CommentaryMarket Analysis

Aluminum may have been the best-performing metal on the LME this year, but copper is making a good showing, too, with the price hitting a 4 1/2 month peak last Friday.

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

Supporting the price earlier this year was a long strike at Chile’s Escondida, the world’s largest copper mine. However, as that dispute was settled workers contracts have come up for renewal at other mines in Chile and Peru, causing if not out-right strikes then the fear of supply disruption.

Workers at Chile’s Zaldivar mine came out on strike after talks failed while nearby Centinelais is also in negotiations with the threat of strike action.

According to Reuters together the two mines produced 340,000 tons of copper in 2016. Unionized workers in Peru, the world’s second-biggest copper producer, began a nationwide strike on Wednesday protesting against labor reforms, Reuters reported.

Meanwhile, recent data from China show the economy picked up in the second quarter and the expectation that the world’s largest copper consumer is likely to hit growth targets for 2017 set earlier this year have only added fuel to the fire in supporting prices.

Read more

quka/Adobe Stock

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:

Antony McAulay/Adobe Stock

Although oil and gas remain Iran’s most important exports by far, one beneficiary of the relaxation in trade embargoes has been the metals industry.

Participate in MetalMiner’s Budgeting Workshop on July 26 to help set your 2018 metals budget

According to an analysis by the Ministry of Industries, Mining and Trade, reported in the Financial Tribune, the data show growth in the production of crude steel, finished steel products, iron ore, coal concentrate and sheet glass in the last Iranian financial year running March 2016 to March 2017 compared to the year before, showing a significant uptick in output (much of it for export).

Coal concentrate saw the greatest increase with the rise of 10.6%, from 1.113 million tons in March 2015-16 to 1.232 million tons last year. Crude steel output had the second-largest gain, rising from 16.538 million tons to over 18 million tons (a 9% increase).

Iran holds the world’s 10th-largest reserves of iron ore. Despite dominance by Australia and Brazil, Iran still managed a 4.2% increase to 31.711 million tons, helping lift production of steel products 1.4% to 17.681 million tons.

These sound like modest increases for a country recently facing lower barriers to trade, but that may be because the benefits have yet to percolate through to the wider economy.

In the meantime, it is direct exports that have benefited the most. The Financial Tribune reported Iran’s total mineral products shipments last year registered a 17% and 38% increase in value and volume, respectively, year-on-year.

Source: Trading Economics

From a value perspective, it is difficult to make a judgement year-on-year for total exports because some 82% by value is oil and gas, for which prices have been highly volatile.

Even so, with a depressed oil price, Iran’s exports are heading back above their historical long-term trend of some $20 trillion, as the above graph from Trading Economics shows. The oil-price-induced spike of 2006-10 was an anomaly not seen before or since.

Economically, Iran would benefit enormously from a full and unfettered return to the international markets, but that is not going to happen while the autocratic mullahs remain in control. Liberal parties are dissuaded from the political process and many opposition politicians remain in jail. As in so many authoritarian regimes, those in power live well while the clear majority fail to enjoy the standard of living they could achieve based on their high standards of education and young, dynamic population.

Free Download: The July 2017 MMI Report

Even so, the country’s economic situation is trending positively. Foreign firms are showing greater confidence in returning to the Iranian market after years of sanctions.

AdobeStock/Stephen Coburn

Despite U.S. oil stocks falling 7.6 million barrels, the biggest drop since September, a recent Financial Times article reports, quoting U.S. Energy Information Administration data, that the oil price is struggling to get back to $48 per barrel, let alone the heady heights above $50 it achieved in May.

Participate in MetalMiner’s Budgeting Workshop on July 26 to help set your 2018 metals budget

U.S. refineries are running flat out to meet summer demand, drawing down on U.S. stocks — but still, the price is not responding.

Meanwhile U.S. exports are booming. Rather than being constrained by OPEC cuts, global production is rising. Ironically, even Saudi Arabia is pumping above its target, reporting to the cartel that last month it raised output to 10.7 millions barrels per day, a 190,000 b/d increase on the previous month and 12,000 b/d above its own target.

The Kingdom claims it needed to increase output to meet peak electricity-generating demand experienced during the summer months, but the Saudi increase contributed to total OPEC overproduction of 393,500 b/d from last month, according to the Financial Times.

Source: Financial Times

Iraq, Nigeria and Libya are all pumping more oil than at any time this year and Iran is close to its own year’s highest output, too.

In addition, Canadian oil sands production is rising, Production is predicted to be higher still next year as new projects come on-stream (despite the low prices), making many projects marginal or even loss-making, debts must be repaid and oil sands producers are hanging in there hoping for firmer prices.

News south of the border is not encouraging, though. U.S. tight or shale oil production has continued to rise this year, although at a more gradual rate than seen over the last 12 months. Nevertheless, shale oil producers have become adept at squeezing profits out of production, even at sub-$50 per barrel prices, and show no signs of backing off at current levels.

Long-position holders are hoping OPEC may take further action to curb supplies, but members are sticking to their mantra that they expect stocks to decrease and, therefore, prices to rise, as the current restrictions bite.

