Market Analysis

Automotive markets just about everywhere are in decline this year.

The question is: to what extent is this a cyclical downturn as opposed to a structural shift?

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The Financial Times article reported Indian passenger vehicle sales fell 31% last month from the same time a year earlier, according to the Society of Indian Automobile Manufacturers. It was the worst month since the turn of the century in a dismal spell that has seen sales fall 20% or more for four consecutive months, while sales have failed to rise for more than a year.

India’s economy is slowing, with GDP growth falling to a five-year low of 5.8% in the first quarter of 2019. In addition, a liquidity squeeze caused by a crisis in its shadow banking sector is choking off consumer demand and business expansion.

The article goes on to explain that about 40% of new car loans came from these shadow banks, making liquidity tight. Although a reduction in India’s high car taxes — the government levies a 28% goods and services tax on cars, with the effective rate including other duties rising as high as 48% for some vehicles — is a possibility, it is unlikely the new administration’s cash-strapped budget could afford it.

Significant as India’s car market is — as recently as last year, India’s motor market was thought to be on course to overtake Germany and Japan and become the world’s third-largest, the Financial Times reported – Germany’s is even larger.

Yet, declines are dramatic in Germany, too.

Source: ING Bank

Germany’s problems are more nuanced.

Domestic production has been hit by the delayed introduction of the new worldwide light vehicle test procedure, which caused severe disruption to German automotive production and shipments.

But matching the introduction of the China 6 emission standard has also caused a downturn in Germany’s largest automotive export market: China.

To underline the importance of the market, ING Bank reported that in 2018 almost one-quarter of all cars sold in China were German. BMW and Daimler recorded more than one-third of their total car sales in China. For Volkswagen, the share is even bigger (40%).

Yet new car sales in China have fallen for 13 months in a row, a slump that started in the second half of 2018 when the trade war between China and the U.S. began to heat up, according to ING.

The trade war has been a factor. U.S. customs duties on Chinese goods worth U.S. $250 billion (with U.S. $300 billion to follow Sept. 1) and Chinese customs duties on U.S. goods worth U.S. $110 billion, car and car parts from China are being taxed at 27.5% in the U.S. since July 2018. U.S. autos are subject to China’s standard tariff rate of 15%.

Given that some German car manufacturers actually export U.S.-produced cars to China, there has been a clear and direct impact of the trade conflict on the German car industry.

But that is only part of the story.

The switch to China 6 meant consumers held off buying the older models despite a major distributor push to discount old stock.

But the industry worries China could be going through a structural shift.

According to ING, China is already the largest ride-hailing market in the world, with over 459 million customers and a turnover of around U.S. $53 billion. By comparison, where it all started in the U.S. there are currently 66 million users generating U.S. $49 billion in turnover.

To put things into perspective, one-third of the Chinese population already uses alternative mobility solutions, while in the U.S. the figure is around 20% and in the E.U. it is just 18%. Further, while in the U.S. ride-hailing is used occasionally by a car owner, in China many users are not yet on the car ownership ladder; as ride-hailing becomes more widespread, those users may elect never to become car owners.

According to JustAuto, new vehicle sales in China fell by 4.3% to 1.81 million units in July from 1.89 million units a year earlier, according to wholesale data released by the China Association of Automobile Manufacturers. This includes all vehicle types, passenger vehicles and commercial vehicles, with the cumulative seven-month total at 14.13 million units – down by 11.4% from the 15.96 million units sold in the same period of last year.

Jeff Schuster, president of global forecasting at LMC Automotive, is quoted in Europe’s Autonews as saying global light-vehicle sales will decline 2.6% in 2019 to 92.2 million units. Through 2025, he doesn’t see more than 2% growth as the mature markets of western Europe, the U.S., Japan and Korea contract in volume over the next five to seven years. Only electric vehicle production as a subset — coming from a very low base — is set to rise.

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The industry’s current downturn is in part cyclical and production will recover regionally as consumer confidence and access to credit improves.

