Market Analysis

HRC and HDG prices seem to have recovered a bit since the start of the month. CRC price increases appear less sharp, but may follow suit.

U.S. HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

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Some steel forms have increased such as CRC and HDG for three consecutive weeks. If the price increases continue at this pace, prices could breach previous levels, which may signal strength and the start of a rally.

Chinese Steel Prices

Chinese steel prices drive U.S. domestic prices. Both usually tend to follow a similar pattern, which means that when Chinese steel prices increase, we would expect a similar movement in U.S. prices.

Despite the Chinese steel price’s cooldown during the last quarter of the year, a new sharp uptrend appears to have started this month.

China HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

Increasing Chinese prices add strength to the bullish case for steel. Buying organizations may want to follow Chinese prices closely, as they seem to have recovered.

Let’s Remember the Bullish Case

MetalMiner has watched steel prices closely since commodities and industrial metals turned bullish in August 2017.

Although base metals and steel do not necessarily trade in the same direction at the same time, industrial metals do tend to move together. December began with a stronger U.S. dollar caused by expectations of the Congress passing a tax bill. A stronger U.S. dollar caused commodities to fall slightly. However, this commodity downtrend appears short term, as the bullish case remains supported.

What This Means for Industrial Buyers

Buying organizations may want to closely follow both domestic steel prices and Chinese steel prices. Now that the bullish case appears more probable, steel-buying organizations may want to readjust their purchasing strategies.

MetalMiner sends automatic notifications when buying signals trigger a change in purchasing behavior.

Free Download: The December 2017 MMI Report

Take a free trial now to our Monthly Buying Outlook for a short-term analysis.

We’re another month closer to the end of the calendar year, and there’s much to recap from the last month in metals.

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After four MMIs ticked upward for our November reading, five did so for our latest report.

Hitting some of the high points:

  • The biggest winners of the month were the Automotive, Construction and Raw Steels MMIs. Automotive picked up four points, while Construction and Raw Steels picked up five points apiece.
  • The Aluminum MMI tracked back down, losing four points after a five-point rise the previous month. As Irene Martinez Canorea wrote, a dropping LME aluminum price had much to do with the sub-index’s drop.
  • The Stainless MMI, meanwhile, fell five points on the month. In this case, a 10% decline in nickel prices contributed to the MMI’s fall. Trading volume for LME nickel is still strong, Martinez Canorea wrote, and the outlook for nickel remains bullish.

You can read about all of the aforementioned — and much more — by downloading the December MMI report below.

Grain-oriented electrical steel (GOES) import levels appear to have peaked in March of this year at 3580 metric tons. Despite a rise in June, import levels appear lower now than during the summer months, but are clearly higher than 2016 levels.

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With a Section 232 investigation still underway, we might expect to see declining import levels until the Department of Commerce submits a report to the Trump administration next month — at which point it remains unclear what will happen with steel imports.

The story behind GOES imports, however, looks quite different from the story behind other steel imports, particularly carbon steel – hot rolled coil, cold rolled coil and coated products.

The GOES trade story has become more complicated, particularly when one considers what types of GOES materials have entered the U.S. market.

Most of the imports did not come from China or Korea (often the targets of trade complaints) — rather, the lion’s share of the volume comes from Japan. See chart below:

Source: US ITC

Yet, Japan produces several products for which no domestic source exists – namely, “heat-proof” products, including those using domain-refined processes used “…in specialty transformers where small size, high efficiency and low noise are at a premium.” Indeed, that description appeared in the U.S. International Trade Commission’s examination of “Grain Oriented Electrical Steel from Germany, Japan and Poland” (see link above).

The domestic producers did not win that trade case. ATI subsequently shut down its GOES operations.

Japan’s JFE and Nippon Steel remain the dominant GOES players for these more technically difficult higher end grades. The Kobe Steel scandal will have little to no impact on GOES markets, since Kobe does not supply the U.S. market with GOES.