But as the Financial Times notes, OPEC’s own monthly report indicates the group still faces an uphill struggle to balance output under the terms of its supply deal, what with cheating and non-OPEC production.

Free Download: The July 2017 MMI Report

A balanced oil market seems a distant dream for producers.

Our July MMI report is in the books, and it paints a more positive picture than our June report.

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

Last month, four sub-indexes posted no movement. This month? Just one.

On top of that, the number of sub-indexes posting upward movement increased from four to six.

It was an especially good month for the Raw Steels MMI, which shot up 4.4%.

The Stainless Steel MMI — stainless is also part of the Section 232 investigation – also rose, while the other 232 investigation subject, aluminum, fell by a point.

The Department of Commerce is expected to announce the results of the Section 232 steel investigation in the near term. Will the Trump administration opt for tariffs, quotas, or a combination of the two, to combat excess capacity from China? Will China make good on talk of cutting production, particularly in light of what was a record June for Chinese steel and aluminum production?

Once the first 232 domino drops, the metal markets will feel the ripple effects — it’s only a matter of when.

Free Sample Report: Our Annual Metal Buying Outlook

You can read about all of the above and much more in our July MMI report, which you can download below.

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:

stockquest/Adobe Stock

Aluminum prices have been in the spotlight since the beginning of the year.

Since June 2016, aluminum prices have risen. However, for the past three months, they have traded somewhat sideways.

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

Source: MetalMiner analysis of fastmarkets.com data

From a technical perspective, aluminum prices are trading in what is called a wedge formation, with prices fluctuating between the two main blue lines drawn in the chart above. Because the top line descends from a previous uptrend, which characterizes a bull market, this movement could suggest a market top. By observing aluminum prices this month, the market will show us whether aluminum has reached the top of its bull run and will fall, or if it will continue to rise.

If prices fall below the bottom blue line, it will signal to us that a major trend reversal has started. We would also expect to see heavier trading volumes for any shifts in trend. If not, prices will likely continue to move in a sideways direction. This statements works for both the upper and lower limits.

These types of triangle trading patterns show us when to buy on the dips when prices appear in their lower limit. Aluminum has counted two buying dips since prices began to fluctuate in May and June. As prices fluctuate between the triangle limits, a potential third dip could appear if prices retrace to $1,865.

Free Sample Report: Our Annual Metal Buying Outlook

What This Means for Industrial Buyers

Although industrial metals remain bullish, commodities have shown a recent downtrend revealing price weakness.

Buying organizations that need to make aluminum purchases would do well by monitoring aluminum prices closely and taking action if prices break move outside the blue lines, as discussed in detail in our Monthly Metal Buying Outlook.

The M3 GOES MMI — the sub-index tracking grain-oriented electrical steel — fell two points this past month from 189 to 187.

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

The small decline in the U.S. runs counter to market price trends for Japanese GOES material. According to a recent TEX Report, Japanese producers have won price increases because of supply shortages. Moreover, Korea’s Posco scored a $300/metric ton price increase to supply India.

Meanwhile, MetalMiner sources say Chinese producers appear fickle, quickly raising prices only to lower them to accept new orders and fill capacity.

The 800-pound gorilla in the room, however, involves the Section 232 investigations.

Many are speculating that the delay will bring about a more modest set of recommendations from Department of Commerce Secretary Wilbur Ross, as the much-awaited report rumored to have been released prior to the July 4 holiday and delayed to right after the G20 summit, has still yet to be released.

MetalMiner speculated about potential outcomes in a story published nearly a month ago (and still believes that to be the most likely outcome). Meanwhile, Australia appears confident that it will be exempted from any such action. Some have suggested that Canada might also feel secure in receiving an exemption, but MetalMiner has not been able to substantiate that claim. Moreover, because Canada is such a significant supplier to the U.S. for steel products, it’s hard to conceive of how that country would receive a full exemption from whatever is recommended under Section 232.

Of course, Canada remains a critical part of the GOES supply chain, as Canada produces wound and stacked cores and exports them to the U.S.

Meanwhile, Back at the BRS Ranch…

In addition to the Section 232 investigation, David Stickler, CEO of Big River Steel (BRS), recently indicated at a steel conference that BRS would move forward with an additional study and due diligence activities on its Phase II expansion to include non-oriented electrical steel (NOES) capability.

Industry participants suggest that this could also include Phase III funding that includes GOES capability.

Last month, MetalMiner reported on growth projections for electric vehicles (which requires NOES materials to get the power from the battery to the motor) and the numbers suggest very large growth within the automotive sector. This will likely form the basis of due diligence activities and indirectly impacts GOES production, as NOES is often produced on the same lines.

Free Sample Report: Our Annual Metal Buying Outlook

What this means for industrial buyers

It’s hard to pay close attention to the month-to-month movements of what is essentially a M3 spot market index. The Section 232 investigation outcome remains potentially the single biggest price driver for the U.S. market.