At the same time, there is a structural shift happening that will impact the industry’s long-term future and create significant challenges for global western carmakers in the years ahead.

The August 2019 Monthly Metals Index (MMI) report is in the books.

After a July in which seven of 10 MMI indexes moved upward, this month a majority of the indexes retraced.

Six MMIs declined, three moved up and one held flat (the Copper MMI).

A few highlights from this month’s round of MMI analyses:

  • U.S. construction spending in June fell 2.1% on a year-over-year basis.
  • Despite a 0.8% rise in the LME aluminum price, the Aluminum MMI retraced on global demand weakness.
  • Glencore announced plans to halt production at its Mutanda cobalt and copper mine by the end of this year, which would take approximately 20% of the world’s cobalt off the market.
  • Surging nickel prices led a six-point increase in the Stainless MMI.

We are not stock market investors at MetalMiner. While we may hold shares, either as direct punts or as part of pension or investment funds, we do not consider ourselves stock market experts and, as such, rarely cover market movements unless part of a wider review of financial markets.

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That said, few can have missed the wild gyrations U.S. stock markets — also mirrored in Europe and Asia — have been going through this month. Those movements might lead one to question whether this has implications for commodity markets in general and metal markets in particular.

Anyone who has attended one of our market seminars will know there are clear correlations between share prices and commodities, so it is not an idle question to ask whether this month’s falls are a correction or the early signs of an end to the bull market that has powered shares higher for some 11 years.

Source: Financial Times

To answer that question, it helps to review why share prices have taken such a hammering.

Read more

leszekglasner/Adobe Stock

The Stainless Steel Monthly Metals Index (MMI) jumped six points for an August reading 75 on the back of strong nickel price gains.

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Within the Stainless MMI basket, LME nickel prices increased the most once again this month, recording a 13% increase. Rather than correcting back to pre-spike levels, traders continued to buy into the market.

Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets

In addition to the price rise, stock levels have also risen as a result of Chinese stockpiling activities ahead of the Indonesian export ban.

Very recent rumors of Indonesia possibly pushing up a raw ore ban created a fresh round of speculative buying activity during this past week, which gained even more steam in the first week of August.

The new export ban regulations, initially announced in 2017, will take effect by 2022. This most recent round of nickel price escalation through speculation may also spur a new round of Chinese direct investment into Indonesia (aimed at securing future stocks of the metal ore).

Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets

Looking at a longer-term chart, nickel prices previously spiked at various points in time. After a steep period of rising prices, we should expect to see a quick correction followed by a period of time with higher prices.

For example, it appears that a speculative price spike took the price away from fundamentals back in 2016, as called out by the rectangular box in the chart below. In that case, the price stayed higher for about six weeks before dropping back.

Source: MetalMiner analysis of the London Metal Exchange (LME) and FastMarkets

Should a steady uptick in positive trading volume continue, that would indicate the uptrend will continue. During the past week or so, we have seen lower trading volume; however, volumes still look relatively strong.

Global Demand Outlook Declines

According to Outokumpu’s Q2 results, the company saw weaker stainless steel demand heavily impacting declining sales, which dropped by around 8% compared to Q2 2018.

Difficult competitive conditions in Europe hurt sales, with that market struggling against cheap Asian imports. Permanent safeguards became effective in February, but import penetration increased back to 30%. In addition, a new quota period started July 1.

While import levels into the U.S. remain low, the company reports ongoing distributor destocking will limit volume upside in the Americas in the short term. Further, the company expects challenging conditions to continue through 2019.

The International Stainless Steel Forum (ISSF) released Q1 production figures in early July showing a 2.5% year-on-year decline in global stainless steel melt shop production.

In Europe, the decline reached 5.7%. Asian production outside of China also declined by an estimated 5.7%. The U.S. saw a decline of 2% and Chinese production declined by 1.5%.

