Articles in Category: Supply & Demand

electric car battery

Electric car lithium battery pack. (Nischaporn/Adobe Stock)

In the coming months, metal prices could be buoyed by policies of the next U.S. presidential administration, Reuters reports.

President-elect Joe Biden plans to spend $2 trillion on infrastructure and promote green policies, which require the use of more batteries and solar panels — both of which rely heavily on metals.

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HRC hot-rolled coil steel

taitai6769/Adobe Stock

HRC mills in Western Europe continue to seek higher prices for hot rolled coil on high local demand and low availability, traders told MetalMiner.

End users are also trying to hedge their positions because November and December are the two months when they build up stocks before year’s end, traders said.

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Mills are now offering HRC at €600 ($715) per ton EXW for February/March delivery, up from previous deals of €520-530 ($620-630), sources said.

It’s not clear if any buyers have accepted the latest offers because they are still “swallowing this information,” one of the traders noted.

HRC from Russia, Turkey

The lack of available material on the local market is adding support to the offer prices, one trader added.

“The mills can wait,” the trader said about market acceptance, noting that even availability of imported HRC is becoming scarcer.

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China steel plant

gui yong nian/Adobe Stock

Not surprisingly, China paced a significant jump in October 2020 crude steel production.

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October 2020 crude steel production up 7%

October 2020 global crude steel production has bounced back after a down spring and summer.

In March, global crude steel production fell 5.7% before taking a 13.1% dive in April.

From there, output recovered, even as the world continued to struggle with the COVID-19 pandemic.

Output remained down on a year-over-year basis in May, June and July before finally posting a 1.9% jump in August.

September output jumped 3.9% before growing 7% in October.

China leads the way in October production

Meanwhile, top steel producer China posted a 12.7% year-over-year increase in crude steel output in October.

The rise followed a 10.9% jump in September and an 8.4% increase in August.

China’s output totaled 92.2 million tons in October.

As MetalMiner’s Stuart Burns noted recently, China’s economic recovery has powered the rise of prices for a number of commodities.

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As the World Bureau of Metal Statistics (WBMS) will tell you, the global aluminum market reached a surplus of 1,603 kt in the January to September 2020 period.

That tripled the surplus of 480 kt recorded for the whole of 2019.

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Global aluminum market sees rising production

Production continued to rise in China. In addition, production made a strong comeback in North America, where it rose 4.3% year over year, according to Capital Economics, largely due to the recovery of Alcoa’s Becancour smelter in Canada.

Chinese output grew 3.8% to nearly 31 million tons in the January to October period. Even so, demand still outstripped supply. The country imported some 766 kt of primary metal, according to Reuters.

Despite Chinese demand — or maybe because of it — an estimated 3.2-million-ton global surplus will build this year, according to CRU estimates. Some 2.9 million tons of that tonnage will occur outside of China.

Aluminum stocks and demand

Yet if ever there was an example of how exchange stocks are no indication of demand, LME inventory levels actually fell this year (down by 53 kt so far).

Surplus production has a way of disappearing off the radar in the aluminum market. The stock and finance trade soaks up excess production and profitably stores it away on the back of a strong LME forward price curve.

The portion that is visible via the LME’s off-warrant reporting structure doubled from 730 kt in February to 1.56 million tons by September. That figured has continued to climb since.

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copper smelter

Bombardho/Adobe Stock

Earlier today we touched on aluminum prices — well, the copper price is similarly ascendant.

The copper price has, as we’ve mentioned on multiple occasions, been supported by a recovering Chinese economy.

Furthermore, according to data released Monday by the International Copper Study Group (ICSG), global copper production declined over the first eight months of the year.

Stop obsessing about the actual forecasted copper price. It’s more important to spot the trend. See why.

Copper price rises to 2020 high

The LME three-month copper price closed last week at $7,195 per metric ton, its high for 2020.

In addition, the price point in fact marked its highest since early 2014.

How much further can it go? Certainly, markets at large and metals in particular — including copper — showed upward momentum after recent announcements of potentially effective COVID-19 vaccines from Pfizer and Moderna.