Exact GOES Coil Price This Month

For full access to this MetalMiner membership content:
Log In |

Here’s What Happened

    • MetalMiner’s Global Precious MMI took a bit of a dip this month, coming down 1.1% to 83.
    • The sub-index’s value held at 84 in June and May, but on balance, the price drops within the overall basket of metals couldn’t hold the ship steady into this post-Independence Day summer lull.
    • While our U.S. platinum bar price got very close to its 2017 start-of-the-month low (which it hit in January; more on platinum below), U.S. palladium rose 3.8% month-on-month to record its highest price in 34 months — nearly a 3-year high.

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

What’s Going On in the Background?

  • Diesel goin’ down? Due to negative sentiment after Dieselgate, as MetalMiner’s Editor at Large Stuart Burns pointed out recently, sales of diesel vehicles in some parts of Europe have taken a dive in the past few months over concerns that “authorities will raise costs or otherwise make living with diesel engines a less attractive proposition for owners.” Overall, total car sales have dropped in some European markets, including the U.K. — but in the spots where they haven’t, gas-powered vehicles have been winning over diesel. In short, not awesome for platinum prices.
  • BEVs are not the panacea. Battery electric vehicles (BEVs) could be the ticket … except that the World Platinum Investment Council forecasts BEVs to make up no more than 5% of the market by 2025, so that wouldn’t work either.
  • Of course, investor demand, jewelry demand and other industrial sectors, such as chemical, all play into it. But “platinum’s fortunes will in part ride on the coattails of the auto industry’s ability to re-establish the diesel engine as an environmentally acceptable propulsion unit,” according to Burns.
  • Meanwhile, as my colleague Fouad Egbaria reported yesterday, gold is now trading on the LME.

What Metal Buyers Should Look Out For

  • The divergence between platinum and palladium prices of late certainly merits attention, and perhaps may drive industrial manufacturers to broader substitution efforts — but that could be a stretch. According to analysts cited by the Financial Times (paywall), “the divergence reflects a number of factors, including speculative demand and several years of production deficits that have eroded stockpiles and reduced available supplies.” The article goes on to say that longer term, “with the increasing popularity of electric vehicles, analysts say this year’s turbocharged run for palladium could be a last hurrah for the material, which has few industrial uses outside of the car industry.”
  • Last month, we wrote that “while we’re unsure of when prices will swing back up, mainly because output cuts in South Africa and elsewhere have seemingly not helped, it may be hard to discount current windows for smaller spot buys.” Fortunately for platinum spot-buyers, this still holds true.

Key Price Movers and Shakers

For full access to this MetalMiner membership content:
Log In |

The Renewables MMI, which tracks metals and materials going into the renewable energy industry, moved up by a single point for our July reading, up to 72 from last month’s 71.

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

For just the second time this year, U.S. steel plate posted a price drop, falling 3.7% for this month’s reading. U.S. grain-oriented electrical steel (GOES) also fell, by 1.2%. GOES had alternated between price drops and rises all year until this month, when GOES dropped in price for the second month in a row.

Meanwhile, Chinese steel plate rose 1%. Chinese neodymium, cobalt cathodes and silicon also posted price increases.

Japanese and Korean steel plate both posted price drops, by 1.1% and 5.9%.

Feeling Green

The renewable metals market is potentially in for a jolt in the coming years, especially in light of the direction of the automotive industry.

Last week, Volvo announced that “every Volvo it launches from 2019 will have an electric motor, marking the historic end of cars that only have an internal combustion engine (ICE) and placing electrification at the core of its future business.” While the reviews are mixed regarding how revolutionary the announcement actually was, it is certainly a long-term boon for the metals used in electric vehicles.

In other automotive news, Tesla is preparing to debut its Tesla Model 3. According to a Reuters report Tuesday, the new sedan model is expected to increase Tesla’s sales by 500%.

While Tesla’s sales currently represent a tiny fraction of the sales of the traditional automotive heavyweights, its sales are on the rise.

According to Autodata Corp sales figures released earlier this month, Tesla’s U.S. sales in June amounted to 3,900 units, up by 25.8% from June 2016, and year-to-date sales in 2017 (23,550) were up 42.7% from the same time frame in 2016.

However, a Washington Post report earlier this week notes that electric-vehicles sales hit a wall in Hong Kong once tax breaks there expired.

In the short term, the same thing could happen as sales pick up in the U.S.

Currently, a maximum total credit of $7,500 is afforded for consumers who purchase plug-in electric vehicles. That credit, however, begins to be phased out once a manufacturer sells more than 200,000 vehicles in the U.S.

On a macroscopic scale, despite President Donald Trump’s decision to remove the U.S. from the Paris climate accord, renewable energy, in general, has picked up momentum.

While clearly a long-term goal, France announced it will ban the sale of petroleum- or diesel-fueled vehicles by 2040. Also, the U.S. Conference of Mayors voted in late June to approve a resolution to help cities establish a “community-wide target of powering their communities with 100 percent clean, renewable energy by 2035.”

Actual Metal Prices

For full access to this MetalMiner membership content:
Log In |