SHFE Nickel Prices Jump

SHFE prices also reacted to the rumor regarding Indonesia’s consideration of moving up its ore export ban.

SHFE nickel prices reached a new high for 2019, in addition to a new longer-term high.

Source: MetalMiner analysis of FastMarkets

While prices increased recently, prices were much higher at previous points in time.

Most notably, nickel prices surged past $50,000/mt, or roughly around CNY 500,000/mt, and then sank back down to around $10,000/mt during a three-year period from 2006-2009, according to data from the International Nickel Study Group (INSG). At the start of that period, prices were similar to current prices and jumped about 400% in around 1 1/2 years (at the the midpoint of the aforementioned period).

On the way back down, prices stalled at the $30,000/mt level for a year during a period of historically low stocks.

Domestic Stainless Steel Market

Source: MetalMiner data from MetalMiner IndX(™)

Stainless 304 and 316 NAS surcharges nudged back up in early August, still maintaining sideways movement.

Weaker demand outweighed higher nickel prices this month as surcharges reversed.

What This Means for Industrial Buyers

MetalMiner’s stainless steel price index hit a one-year high. Industrial buyers need to stay alert for the right opportunity to buy, as nickel prices may be at a short-term speculative high that still seems to be going strong. As ingot prices rise, expect premiums to follow.

For buying guidance, including resistance and support pricing levels by metal, industrial buying organizations can request a free two-month trial to our Monthly Metal Buying Outlook report.

Buying organizations will want to read more about our longer-term steel price trends in our Annual Outlook.

Actual Stainless Steel Prices and Trends

Nickel prices registered double-digit increases this month, extending last month’s sizable gains.

The LME primary 3-month nickel price increased by 13.1% to $14,380/mt. China’s primary nickel price increased by 11.7% to $16,367/mt. India’s primary nickel price increased by 11% to $14.50/kg.

The U.S. 316 and 304 Allegheny Ludlum stainless surcharges increased this month by 4.9% and 7%, respectively, to $0.88/pound and $0.59/pound.

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Chinese Ferro Alloys FeMo lumps also jumped by 11.7% this month, while FeCr lumps increased by 0.6%, reversing mild declines for both prices last month. Other Chinese prices in the index moved sideways, with only mild price movements of under 0.5%.

Korean prices for 430 CR 2B stainless steel coil and 304 CR 2B stainless coil decreased by 5.8% and 4.5%, respectively, to $1,221/mt and $2,149/mt.

Chris Titze Imaging/Adobe Stock

The Renewables Monthly Metals Index (MMI) fell four points this month for an August reading of 101.

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Glencore Shakes up Cobalt Market

As covered by MetalMiner’s Stuart Burns, Glencore announced it would halt production by the end of the year at the world’s largest cobalt mine: Glencore’s Mutanda operation in the Democratic Republic of the Congo (DRC).

Last week, the miner reported its adjusted EBITDA for the first half of the year came in at $5.6 billion, down 32% on a year-over-year basis, with CEO Ivan Glasenberg citing “a challenging economic backdrop.”

Among the challenges has been a plummeting cobalt price. As a result, the miner announced it will move toward pausing production at its Mutanda copper and cobalt mine.

“However, our African copper business did not meet expected operational performance,” Glasenberg said. “We have moved to address the challenges at Katanga and Mopani with several management changes as well as overseeing a detailed operational review, targeting multiple improvements to achieve consistent, cost-efficient production at design capacity.

“Our teams have identified a credible roadmap towards delivering on the significant cashflow generation potential of these assets, at targeted steady state production levels. At Mutanda, we are planning to transition the operation to temporary care and maintenance by year end, reflecting its reduced economic viability in the current market environment, primarily in response to low cobalt prices.”

So, what kind of impact will the removal of Mutanda’s cobalt — making up a whopping 20% of global supply — have on the market? Burns explained Glencore’s closure of zinc mines in 2015 is credited with the recovery of that market, so there is precedent for the maneuver.