Meanwhile, the market will await for additional grain-oriented electrical steel announcements (and potentially supply of H1-B) from Big River Steel, as well as some clarity around GOES with the Section 232 investigation.

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Exact GOES Coil Price This Month

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The Copper MMI dropped one point this month, primarily driven by a 0.6% drop in the LME copper price.

This comes as no surprise as base metal price increases have slowed in November, while LME copper prices saw a small pullback.

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Source: MetalMiner analysis of FastMarkets

During the first week of December, LME copper prices fell sharply. However, we can expect these movements in bullish markets as a mechanism for prices to digest previous gains.

Trading volumes also support the uptrend. LME copper prices remain well above May levels, when MetalMiner provided a “buy signal” to forecast subscribers.

Chinese copper output could increase by 300,000 tons in 2018. Some analysts suggest higher output together with a slowdown in the Chinese real estate market may result in a slight cooldown for copper prices.

However, no signs suggest a cooldown.

According to the International Copper Study Group (ICSG), the market could see a a 50,000-ton deficit for 2017 and a 105,000-ton deficit next year.

Copper Scrap vs. LME Copper

The drop in scrap prices this month appears sharper than the one for LME copper prices. Chinese scrap prices decreased by 2.71% this month. However, both LME copper and Chinese scrap copper do tend to follow a similar trend.

What This Means for Industrial Buyers

As copper prices remain bullish, buying organizations may want to “buy on the dips.”

For LME copper prices, buying organizations can also read more about longer-term copper price trends with our free 2018 Annual Outlook, or take a free trial now to the Monthly Outlook.

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Actual Copper Prices and Trends

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The Rare Earths MMI took a three-point drop for the month, falling to 18 for our December reading. 
Save for an 11-cent increase in the Chinese yttrium price, the heavier hitters in this basket of metals  — terbium oxide, neodymium oxide, europium oxide and dysprosium oxide — posted price drops.

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Australian Rare Earths Miner Makes a Comeback

An article by Forbes chronicles the major bounceback of Australian rare-earths miner Lynas Corp., which rebounded after losing 99% of its share price.

The reason for the revival? The electric-car wave and environmental cleanup efforts in China, the Forbes article reports.

Surviving an oversupplied market that saw rare-earths prices plummet in recent years, a tightening of the market by China — the dominant global producer of rare earths — saw the firm’s fortunes reverse.

“Lynas, a former gold miner, somehow survived, and today it’s enjoying a rerun of the rare-earths shortage as China’s tougher pollution laws and the growing popularity of electric cars are boosting prices,” Forbes reports.

Namibia Rare Earths Acquires Portfolio of Metal Properties

In other recent news, Namibia Rare Earths announced in November the acquisition of a portfolio of critical metal properties in Namibia.

According to a release from the firm, it agreed to acquire a “majority interest in seven projects ranging from exploration opportunities to near term feasibility stage” from Gecko Namibia (Pty) Ltd.

“The Gecko Namibia portfolio of properties will expand the Company’s commodity base from solely rare earths to a variety of highly critical commodities including cobalt, copper, zinc, lithium, graphite, tantalum, niobium, nickel, and gold,” the release continues. “Ground holdings in Namibia will increase from 221 km2 (Lofdal) to over 6,850 km2.”

Instability, Violence in Congo

The Democratic Republic of Congo is rich with rare-earths, like cobalt, used in things like computers, cellphones and electric car batteries.

However, political instability and violence in the country this year have understandably had significant effects on the rare-earths market in the central African country. (Of course, as has been mentioned in this space before, the market effects of the instability and violence is not the primary takeaway of these events, but is relevant insofar as we are talking about metals.)

Recently, at least 14 United Nations peacekeepers were killed after an attack in the eastern portion of the country Friday, the Washington Post reported.

In a statement Friday, U.N Secretary-General António Guterres condemned the attack, saying it constituted a war crime.

