Copper

Department of Commerce building

The U.S. Department of Commerce. qingwa/Adobe Stock

This morning in metals news: the Department of Commerce said imports of common alloy aluminum sheet from 18 countries are being dumped and benefiting from subsidies; Federal Reserve Governor Lael Brainard this week commented on the US’s economic outlook; and the copper price has retraced somewhat over the last week.

DOC makes common alloy aluminum sheet ruling

The Department of Commerce ruled that common alloy aluminum sheet imports from 18 countries benefited from either dumping or countervailable subsidization.

The affirmative final dumping determination related to imports from: Bahrain, Brazil, Croatia, Egypt, Germany, India, Indonesia, Italy, Oman, Romania, Serbia, Slovenia, South Africa, Spain, Taiwan, and Turkey.

Meanwhile, the countervailing subsidy investigation referred to common alloy aluminum sheet imports from Bahrain, India and Turkey.

In 2019, Germany sent the most common alloy aluminum sheet, by value, to the US, at $286.6 million.

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Department of Commerce building

The U.S. Department of Commerce. qingwa/Adobe Stock

This morning in metals news: the American Iron and Steel Institute (AISI) offered positive comments on the heels of the confirmation of the secretary of commerce; UK unions worry about the potential loss of thousands of jobs; and the Biden administration is taking a step back in the process toward an Arizona copper mine.

AISI on new Secretary of Commerce

The Senate voted 84-15 in favor of confirmation of Gina Raimondo to the position of secretary of commerce.

“Strong enforcement of U.S. trade laws is a top priority for American steelmakers, particularly as foreign government subsidies and other market-distorting policies and practices have resulted in significant global steel overcapacity — the impacts of which have been exacerbated by the COVID-19 pandemic,” AISI President and CEO Kevin Dempsey said.

Dempsey emphasized the need for “full enforcement” of Section 232 remedies on steel products.

Raimondo had served as governor of Rhode Island since 2015.

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UK union fears

Workers in the UK’s steel industry are expressing concern over potential job losses due to financial troubles within Sanjeev Gupta’s GFG Alliance, the BBC reported.

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housing starts

ungvar/Adobe Stock

This morning in metals news: US construction spending picked up in January; meanwhile, the Federal Register published the text of President Joe Biden’s latest executive order; and, lastly, the copper price came back down to close last week.

US construction spending rises in January

US construction spending picked up to a seasonally adjusted annual rate of $1,521.50 billion, the Census Bureau reported.

The spending rate marked an increase of 1.7% from the previous month and 5.8% from January 2020.

Private construction spending increased by 1.7% from the previous month.

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Federal Register publishes supply chain order

Last week, President Biden signed an executive order that seeks to review and strengthen several critical supply chains.

Today, the Federal Register published the full text of the executive order titled “America’s Supply Chains.”

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copper mine

Gary Whitton/Adobe Stock

The copper price has resumed its rise this month after taking a brief pause in January.

Meanwhile, on the supply side, tightening began last year and could exacerbate in the year ahead. Strong demand from China, lack of new mine investment and enthusiasm about copper’s role in the renewables revolution are all contributing to the metal’s bullish run.

Copper’s outlook is strong, MetalMiner’s Stuart Burns explained earlier this week. However, it would not be a surprise to see short-term retrenchment.

“So, for investors to take profits and the copper price to fall back should not come as too much of a surprise after such a strong rise in prices,” he wrote.

“Furthermore, it does not undermine the longer-term bull narrative for the metal. It does suggest, however, copper consumers think carefully before fixing all their requirements for the year at today’s price.”

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Global copper mine production down 0.2%

Mine output — or lack thereof — is contributing to the copper price hot streak.

According to data from the International Copper Study Group, global copper mine production fell by 0.2% year over year during the first 11 months of 2020. The reduction narrowed as the year progressed after a 3.5% aggregate decline in April and May.

Furthermore, the global copper market recorded an apparent deficit of 590,000 metric tons.

By country, second-largest copper producer Peru has recovered after COVID-19 impacts earlier in 2020. Peru’s copper mine output reached its highest levels last year in October and November.

Meanwhile, top producer Chile saw a decline in output from July-November. However, output through the first 11 months of the year matched that of the first 11 months of 2019.

Indonesian output rose by 36%. Output in the Democratic Republic of the Congo and Panama also increased.

Refined copper production picks up

On the other hand, refined copper production rose by 1.8% during the first 11 months of 2020.

Chile’s electrolytic refined output picked up by 28%. Meanwhile, Indian refined output fell by 19%.

Copper price surge

After a sideways January, the copper price has picked up again in recent weeks.

The LME three-month price closed Tuesday at $9,126 per metric ton. The copper price is by more than 14% over the last month.

The ICSG noted the average LME cash price for January reached $7,970.50 per metric ton, or up 9.8% from the December 2020 average.

