Market Analysis

The Rare Earths Monthly Metals Index (MMI) fell by 9.8% for this month’s reading.

May 2021 Rare Earths MMI chart

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Biden’s DOE awards $19M in funding for rare earths, critical minerals production initiatives

As MetalMiner contributor Sohrab Darabshaw explained this week, the Department of Energy has awarded $19 million toward 13 initiatives geared toward rare earths and critical minerals production.

“The very same fossil fuel communities that have powered our nation for decades can be at the forefront of the clean energy economy by producing the critical minerals needed to build electric vehicles, wind turbines, and so much more,” Secretary of Energy Jennifer M. Granholm said. “By building clean energy products here at home, we’re securing the supply chain for the innovative solutions needed to reach net-zero carbon emissions by 2050 – all while creating good-paying jobs in all parts of America.”

The DOE’s Office of Fossil Energy’s National Energy Technology Laboratory (NETL) will manage the 13 projects.

The projects cover 12 areas of interest. They correspond to “selected U.S. basins that have the potential to produce rare earth elements and critical minerals.”

The project leaders include Pennsylvania State University, Virginia Polytechnic and State University, the New Mexico Institute of Mining and Technology, and the University of North Dakota, among others.

Electrification and cobalt

Earlier this month, MetalMiner’s Stuart Burns delved into the shift toward electrification in the automotive market.

Namely, he zoomed in on rising EV demand’s impact on materials prices — particularly for critical battery metals, like cobalt. Cobalt prices, like many other metals, surged in Q1 2021.

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Some of the merchant banks would have us believe we are in the grip of another supercycle.

Certainly, the relentless recovery in commodity prices following last year’s lows appears graphically like a repeat of the relentless rise in prices during the last supercycle in the first part of this century.

commodities graphic

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During that supercycle, support came from a gradually depreciating dollar. However, it was driven mainly by a relentless historic rise in demand from China and the belief that where China led, the other BRICS nations would follow.

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Supercycle or no supercycle

Prices of iron ore, oil, and base metals (such as copper, aluminum and tin) have all been rising relentlessly on the back of a marketwide embrace of risk-on sentiment.

Prices have suffered — or enjoyed, depending on your position as producer or consumer — a perfect storm of factors.

Vaccine rollouts and, with the tragic exceptions of India and Brazil, falling COVID-19 infection rates around the world have fueled positive sentiment among investors chasing better yields.

The constrained global logistics market is pushing costs up and creating shortages across multiple supply chains. That is further incentivizing restocking such that shortages become a self-fulfilling prophecy and manufacturer lead times extend.

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Western Europe’s hot rolled coil and cold rolled coil prices continued to rise over the past month.

High demand from China and rising input prices supported prices, market sources told MetalMiner.

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Hot rolled coil prices rise

hot-rolled coil steel

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Hot rolled coil from European mills have transacted in the past two weeks for €1,000-€1,020 ($1,200-$1,225) per metric ton exw for rolling and delivery as far ahead as Q4, sources said. Cold rolled coil for the same production and delivery times transacted for about €1,100 ($1,320).

Prices for hot rolled coil in late March reached about €900 ($1,140-1,200). Meanwhile, CRC reached approximately €980 ($1,180).

Deals on imports of HRC over May from India and Turkey concluded at about $1,100 per ton cost and freight (CFR) European ports for delivery in June and July, a second trader stated. That marked an increase from $900-$910 in late March.

A Russian steelmaker also let some steel go into Europe at prices lower than the imports from Asia, another European trading source reported, though no other sources told MetalMiner about this.

The Russians only concluded those transactions in the run-up to Russia’s May holidays. This year, the holidays last 10 days and include May Day on May 1 and Victory Day on May 9, the European trading source warned.

A construction boom in the country has also made Russia’s domestic market the end-user for its rolled product, the source added.

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The Automotive Monthly Metals Index (MMI) jumped by 8.1% for this month’s value, as US auto sales showed strength in April.

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US auto sales continue to show strength

auto sale

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Automakers posted solid US sales results in April, even as the ongoing semiconductor shortage continues to hamper automotive operations.

Ford Motor Co. reported retail sales in April jumped 57.1% year over year. April retail sales reached 197,813 units.

US retail sales also jumped by 23.7% compared with April 2019 sales.

Truck sales jumped 33.0% year over year. In addition, SUV sales surged by 127.2%.

In addition, Ford EV sales jumped by 262%.

Honda sales surged by 171% in April, reaching 156,482 units sold. Honda car sales rose by 125.1%, while truck sales rose by 207.5%.

As for quarterly reporters, last month FCA US reported Q1 2021 sales jumped by 5% year over year. General Motors reported Q1 deliveries jumped by 19% year over year.

Today, GM also reported its Q1 financial results, posting $3 billion in net income.

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The Construction Monthly Metals Index (MMI) jumped by 12.1% for this month’s reading, as construction spending picked up in March.

May 2021 Construction MMI chart

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US construction spending rises

US construction spending in March reached a seasonally adjusted annual rate of $1,513.1 billion, the Census Bureau reported.