In addition, the electric vehicle (EV) revolution hasn’t taken off perhaps as much as expected.

“Cobalt demand has traditionally been driven by its use as an alloying element, but it is increasingly being seen as part of the lithium battery demand story because of its role in production of advanced batteries,” Burns said. “The electric vehicle (EV) market, though, has failed to match up to its hype this decade. Although both lithium and cobalt prices have risen as a result of battery makers securing their supply chain, the reality is supply is perfectly adequate.”

GOES

Meanwhile, the GOES MMI, which tracks grain-oriented electrical steel, picked up six points for an August reading of 197.

The U.S. GOES price hit $2,719/mt as of Aug. 1, up 3.2% from the previous month.

A.K. Steel, the lone remaining electrical steel producer in the U.S., announced its second-quarter earnings late last month. The firm brought in net income of $66.8 million in 2018, up from $56.6 million in Q2 2018.

Shipments in its stainless/electrical segment were down, however, coming in at 198,400 tons in Q2 2019, down from 221,500 tons in Q2 2018. For the first six months of the year, shipments amounted to 405,000 tons, down from 422,200 tons in the first half of 2018.

Meanwhile, German firm Thyssenkrupp, also a producer of electrical steel (with plants in Germany, India and France), has announced it will continue to move forward with realignment plans amid disappointing quarterly results.

For the quarter ending June 30, 2019, the firm’s adjusted EBIT came in at €226 million, down 32% from the €331 million for the same quarter in 2018.

In addition, the firm revised its full-year 2018-2019 forecast down to €0.8 billion from the previous forecast of €1.1 billion-€1.2 billion.

In addition to improving performance, the firm cited its planned partial IPO of its elevator business in 2019-2020 and efforts to improve organizational efficiency as part of its realignment efforts.

“The most important portfolio measure is the planned partial IPO of Elevator Technology,” the company said. “This will allow thyssenkrupp to sustainably strengthen its capital base and make the value of its elevator business visible. By retaining a majority interest, the Group will also continue to profit from future value growth. With the expected proceeds, the Group will increase its financial leeway for necessary restructuring and securing the future of its businesses.”

Actual Metal Prices and Trends

Japanese steel plate fell 0.4% month over month to $790.22/mt as of Aug. 1. Korean steel plate fell 5.4% to $564.33/mt. Chinese steel fell 1.2% to $611.40/mt.

U.S. steel plate dropped 9.8% to $781/st.

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Chinese neodymium dropped 13.7% to $55,911.60/mt. Chinese silicon fell 0.3% to $1,495.82/mt. Chinese cobalt cathodes fell 0.3% to $96,574.60/mt.

The Global Precious Monthly Metals Index (MMI) picked up one point this month for an August MMI reading of 102.

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Time for Safe Havens

Amid the latest jolt of trade uncertainty — namely, President Donald Trump’s intention to impose a 10% tariff on an additional $300 billion in Chinese goods — safe-haven metals prices have increased.

Gold, for example, last week moved over $1,500 per ounce for the first time in six years, Reuters reported, while silver prices have also gained momentum.

Demand for gold in the first half of the year was strong, according to the World Gold Council, rising 8% on a year-over-year basis. The demand was largely powered by central bank buying and a rise in holdings of gold-backed ETFs, according to the World Gold Council.

“June was a big month for gold,” said Alistair Hewitt, head of market intelligence for the World Gold Council. “The price broke out of a multi-year trading range to hit a six-and-a-half year high and gold-backed ETF assets-under-management grew by 15% – the largest monthly increase since 2012. While the Fed’s dovish turn was a key driver for this, it also builds on a strong H1 which saw gold demand hit a three-year high, underpinned by extremely strong central bank buying. But we also saw an uptick in sales at an individual level as investors took advantage of June’s price rally to lock-in profits; jewellery recycling and retail bar and coin liquidations both rose.”