“This is the worst attack on UN peacekeepers in the Organization’s recent history,” Guterres said.

While the price of metals is a small consideration compared with the bloodshed in the country this year — in August, the U.N. reported approximately 250 people were killed in ethnic-based massacres — instability and violence certainly have an effect on production capabilities and, thus, metal prices for rare earths mined in the DRC (like cobalt).

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Actual Metal Prices and Trends

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

Here’s What Happened

  • MetalMiner’s Global Precious MMI, tracking a basket of precious metals from across the globe, ticked up another point to 88 for the December reading, a 1.1% increase.
  • Palladium flexed its muscles, officially busting through the $1,000 per ounce ceiling. The platinum-group metal’s (PGM) U.S. bar price has jumped nearly a whopping 50% since the beginning of the year.
  • Platinum crept closer to palladium’s level over the last month, ending up in the mid-$900s per ounce level. It has receded from its most recent high of March 2017, when it landed above $1,000 per ounce.
  • “We’ve got a trend, folks!” — this is the third straight month in which palladium is priced at a premium to platinum, which has not been the historical norm.
  • After breaking and holding above the $1,300 per ounce threshold at the beginning of September for the first time since October 2016, the U.S. gold price has been dropping for a couple months before leveling out for Dec. 1. Gold bullion is just about $4 per ounce higher than it was at the start of November.

What’s Going On in the Background?

  • Why has palladium been trading at a premium to platinum? A reminder: “Palladium has traded at a discount to platinum because of platinum’s greater cost of extraction and its wider scope of applications,” according to Stuart Burns, MetalMiner’s editor at large. But the fall of diesel (compared to gas) engines has bumped up palladium demand — which, coupled with anticipation of both palladium and platinum production falling, according to analysts from UBS and SP Angel, paints a picture of potentially sustained higher prices. For now, heading into the winter holidays, the current trend is making palladium investors feel pretty good.
  • Gold in the spotlight. Let’s pivot to gold a bit this month. A gold mine in Ireland is causing some controversy amidst the background of Brexit, with greater numbers of potential jobs and environmental impact all hanging in the balance.

What Metal Buyers Should Look Out For

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Key Price Movers and Shakers

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The Stainless Steel MMI dropped five points this month as nickel prices fell by 10%. Despite the increase in stainless steel surcharges this month, the sharp fall in nickel prices drove the index lower.

Nickel price volatility has increased over the past few months. Prices currently trade in a +/-$3,000/mt range. Strong demand in the stainless and battery sectors and heavy trading volumes have driven nickel prices.

Price volatility is being driven by increased activity in nickel transactions. Nickel has become one of the “hottest metals” due to its demand in electric batteries. Therefore prices and trading volumes have shifted:

Source: MetalMiner analysis of FastMarkets

Trading volume for LME nickel remains strong, and does not reveal a downtrend. Although the red lines in trading volume above seem to signal heavy selling volume, prices do not slip together with volume. Therefore, the outlook for nickel remains bullish.

In bullish markets, buying dips also present good opportunities to buy some additional volume.

Domestic Stainless Steel Market

Despite the slower momentum of the Stainless MMI, domestic stainless steel surcharges increased again this month. Surcharges reached May 2015 levels and remain far from last year’s lows (under $0.4/pound).

Source: MetalMiner data from MetalMiner IndX(™)

Global Stainless Steel Market

Chinese crude stainless steel output has grown five-fold since 2006, reaching approximately 55% of total worldwide output. This month, Chinese domestic stainless steel prices fell. The drop in stainless steel prices followed nickel’s short-term downtrend.

Chinese chrome metal prices and the ferrochrome prices demonstrate a market anomaly. Ferrochrome (FeCr) is a chromium and iron alloy, containing 50% to 70% chromium by weight. Ferrochrome price increases in the May-September 2017 period appear sharper than the chrome metal price increase.

