demand has held up well so far, in the region of 2-3% annually.

Not surprisingly, miners are flagging up supply risks as a bigger issue for the copper market than lack of demand.

In the medium term, they are probably right. Despite all the noise about trade fears and tariffs, the reality is global growth and metals demand has remained robust. Contemporary developments are likely to trump medium-term supply risks in the minds of investors. As such, prices are going to remain subdued this year — if not bearish, then at least trading sideways.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

How we go next year, though, is another matter.

If trade issues can be even partially resolved and some degree of confidence restored, prices could recover; but, for the time being, it is buy as needed.

natali_mis/Adobe Stock

Miner Freeport-McMoRan Inc., the world’s largest publicly traded copper producer, announced its second-quarter earnings Wednesday.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

The miner reported Q2 net income attributable to common stock of $869 million and $1.6 billion for the first six months of the calendar year. The figures compare with $268 million in Q2 2017 and $496 million for the first six months of 2017.

The miner reported copper sales of 989 million pounds in Q2 (1.982 billion pounds through the first half of the year). The miner, also a producer of gold, reported gold sales of 746,000 ounces in Q2 (1.345 million ounces through the first six months). In addition, Freeport reported sales of 24 million pounds of molybdenum (48 million pounds through the first six months).

“Our second quarter results reflect strong performance from our global operations and a continued focus on productivity, cost management and capital discipline,” President and CEO Richard C. Adkerson said. “During the first half of 2018, we generated $2.7 billion in cash flow from operations and capital expenditures totaled $0.9 billion, enabling further strengthening of our balance sheet and advancement of initiatives to build value for FCX shareholders.

“We achieved important progress during the quarter to reach a new long-term partnership structure with the Indonesian government, and we remain focused on completing negotiation and documentation of definitive agreements to restore long-term stability for our Grasberg operations.”

The miner’s share price dipped Wednesday, Bloomberg reported, as a result of operational issues at its Grasberg mine in Indonesia. After hitting $16.43 in the early part of the day, the price dropped 6.4% to $15.06 around noon. It rallied the rest of the day, closing at $15.86 (down 1.37% for the day).

In addition, the miner reported paying off $454 million in debt in April.

Copper Price Slumps

As a major copper producer, Freeport-McMoRan is eyeing the copper market’s recent slide.

The LME copper price has been falling fast since early June. After hitting $7,271.50 on June 8, the copper price proceeded to drop 17.6% and even dipping below $6,000/mt on July 17.

The price then bounced back slightly, moving to $6,166.50 as of July 24.

Source: LME

Adkerson referred to the slide in the copper price in tandem with the trade measures currently being undertaken by the U.S., in particular vis-a-vis China (the world’s top copper consumer).

As we sit here today, there is an anomaly between market sentiment and fundamentals in the marketplace,” Adkerson said. “We’re continuing to see real demand being very positive for our global business, including our business in China.”

Adkerson added that copper demand in the future will benefit from renewable-energy projects and electric vehicles.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

“Absent having some sort of global recession or a major setback in China, market deficits in copper appear to be inevitable,” Adkerson added.

Andrey Kuzmin/Adobe Stack

This morning in metals news, E.U. states have thrown their support behind measures to curb steel imports, Indian steel demand could double by 2025, and copper and zinc prices continue to drop.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

E.U. Backs Steel Import Curbing Measures

E.U. states voted to approve provisional measures to curb steel imports on the heels of the U.S.’s steel tariff, Reuters reported.

E.U. industry members have warned about the potential for steel, once destined for the U.S. market, to flood the European market after the U.S. imposed a 25% global steel import tariff (which included exemptions for a few countries).

According to the report, 25 E.U. member states voted for the provisional measures, while three abstained from the vote.

Indian Steel Demand on the Rise

Demand for steel could be set to double by 2025, according to a report by the Economic Times.

Per the report, BHP Billiton said demand in the country could hit 170 million tons (MT) by 2025.

Copper, Zinc Prices Continue to Fall

Prices of copper and zinc hit multimonth lows yesterday, Reuters reported.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

Per the report, the zinc price dropped to its lowest since June 2017, while copper fell to an 11-month low.

Rising oil prices were seen last year as a positive result of growing global growth and recovery, but a combination of factors are turning this benign view into a more sinister scenario.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

On the supply side, the combined efforts of OPEC and Russia, leaky as the agreement has been, have managed to reduce the global oil surplus in just 18 months to bring the market largely into balance. As a result, oil prices have gradually risen during the period. It’s a trend most observers have been sanguine about, believing the U.S.’s tight oil producers, encouraged by rising prices, will increase output to ensure ample supply and keep a lid on oil prices getting ahead of themselves.

But that benign view had not taken account of President Trump’s decision to rip up the Iran nuclear deal and, as a result, to reinstate sanctions, a move that will take place in two phases to give firms time to adjust.

According to The Telegraph, this will be done in two stages, on Aug. 6 and Nov. 4, allowing 90- and 180-day wind-down periods. In addition the Treasury is to re-list Iranian individuals and entities in the Specially Designated Nationals (SDN) list, thus revoking special licenses and exceptions previously granted to individuals and companies to deal with Iran, making it all but impossible for firms with a U.S. presence or needing dollar clearing to deal with them.

Lastly, Iran’s crude oil sales will be limited under the National Defense Authorization Act of 2012, as the U.S. departments of State, Energy and Treasury will allow ongoing but reduced purchases of oil from Iran, termed “significant reduction exceptions” on a country-by-country basis if they demonstrate a commitment to substantially decrease oil purchases (usually at least a 20% reduction).

As a result, Iran’s exports this year are likely to take a 500,000-barrel-per-day hit, from the country’s roughly 2,200,000 bpd current exports. The Telegraph speculates this could rise to 750,000 bpd next year as sanctions bite deeper.