Meanwhile, silver — which had been a bit undervalued — posted its largest daily increase in over three years last week, bringing silver above the $17 per ounce mark.

Platinum-Palladium Spread Narrows

The palladium price retraced this past month while platinum picked up, narrowing the spread that has built up over the last over a year and a half.

However, that narrowing could be a blip on the radar in terms of performance throughout the rest of the year.

According to a Reuters poll, palladium’s premium over platinum is expected to hit an average of $609 per ounce this year and $595 per ounce next year.

Actual Metal Prices and Trends

The U.S. silver ingot/bar price rose 6.2% month over month to $16.23 per ounce as of Aug. 1. U.S. gold bullion rose 0.3% to $1,413.40; however, as noted above, the Trump administration’s tariff announcement sent the gold price past the $1,500 per ounce mark.

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Chinese gold bullion rose 2.1% to $45.88 per gram.

U.S. platinum bars rose 3.4% to $862 per ounce. U.S. palladium bars fell 1.1% to $1,500 per ounce.

The Rare Earths Monthly Metals Index (MMI) dropped one point this month for an August reading of 22.

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Tariffs, China and Rare Earths

Once again, the ongoing trade talks between the U.S. and China took a turn toward further tensions recently when President Donald Trump announced the U.S. would impose a 10% tariff on an additional $300 billion in Chinese goods (effective Sept. 1).

The move would subject nearly all of the U.S.’s imports from China to duties. The proposed $300 billion tariff list includes a wide range of consumer goods, including cellphones, cheeses, jackets, shirts, jewelry and toys.

In addition, the proposed tariff list included: various forms of iron/nonalloy steel; copper and copper alloy table, kitchen, household articles and parts; and aluminum kitchen or household articles.

Notably missing on any of United States Trade Representative’s tariff lists to date?

Rare earths.

The omission is not surprising given the U.S.’s reliance on China for rare earths, the latter which boasts an overwhelming dominance of the global market.

As the U.S.-China trade war has unfolded, speculation has increased regarding the potential for China to use that rare earths dominance as a weapon in trade talks with the U.S.

The Association of China Rare Earth Industry this week accused the U.S. of “bullying,” Reuters reported, adding it would support counter-measures by China to combat the U.S. tariffs.

“The cost of tariffs imposed by the United States should be borne by the U.S. market and consumers,” the association was quoted as saying.

Reuters: Lynas to Receive Malaysia License Extension

Given the specter cast over the rare earths market by China (and possible trade-related restrictions on its rare earths exports), the ongoing saga of Australia’s Lynas Corp. in Malaysia is of particular importance.

Lynas is the largest rare earths miner outside of China. The miner has been entrenched in a battle with the Malaysian government regarding disposal of radioactive waste at its facilities in the country; the miner’s license is set to expire as of Sept. 2, 2019.

According to Reuters, however, Malaysia plans to renew Lynas’ license to operate in the country, which would preserve a key source of rare earths production outside of China. Lynas announced Wednesday that it will receive an update from the Malaysian government on the license renewal in mid-August, Reuters reported.

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Actual Metal Prices and Trends

The Chinese yttrium price fell 0.3% month over month to $32.68/kg as of Aug 1. Terbium oxide fell 5.0% to $567.83/kg.

Neodymium oxide plunged 14.8% to $43,059.20/mt.

Europium oxide fell 2.5% to $31.95/kg. Dysprosium oxide fell 4.6% to $270.12/kg.

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A 15-year trade dispute between Airbus and Boeing could send copper prices skyrocketing, with an even greater impact on U.S. manufacturers than the Section 232 tariffs had on steel and aluminum. MetalMiner has long covered this current dispute between Airbus and Boeing.

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Last year, the U.S. claimed victory in the dispute, essentially setting the groundwork for retaliatory tariffs against European imports. Though it took some time to go through an appeals process, Bloomberg has reported that tariffs appear imminent and, as a result, the U.S. copper industry has been galvanized into action.