Source: MetalMiner data from MetalMiner IndX(™)

Therefore, iron ore may be the culprit increasing the ferrochrome price. When looking at the iron ore chart, readers may see that iron ore prices appeared higher during Q2 and Q3.

Source: MetalMiner analysis of Trading Economics

Despite the sideways trend during the last few months, iron ore prices increased in November and have continued their uptrend in December too. Therefore, ferrochrome prices may continue to increase driven by higher prices in both raw materials (iron ore and chrome metal).

India overtook Japan in 2016 and serves as the world’s second-largest stainless steel producer. Indian stainless steel output continues to expand and is forecasted to reach 4 million tons in 2018. Strong domestic demand from both the automotive and construction sectors has driven Indian growth.

The European domestic 304 stainless steel remains flat due to weaker domestic demand.

What This Means for Industrial Buyers

Stainless steel momentum appears slow, just as it does for all the other forms of steel. However, due to nickel’s high price volatility, buying organizations may want to follow the market closely and buy in the dips. To understand how to adapt buying strategies to your needs, dive deeper into our Monthly Metal Buying Outlook or you can take a free trial now.

To read more about longer-term stainless steel price trends, download the free Annual Outlook.

Actual Stainless Steel Prices and Trends
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The Renewables MMI dropped 2.5% for the month of December, ending at a value of 78.

Here’s What Happened

  • Since our recalibration of this index back in May 2017 to better take into account cobalt price fluctuations, the Renewables MMI has been slowly but surely gaining ground the latter half of 2017, hitting a high of 84 in September.
  • Within this basket of metals and materials used in the renewable energy industry, the Big Heavy is the U.S. steel plate price. Yet from November to December, that price point only dropped a single dollar per short ton.
  • The China steel plate price, however, did move much more – increasing 4.3% on the month.

What’s Going On in the Background?

  • The biggest news for the renewables industry has been the controversial tax plan put forth by legislators and still awaiting final House/Senate reconciliation – mainly, the fact that the Base Erosion Anti-Abuse Tax (BEAT) has been kept intact in the latest version of the Senate bill.
  • As Sydney Lazarus wrote in MetalMiner last week, currently, “many companies have large multinational corporations finance wind or solar energy projects, and in return, give the latter the renewable energy credit that the government provides.” But the BEAT tax, which is meant to discourage multinationals from moving profits abroad — and which the Senate bill kept intact — would make the crucial solar investment tax credit (ITC) and wind production tax credit (PTC) “unusable for multinational banks and other corporations who have low tax rates,” according to this article.
  • It’s unclear if this move was intentional or not, but regardless, it injects huge uncertainty into the renewable energy industry as the bill hurtles toward law. (Some, such as American Wind Energy Association’s Peter L. Kelley, say it “could put an end to more than half of the country’s wind projects,” as reported by Lazarus.

What Metal Buyers Should Look Out For

  • Keep an eye out on steel plate’s raw material inputs — iron ore prices increased over the past month, as we reported in our December Monthly Buying Outlook, while coal prices decreased. Although steel plate prices appear a bit sluggish at the moment, China’s demand is something worthy of paying attention.

Key Movers and Shakers: Exact Prices

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The Raw Steel MMI jumped 6.5%, reaching 82 in December. This MMI sub-index remains one point above September’s reading, when steel prices were slightly higher.

Raw material prices increased this month together with Chinese steel prices and Midwest premiums, which drove the increase in this month’s Raw Steels MMI.

U.S. HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

Early December prices suggest a drop in HRC, CRC and plate. Only HDG appears to have increased from November’s closing price. Steel prices have failed to move into bullish mode, similar to both industrial metals and commodities.

Chinese Prices Started December Strong 

Despite U.S. steel prices falling at the beginning of this month, Chinese steel prices increased this week. Increases range between 1.5% for hot-rolled coil and 3.5% for cold-rolled coil.