As Maria Rosa Gobitz explained in this month’s Copper Monthly Metals Index (MMI) report, copper prices could continue to go up. In fact, according to investment bank Goldman Sachs, copper could rise to $7,500 per metric ton by this time next year.

While it’s still early to say, with the copper price already approaching the $7,200 mark, $7,500 next year is not out of the question. The LME three-month copper last reached the $7,500 per metric ton mark in spring 2013.

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oil price chart

Sodel Vladyslav/Adobe Stock

The oil price was not alone in responding positively to this week’s encouraging news from Pfizer and BioNTech regarding progress with their mRNA COVID vaccine.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Stocks, oil surge on positive news on potential COVID vaccine

Stock markets surged as investors took heart from the firms’ optimistic media announcements.

The oil price has dropped back a little since yesterday’s high. At around $44.50/barrel, it is up 5% and still well supported.

Joe Biden’s win in the U.S. presidential election is something of a double-edged sword for the oil market.

The president-elect’s environmental policies could raise costs and, hence, stifle a rebound for the U.S. shale market. While supportive for prices, the possibility he would take the U.S. back into the European-U.S. Joint Comprehensive Plan of Action (JCPOA) deal with Iran is seen as a path to relaxing Trump-era sanctions. A return of the deal would ostensibly result in the release of Iranian oil onto the world market.

The reality is, although the new administration would like to get Iran back into an agreement to limit the refining of fissile material the process is fraught with complexity. Progress is likely to come slowly.

For the time being, neither dynamic is likely to have much impact before well into the middle of next year, if not the year beyond.

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Aerospace may be down, automotive is coming back, albeit going through immense change from internal combustion engine (ICE) to electric vehicles (EVs), but one sector of the aluminum market that is brewing up a storm is the aluminum can market.

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Aluminum can market tightens amid pandemic

The media has been awash with reports for months now that the aluminum can market is really tight. As lockdowns hit this year and bars either closed or saw falling attendance, consumers switched to supermarkets and liquor stores for their soft and beer beverages.

Beer and soda sales have held up well and are actually increasing for some. But where brewers and drinks producers sold volume through hospitality outlets and delivered in kegs, they now have to meet demand in six-packs from supermarket shelves.

The switch to aluminum cans has been unprecedented. “For the most part, the North American can industry is sold out for the next 24-36 months, and we don’t see the supply chain catching up to real demand until 2025-26,” Credit Suisse said in a recent report.

According to SPGlobal, U.S. producer shipments of aluminum can stock for the domestic market in the second quarter rose 5.5% year over year to 912.5 million pounds. Meanwhile, in the first quarter, Aluminum Association data show U.S. imports of aluminum can sheet reached 118.18 million pounds. That figure compares with 71.59 million pounds in Q1 2019 — a 65% jump.

And therein lies the problem.

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West European steelmakers are likely to see improvements in production and demand for their rolled products in 2021, following the adverse economic effects due to COVID-19 in 2020, industry watchers predicted.

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Better 2021 for Western European steelmakers

“Next year should be better if you take the view that this year was diabolical,” one analyst said about 2020. Steelmakers in France, Spain, Italy, Germany and Benelux saw aggressive production cutbacks in crude steel and rolled products as governments undertook containment measures and economies slowed.

“COVID-19 practically destroyed demand,” the analyst added.

Localized lockdowns — rather than the national ones that occurred earlier in the year around Europe, when it was the epicenter of the virus — will also help to boost activity, the analyst said.

“If people are out of their homes, then there is economic activity,” he noted.

The World Steel Association (worldsteel) also predicted in its Oct. 15 short-range outlook that crude steel production within the European Union would improve by almost 11% to 149 million tonnes in 2021. Meanwhile, the Brussels-based organization predicted 134 million tonnes of production for 2020.

The latter forecast reflected a 15.2% decrease from the over 158 million tonnes of crude steel poured in 2019, worldsteel noted.