The tariffs apply to a wide range of products, including hundreds of items unrelated to airplane parts, including cheese, whiskey and wine.

However, the following copper alloys and products could face a 100% — that is not a typo — duty if coming from the E.U.:

  • 7407.10.50: Refined copper, bars and rods
  • 7407.21.90: Copper-zinc base alloys (brass), bars and rods nesoi, not having a rectangular cross section
  • 7409.11.50: Refined copper, plates, sheets and strip, in coils, with a thickness over 0.15 mm but less than 5 mm
  • 7409.21.00: Copper-zinc base alloys (brass), plates, sheets and strip, in coils.
  • 7409.29.00: Copper-zinc base alloys (brass), plates, sheets and strip, not in coils.
  • 7409.31.50: Copper-tin base alloys (bronze), plates, sheets and strip, in coils, with a thickness o/0.15 mm but less than 5 mm and a width of 500 mm or more
  • 7409.31.90: Copper-tin base alloys (bronze), plates, sheets and strip, in coils, w/thickness o/0.15 mm but less than 5 mm and a width of less than 500 mm
  • 7409.40.00: Copper-nickel base alloys (cupro-nickel) or copper-nickel-zinc base alloys (nickel silver), plates, sheets and strip, w/thickness o/0.15 mm.
  • 7409.90.90: Copper alloys (o/than brass/bronze/cupro-nickel/nickel silver), plates, sheets and strip, w/thickness o/0.15mm but less than/5 mm and width less 500 mm
  • 7410.11.00: Refined copper, foil, w/thickness of 0.15 mm or less, not backed

These alloys cover 16% of the U.S. copper market, according to the Precision Metal Forming Association, and go into a broad range of industries, including electronics, automotive, aerospace, agribusiness, defense and home appliances.

In fact, the Bureau of Economic Analysis estimates these sectors represent approximately $1.7 trillion in U.S. output annually, according to testimony delivered Aug. 5 by ABC Metals President Dan Kendall.

In the Section 232 steel and aluminum exclusion requests, some companies received exemptions where no domestic supply exists. That scenario certainly applies to some copper alloys — nobody produces the C101, C102, C103 up to C110 (oxygen-free copper) grades, nor does the U.S. cast C500 series (phosphor bronze).

The copper industry, unlike the steel and aluminum industries, has already heavily consolidated. As Kendall explained at the hearing with regard to a monopoly in copper supply:

“On July 16th, Wieland Metals, headquartered in Germany, completed its acquisition of Global Brass & Copper, the last remaining US-owned brass and copper strip manufacturer. Prior to that, on May 28, Olin Brass, a division of GBC (which was about to be acquired by Wieland), petitioned the USTR for inclusion of these metals for tariff protection that are sourced in Europe.”

Wieland has petitioned to essentially create a virtual U.S. monopoly of more than 23 copper alloys. Furthermore, Wieland has no quoted ABC Metals. (Wieland did ship 10,000 pounds, though certainly not enough to fill an order!)

Trump can’t be blamed for this set of tariffs. However, this 301 WTO case has the power to wreak havoc throughout many manufacturing supply chains.

OEM manufacturers will act quickly to reconfigure their supply chains to continue to access copper products competitively. They will likely move offshore for electronic production. In addition, the remaining domestic copper suppliers will raise prices because they can.

Product substitution in copper remains limited compared to other metals, such as aluminum and steel, particularly due to the tough mechanical and chemical performance criteria demanded by consumers such as Aptiv, Lear, Molex, TE (Tyco Electronics), Ford, Chrysler, Denso, etc.; few suppliers can meet such demands.

MetalMiner gives these tariffs a 50% probability based on the USTR recommendation to the administration, expected in September.

Domestic suppliers have already raised prices.

We remind readers, however, that nothing kills high prices like high prices.

Monopoly Pricing on the Horizon?

The Copper Monthly Metals Index (MMI) moved sideways in July, maintaining its value of 74.