Iran is not the only threat to supply. The ongoing implosion in Venezuela’s output, as spare parts run out and infrastructure collapses, also figures into the equation. So far, this has taken some 700,000 bpd out of global markets, the news source reports, with no sign of the trend slowing and no quick fix, even if a revolution overthrows the Maduro regime.

Meanwhile, the global oil industry investment collapse since 2014 following the plunge in oil prices has, like a juggernaut, taken time to impact output.

Output from conventional projects has until now been rising as projects started at the beginning of the decade have come onstream, but the cycle is turning — The Telegraph reports output will fall precipitously, by 1.5 million bpd in 2019.

So, what of all that replacement supply from the U.S. shale market?

Rig counts have predictably risen and output is up, but both U.S. tight oil and the Alberta tar sands are facing an infrastructure squeeze. Limited pipeline capacity and the failure to build new ones is holding back supply from the West Texas and Tar Sands regions. The U.S. is now becoming the world’s largest oil producer, on target to produce 12 million bpd next year by Energy Information Administration (EIA) estimates. However, that will not insulate the U.S. from higher oil prices, as the country is now exporting significant quantities of distillates and growing volumes of crude.

Saudi pledges to maintain stability in the oil markets should be taken with a pinch of salt. They have equally said they do not see any problem with a $100/barrel oil price and so are unlikely to raise their own production to ease the pain for everyone else until prices are well into triple digits.

Want to see an Aluminum Price forecast? Take a free trial!

The Telegraph quotes Westbeck Capital, which says “We believe an oil price shock is looming as early as 2019 as several elements combine to form a ‘perfect storm’,” predicting $100 crude in short order, with $150 coming into sight, as the world faces a crunch all too reminiscent of July 2008.

Lithium batteries. konok1a/Adobe Stock

We normally associate Cornwall in England with scones and cream teas … or, if we are really metal nerds, we associate the sometimes sunny southeast country of the British Isles with mining (particularly with tin mining).

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

The area dominated with igneous morphology has been mined since Roman times for tin, copper and a number of other metals.

But one metal, not surprisingly, that has never featured is lithium. I say “not surprisingly” because up to the end of the last century, it barely featured as a metal of value.

Nickel metal hydride batteries dominated the small appliance world and lead acid still served the rest. This century has seen an exponential growth in the use of lithium-ion batteries, from iPhones to electric cars to massive storage barns. The growth has been such that fears are mounting of a market shortage in the next decade, fueled in no small part by state support for electric vehicles (EVs) in Asia.

In fact, so urgent has the situation become that Chinese and Japanese battery makers are quietly buying into or buying up lithium deposits around the world to ensure they have secure supplies.  Currently, Europe consumes around 25% of the world’s lithium, but is dependent on imports from Australia, Chile, Argentina and China.

Read more

As my colleague Fouad Egbaria wrote last week, the U.S. administration’s relaxation of the timescale for implementation of sanctions against Rusal has had the effect of taking the panic out of the market. As a result, prices have fallen for several days, not just for aluminum but for other metals that the market feared could face the same threat — most notably nickel, in which Russian oligarch Oleg Deripaska has an interest.

Buying Aluminum in 2018? Download MetalMiner’s free annual price outlook

But the vagaries of Washington policy aside, the underlying fundamentals for the nickel market remain firm.

Global Nickel Production and Usage Projected to Grow This Year

Reuters reports that according to the International Nickel Study Group, world stainless steel melting production rose by 5.8% last year, while projecting that global nickel production and usage is expected to rise to 2.344 million tons (MT) in 2018.

In terms of tonnage, world nickel production is expected to grow from 2.07 MT last year to 2.22 MT this year, while usage is expected to increase from 2.19 MT in 2017 to 2.34 MT in 2018.

As a perspective on fundamentals reasserts itself, the nickel price has recovered, rising back about $14,000 per ton. Demand has remained robust among stainless producers, with production forecast to rise 4% this year to over 52 million tons, while fears remain around supply.

Philippines Industry Aims to Navigate Government Land Regulations

The Philippines was top supplier to China last year, but the government of President Rodrigo Duterte is not letting up on its efforts to curb environmental damage from the extraction industry and threats remain of nickel mining being curtailed.

Nickel Asia, the Philippines’ top nickel ore producer and operator of the only two nickel smelters in the country, is quoted by Reuters as saying it intends to ship 20 million tons of ore this year — up 17% on last year.

But the government is limiting the amount of land miners can develop at any one time in a spur to rehabilitate old workings.

The limits are highly restrictive, amounting to only 100 hectares for mines producing 9 million tons or more, or 162 hectares if the project has a processing plant on site. The biggest of Nickel Asia’s mines covers 5,000 hectares and even the smallest covers 700, so it will be interesting to see if the firm manages the expansion in output it is projecting.

Indonesian Output on the Rise

Output in Indonesia is recovering following a lifting of the 2014 ban. The country has reasserted itself as the No. 1 supplier to China in the first half of this year.

The ban was lifted partly as the country looked to make up for the loss of revenue when exports collapsed and partly as firms invest in the downstream processing the ban was intended to force through.

Further increases in output, however, are limited, and investment in new reserves has been poor, while the nickel price was lower over recent years so the ability of the market to respond to predicted increases in demand from electric car and battery makers is in question.

The Outlook

We could see a growing divergence in nickel prices with standard nickel stainless melting grades remaining firm in the short to medium term, but battery Grade A, high-purity nickel premiums rising strongly if demand materializes as expected.

Want to see an Aluminum Price forecast? Take a free trial!

Supplies of such high-purity nickel are limited, with only major producers like BHP Billiton, Norilsk Nickel, Vale and Sumitomo able to supply.