China HRC and CRC prices. Source: MetalMiner data from MetalMiner IndX(™)

The China Metallurgical Industry Planning and Research Institute (MPI) reported that Chinese steel output will increase in 2017 despite capacity curtailments. Output in 2017 will have increased by approximately 3% up to 832 million tons, while 2018 will result in an additional 0.7% output increase driven by the restart of mill operations.

Chinese steel demand will likely increase in 2018 up to 726 million tons from 722 million tons in 2017 due to domestic economic growth. An increasing Chinese steel demand could create upward movements in iron ore demand, which is expected to rise by 1.3% this year.

Raw Materials and Domestic Scrap

Iron ore prices increased this month after trading sideways for a couple of months. Steel prices and raw material prices are generally correlated. Raw material price increases generally support steel prices.

Source: MetalMiner analysis of Trading Economics

The latest price rise for iron ore appears sharp. Buying organizations may expect additional upward movements in iron ore prices. This fact may also result in increasing steel prices (despite the drop earlier this month).

What This Means for Industrial Buyers

Steel price dynamics showed some upward momentum this month. Although U.S. steel prices have risen (yet appear to lack strength), Chinese steel prices increased at the beginning of December together with raw material prices. Buying organizations will want to pay close attention to Chinese price trends, lead times and whether domestic mill price hikes stick. To understand how to adapt your buying strategy this season, take a free trial now to our Monthly Buying Outlook for a short-term analysis. 

Actual Raw Steel Prices and Trends

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The Construction MMI, tracking metals and raw materials used within the construction industry, surged 5.5% to a value of 95 for December.

Here’s What Happened

  • Every single price point comprising the Construction MMI — including ferrous, non-ferrous and scrap components from the U.S., Europe and China — rose as of Dec. 1, with the exception of U.S. steel bar fuel surcharges.
  • The biggest mover appeared to be the Chinese rebar price, spiking 17.7% from November to December.
  • We’ve breached new territory with this month’s reading. Not since May of 2012 has the Construction MMI performed this strongly.

What’s Going On in the Background?

  • Here’s what we wrote back in May: “We’re in the salad days for the U.S. construction sector, at least as far as 2017 is concerned.” According to the Associated General Contractors’ analysis, construction spending was at record levels for the second straight month in March,” as quoted by forconstructionpros.com. Well, after a bit of a summer slowdown, it’s looking even better this month to round out 2017 as a pretty great year for the sector.
  • The Commerce Department said last week “that construction spending increased 1.4 percent to a record high $1.24 trillion, the swiftest advance in five months,” according to Reuters, exceeding analysts’ expectations and driven by state, local and especially federal government spending.
  • To boot, the AIA announced mid-last month that “the monthly Architecture Billings Index (ABI) came in at a score of 51.7 in October, up 2.6 points from September’s score of 49.1.” The ABI is a leading economic indicator of U.S. construction activity, and “reflects a nine- to 12-month lead time between architecture billings and construction spending nationally, and regionally, as well as by project type,” according to the article linked above.

What Metal Buyers Should Look Out For

  • Interestingly, a longer-term ABI uptrend appears to be firmly in place — since 2012, the index looks to be achieving “higher highs” each time it peaks.
  • “As we enter the fourth quarter, there is enough design activity occurring that construction conditions should remain healthy moving through 2018,” said AIA chief economist Kermit Baker, Hon. AIA, in a press release, according to Architect Magazine.
  • MetalMiner analysts are generally bullish on both the industrial (especially base) metals complex and commodities overall, which can be seen directly in this month’s surges of our MMI sub-indexes such as Construction and Automotive.
  • Although prime contracting season usually starts in the November period and steel prices historically tend to rise this time of year, steel prices’ behavior has not shown enough strength to spur bullishness. Get more insight on that in our latest Monthly Outlook Report. (Free two-month trial here.)

Key Movers and Shakers: Exact Prices

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