While prices in the index lost some value, the declines were modest.

LME copper prices moved firmly sideways since early June. In July, the price hit a brief low of $5,823/mt and a brief high of $6,067/mt, trading within a band between $5,850/mt and $6,050/mt during most of the month.

Source: MetalMiner analysis of London Metal Exchange (LME) and FastMarkets

Copper tends to be a beacon for industrial metals trading, typically experiencing more pricing volatility due to macroeconomic conditions than other metals.

With the trade uncertainty around the U.S.-China relationship following the U.S. announcement of more tariffs, the copper price reacted and dropped in early August.

What This Means for Industrial Buyers

Trade conditions deteriorated somewhat in early August on the heels of the latest U.S. announcement of tariffs on an additional $300 billion in Chinese goods. As a beacon industrial metal, copper prices reacted by dropping.

Meanwhile, the U.S. implementation of 301 WTO tariffs of up to 100% on European copper product imports may result in serious ramifications for copper prices and related industrial organization needs.

In light of the shifting trade environment, industrial buyers will need to keep on their toes in August and as we move into the annual planning season for industrial metals buying.

It’s important for buying organizations to understand how to react to copper price movements. The MetalMiner Monthly Metal Buying Outlook report helps buyers understand the copper marketplace.

Actual Copper Prices and Trends

­­­Copper prices across the index weakened slightly this month.

The Indian copper cash price dropped 1.7% to $6.42 per kilogram.

Korean copper strip dropped 1.4% to $8.17 per kilogram.

U.S. prices in the index decreased in the range of 1.6%-1.7%, offsetting last month’s gains of a similar magnitude. U.S. producer copper grade 110 decreased to $3.43 per pound, grade 102 priced at $3.62 per pound and grade 122 at $3.43 per pound.

Chinese prices decreased in the range of 0.3%-1.7%. China’s copper wire price dropped by 1.3% to $6,802/mt. The primary cash price dropped 1.7% to $6,779/mt. Copper bar dropped by 1.7% to $6,767/mt.

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Chinese scrap copper #2 decreased by 0.3% to $5,577/mt.

The Japanese primary cash price decreased by 0.4% to $6,138/mt.

The LME primary 3-month price decreased by 0.5%, falling to $5,950/mt.

The Raw Steels Monthly Metals Index (MMI) fell one point this month for an August reading of 74.

Small price increases for some metals did not outweigh a few steeper price drops, bringing the index down for the month.

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U.S. steel prices seemed to find a bottom recently (at least for HRC, CRC and HDG). Plate prices stopped dropping and moved sideways with the most recent price changes.

Source: MetalMiner data from MetalMiner IndX(™)

Chinese HRC and CRC Prices Move Sideways

Source: MetalMiner data from MetalMiner IndX(™)

Chinese HRC and CRC prices continued to move sideways this month. However, CRC prices showed more strength, with another modest increase in early August, while HRC prices declined slightly as August started, reversing the recent mild uptick that occurred in July.

U.S. HRC and Chinese HRC Prices Start to Diverge Again

Source: MetalMiner data from MetalMiner IndX(™)

Since peaking in mid-2018, the spread between U.S. and Chinese HRC prices began to narrow. The spread hit its narrowest point in about 1.5 years last month when it dropped to a difference of around $37/st — the third-lowest value since January 2014.

The recent increase in U.S. prices increased the spread once more, but it remains low at just $70/st. This does not yet reflect the recent devaluation of China’s currency back to the range of CNY 7-to-1, which should further increase the steel price spread (unless Chinese prices start to rise to a greater extent than U.S. prices).

Source: MetalMiner data from MetalMiner IndX(™)

Chinese and U.S. CRC prices moved more similarly, overall, with both prices increasing again of late.

Similar to HRC, the spread between prices closed quite a bit, but a larger spread remains for CRC. The spread between the two CRC prices currently measures $158/st, up slightly from around $149/st last month — the lowest values seen since late 2017.