The March rate marked a 0.2% increase from February and a 5.2% increase from February 2020.

Meanwhile, construction spending in Q1 rose 4.5% year over year to $328.3 billion.

Broken down further, spending on private construction reached a rate of $1,169.2 billion, or up 0.7% from February. Within private construction, residential construction came in at a rate of $725.2 billion, or up 1.7%. Nonresidential construction dipped 0.9% to $444.0 billion.

Public construction spending, meanwhile, reached $343.9 billion, or down 1.5%. Educational construction fell 2.0% to $85.3 billion. Highway construction slipped 2.2% to $98.8 billion.

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Nickel prices and, as a result, stainless surcharges, remain in the doldrums this month, recovering only slightly from last month’s sharp sell-off.

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Nickel prices drop in March

nickel price

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Nickel’s bull story took a hit at the beginning of March by announcements from China’s Tsingshan Group. The firm said it intended to produce battery-grade material from nickel matte, undermining the market’s electric vehicle (EV) narrative.

That is last month’s news. Reuters confirmed the move would effectively close the processing gap between the sort of nickel used by the stainless steel industry and that used for lithium-ion battery production. That undermines the perception that battery-grade nickel is a constrained market facing a looming wall of demand.

Yet, EV demand has always been part of the future, rather than the present.

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The prospect of buying an electric vehicle (EV) may fill you with anxiety.

That is, range anxiety, charging point anxiety,  reliability anxiety and resale anxiety.

The MetalMiner Best Practice Library offers a wealth of knowledge and tips to help buyers stay on top of metals markets and buying strategies.

Sales rise despite electric vehicle anxieties

electric vehicle charging

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Tesla’s vehicles were ranked at the bottom for reliability in a recent customer poll, scoring a miserable two stars out of a potential five.

So far, EV resales have held up relatively well. However, anxiety remains regarding a significant technological breakthrough that would make used models “obsolete.”

Such anxiety, however, is not the point. Sufficient among us are taking the plunge, so much so that EV sales are skyrocketing.

OK, skyrocketing from a low base. But in percentage terms, sales are rising faster than for any other sector.

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imports

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Preliminary US steel imports reached 2.1 million metric tons in March, the Census Bureau reported earlier this month.

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

US steel imports rise, paced by sheets and HDG strip

US steel imports picked up in March from the 1.7 million metric tons brought in during February.

The biggest increases came from sheets and hot dipped galvanized strip, sheets and strip, and reinforcing bars.

Imports of sheets and hot dipped galvanized strip reached 221,721 metric tons, up 43.1% from the previous month. Imports of the product also gained by 18.8% on a year-over-year basis.

Meanwhile, imports of reinforcing bars reached 128,343 metric tons in March, up 65.6%

In oil-relevant news, imports of oil country goods reached 115,905 metric tons in March, up 45.4%. While the demand outlook for oil is still volatile, the ongoing vaccine rollout and the summer season will likely boost demand in the coming months. (Per the Centers for Disease Control and Prevention, 43% of the population has received at least one vaccine dose.)

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China aluminum

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When the largest aluminum producer on earth keeps reporting high import figures, the world sits up and takes note.

According to figures released by the Chinese General Administration of Customs a few days ago, China recorded a new high for aluminum imports in March 2021.

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

China aluminum imports surge in March

Imports went up 40.8% from February 2021, taking first quarter imports to a total of 661,517 tons. The quarterly total marked an increase of 118.8% from the same period in 2020.

China has been on this aluminum importing spree since July 2020. China’s aluminum imports last year, including primary aluminum and unwrought alloy, surpassed the previous annual record set in 2009.

What’s more, Shanghai aluminum prices last week were at their highest since 2010. China had bought in record volumes of the metal in 2020, riding on an uptick in domestic demand. Strong demand pushed the Shanghai prices higher than London prices, opening an arbitrage window for cheaper overseas metal.

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supply chain chart

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Metal prices have been rising this year, in part because of a rapid recovery in consumer spending and manufacturing following last year’s lockdowns. China led the recovery, but the recoveries have strengthened in North America and, to a lesser extent, Europe.

As vaccines have rolled out, particularly in the US, sentiment has improved. Consumers have begun to spend some of that US $5.4 trillion — estimated by the Financial Times — of pent-up savings amassed during the lockdowns.

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Supply chain woes

However, constrained supply is also a major driver of metal prices.

In some cases, such as copper and zinc, this has been from lockdowns in major resource countries like Peru. In addition, tariff barriers have further squeezed consumers’ supply options.

The US added anti-dumping duties on some 18 aluminum sheet supplying countries earlier this year. Meanwhile, the European Union added aluminum flat rolled countervailing duties this year. Those added to those already in place for extrusions from last year on China. As a result, the moves significantly tightened aluminum supplies into the European market.

Further pressure has come from global logistics constraints and cost increases. That has come principally on the Asia to North America and Asia to European shipping routes. Routes have seen shipping delays, container shortages and a near tripling of freight rates over the last 12 months.

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