“On the positive side, health systems are in a much better shape to tackle the pandemic now due to the lessons learnt from the first wave,” worldsteel noted.

Furthermore, there is a careful balance between “containing the virus and maintaining the viability of economies,” worldsteel added.

COVID uncertainty

However, worldsteel offered a caveat in its outlook.

“Added to this in the northern hemisphere there is uncertainty over how COVID-19 will evolve during the upcoming flu season which may have a serious impact on the outlook for 2021. The risk is tilted toward the downside. A W-shaped recovery cannot be ruled out and a full recovery in 2021 is unlikely,” the organization warned.

While worldsteel’s outlook did not break down the figures by country, it indicated in its September figures that West European steelmakers’ crude production for the first eight months of 2020 fell by 19.7% year over year to 59.1 million tonnes. Meanwhile, production totaled 73.5 million tonnes from Jan. 1-Aug. 31 in 2019.

Those same West European producers are now operating at below 60% of their crude production capacity, which is approximately 16 million metric tonnes per month, a second analyst said.

Western European steelmakers’ profits decline

Two major steelmakers with assets in Western Europe also reported notable drops in their production and in their financial results.

ThyssenKrupp’s Steel Europe subsidiary recorded a €706 million ($835 million) EBITDA loss for the first nine months of its 2020 fiscal year ending June 30. Meanwhile, it reported a €77 million gain ($91.1 million) over the same time in 2019.

Net sales were down 20% year over year to approximately €5.5 billion ($6.5 billion) from €6.3 billion ($7.5 billion), the report indicated.

Steel shipments by the German group saw a 12.8% decline in its steel shipments to 6.83 million tonnes from 7.82 million tonnes for the same time, the German group noted.

ArcelorMittal produces longs and flats at several locations in Western Europe. The steelmaker announced closures in March as part of its COVID containment measures in Italy, France, Spain, Germany, Belgium. Those closures continued in the second quarter of 2020, the Luxembourg-headquartered group said in its H1 report.

Total crude steel production in that group’s Europe segment for the first six months of 2020 fell to 16.1 million metric tonnes, down 30.5% year over year from 23.4 million metric tonnes.

European steel prices slide

Average steel selling prices in Europe were also down 11.2% to $636 per metric tonne from $716, ArcelorMittal said.

Prices for hot and cold rolled coil have already started rising since mid-2020, however, sources said.

“Restocking is happening, especially in the auto sector. This is pushing up prices, though it remains to be seen what happens,” the second analyst said.

Producers’ lower production levels will also strike a balance between supply and demand, the first analyst said.

Prices for hot rolled coil in West Europe now average about €491 ($581) per metric tonne EXW, up from lows of €433 ($512) in March.

The analysts questioned for how long any price increases would be sustainable. Many stockists were replenishing their lower volumes in the face of some renewed activity.

Stop obsessing about the actual forecasted steel price. It’s more important to spot the trend. See why.

Airbus plane

dade72/Adobe Stock

Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner, including the AirbusBoeing subsidy saga, industrial production, Liberty Steel’s bid for German firm Thyssenkrupp’s steel division and much more.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Week of Oct. 19-23 (Airbus-Boeing saga, industrial production and more)

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The International Lead and Zinc Study Group (ILZSG) forecast global lead and zinc demand will decline by 6.5% and 5.3%, respectively, this year.

Meanwhile, ILZSG forecast lead and zinc demand will rise by 4.4% and 6.6%, respectively, in 2021.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Lead demand

The ILZSG forecast lead demand will fall to 11.39 million tonnes this year. Next year, ILZSG forecast demand will pick up to 11.89 million tonnes.

In China, the world’s largest automotive market, the group forecast lead usage will decline this year. The group forecast China’s usage will fall by 1.6% this year. A drop in automotive production will be partially outset by increasing production of e-bikes and lead-acid batteries.

Furthermore, the group forecast lead usage will decline by 9.7% in Europe this year. In the U.S., the ILZSG forecast usage will decline by 7.5%.

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