What This Means for Industrial Buyers

The global steel prices tracked by the index once again showed mixed performance this month.

The U.S. Midwest HRC futures spot price increased slightly, turning around after last month’s decline. The U.S. Midwest HRC futures 3-month price increased once again this month. China saw mixed price signals, with some prices up and others down.

With prices giving sustained mixed signals, industrial buying organizations seeking more pricing guidance should try a free two-month trial of our Monthly Metal Buying Outlook report.

Buying organizations will want to read more about longer-term steel price trends can do so with the Annual Outlook.

Free Sample Report: Our Annual Metal Buying Outlook

Actual Raw Steel Prices and Trends

Prices in the index showed mixed performance this month.

Korean prices showed a clear drop. Korean standard scrap steel prices dropped by 8.3% to $122/st and pig iron prices fell by 2.6% to $332/st.

Chinese price movements remain mixed. Chinese steel slab prices increased the most (by 3.2% to $489/st). Chinese HRC prices increased by 1.3% to $479/st.

Chinese steel billet decreased by 2.7% to $470/st and coking coal prices dropped by 1.1% to $278/mt. Chinese iron ore prices edged down slightly, by less than 0.5%.

U.S. shredded scrap prices fell by 6.2% to $257/st, while U.S. Midwest futures 3-month price increased by 3.2% to $619/st.

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LME billet 3-month prices dropped 2.7% $268/mt.

The Construction Monthly Metals Index (MMI) fell three points for an August reading of 78.

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U.S. Construction Spending

According to the U.S. Census Bureau’s most recent construction spending report, U.S. construction spending reached $1,287.0 billion in June, down 1.3% from the May estimate of $1,303.4 billion.

The June spending estimate also marked a 2.1% decline from the June 2018 estimate of $1,314.8 billion.

Private construction spending totaled $962.9 billion, down 0.4% from May. With private construction, residential construction totaled $507.2 billion, down 0.5% from May. Nonresidential construction reached $455.7 billion, down 0.3% from May.

Meanwhile, public construction spending reached $324.1 billion, down 3.7% from May. Educational construction reached $73.0 billion, down 6.8% from May. Highway construction reached a seasonally adjusted annual rate of $101.9 billion, down 6.4% from May.

Billings Decline in June

Architecture firm billings fell in June after essentially coming in flat the previous two months, according to the American Institute of Architects’ monthly Architecture Billings Index (ABI) report.

The June ABI reflected a contraction in billings with a reading of 49.1, down from 50.9 the previous month (anything greater than 50 indicates billings growth).

Billings have either declined or held flat each month since February, the ABI report showed, the longest such period since 2012.

“In addition, while inquiries into new work and the value of new design contracts remained positive in June, the pace of that growth continued to slow, with inquiries in particular falling to its lowest score in a decade,” the report states. “However, firms are still reporting strong backlogs of work in the pipeline, six and a half months on average, which continues to be the most robust that backlogs have been since we began collecting this data on a quarterly basis in 2010.”

By region, the South (51.9) was the only part of the U.S. in positive growth territory. The Northeast (46.1), Midwest (48.9) and West (49.3) regions all showed billings contraction in June.

This month, the ABI featured a survey of industry professionals on the issue of tariffs, asking them for their level of concern related to tariffs and trade-related retaliation. On a scale from 1-5 (with 1 meaning “not at all concerned” and 5 meaning “very concerned”), 35% of respondents answered either 4 or 5, while 37% checked in at 3 (meaning “somewhat concerned”).

Actual Metal Prices and Trends

Chinese rebar fell 1.0% month over month to $576.54/mt as of Aug. 1. Chinese H-beam steel rose 0.5% to $557.66/mt.

U.S. shredded scrap steel fell 6.2% to $257/st. European commercial 1050 aluminum fell 7.4% to $2,363.71/mt.

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Meanwhile, Chinese 62% iron ore PB fines fell 0.3% to $76.24/dmt.