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copper mine

Gary Whitton/Adobe Stock

This morning in metals news: the copper price rally is going strong; meanwhile, Rio Tinto released its 2020 Annual Report; and, finally, Norilsk Nickel reported a fatal accident at one of its facilities.

Copper price rally

After a January lull, the copper price rally has resumed in February.

The LME three-month copper price closed Friday at $8,763 per metric ton, up 9.3% from the previous month.

Before the copper price rally, the price dropped to $7,748 per metric ton Feb. 2.

Meanwhile, Stuart Burns delved into the copper price rally earlier today.

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Rio Tinto releases 2020 Annual Report

Miner Rio Tinto released its annual report and Sustainability Fact Book today.

“Our strong performance during 2020 was overshadowed by the destruction of the ancient rock shelters in the Juukan Gorge and I reiterate our unreserved apology to the Puutu Kunti Kurrama and Pinikura (PKKP) people,” Rio Tinto Chairman Simon Thompson said. “We fell far short of our values as a company and breached the trust placed in us. It is our responsibility to ensure that the destruction of a site of such exceptional cultural significance never happens again.”

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copper bars

Shawn Hempel/Adobe Stock

Copper seems to be a one-way bet the last six months.

The copper price has risen from a low of $4,371 per metric ton in March last year to $8,631 per metric ton Friday on the LME.

According to Reuters, Goldman Sachs and Citi are doubling down on their bull calls for the copper market. The banks have raised their 12-month price target to $10,000 per metric ton.

Copper price drivers

Exchange-traded stocks are low. China has been buying voraciously as its economy bounced back from the early spring 2020 lockdown.

Many bulls are touting the green revolution story as reasons to buy. Automakers’ announcements of impending ends to the internal combustion engine and a total switch to electric has fueled projections of soaring demand.

Meanwhile, a lack of new mine investment over the last few years leaves the supply landscape short of new projects to meet projected demand.

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Reasons for pause

But not everyone is buying into the relentless rise in the copper price — at least not in the short term.

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The Renewables Monthly Metals Index (MMI) rose by 4.4% this month, as the Energy Information Administration released a forecast on renewable energy.

February 2021 Renewables MMI chart

(Editor’s note: This report also includes the MMI for grain-oriented electrical steel, or GOES.)

Renewable energy growth in the US

renewables

ipopba/Adobe Stock

US electricity generation from renewable energy sources is forecast to double over the next 30 years, according to the Energy Information Administration.

Renewable energy sources accounted for 21% of US electricity generation in 2020.  The EIA forecasts that percentage will reach 42% by 2050.

The renewable energy increase will come on the back of declining coal and nuclear power usage, the EIA said. Furthermore, wind power will account for the majority of renewable energy gains until 2024.

After that period, however, solar power will take over the majority of the gains.

“After the production tax credit (PTC) for wind phases out at the end of 2024, solar generation will account for almost 80% of the increase in renewable generation through 2050,” the EIA said. “Based on the Internal Revenue Service safe harbor guidance, EIA assumes that utility-scale solar PV facilities will receive a 30% investment tax credit (ITC) through 2023, which will then be reduced to 10% beginning in 2024.”

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steel

gui yong nian/Adobe Stock

This morning in metals news: December steel shipments rose by 4.4%; meanwhile, miner BHP announced plans to work with Japanese steelmaker JFE to study how to reduce greenhouse gas emissions from the steelmaking process; and, lastly, the copper price has bounced back after a January lull.

Steel shipments rise in December

US steel shipments rose by 4.4% in December compared with the previous month, the American Iron and Steel Institute reported.

December steel shipments reached 7.05 million net tons.

Meanwhile, steel shipments in 2020 totaled 81.0 million net tons, or down 15.8% from 2019.

By product, hot rolled sheet steel shipments rose by 3%. Meanwhile, cold rolled sheet steel shipments fell by 3%.

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BHP, JFE to study curbing emissions in steelmaking process

Businesses around the world are making efforts to show consumers they are tackling the climate crisis in some form.

As we’ve noted recently in the automotive sector, General Motors unveiled plans to electrify its lineup and reach carbon neutrality by 2040.

Speaking of steel shipments, players in the steelmaking sector are also making similar announcements.

Miner BHP and Japanese steelmaker JFE will work together to study how to curb emissions from the steelmaking process.

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copper bars

Shawn Hempel/Adobe Stock

The Copper Monthly Metals Index (MMI) increased for the fourth consecutive month, rising by 1.1%, as copper demand is likely to remain strong this year.

February 2021 Copper MMI chart

Copper prices traded sideways throughout January, which proved to be a slow month for the red metal. Most of its momentum over the past year came from China, which has stopped some of its manufacturing ahead of the Chinese New Year celebrations.

However, copper prices might pick up as key industries — such as construction, consumer appliances and automotive — continue to grow. Copper demand should also benefit from the “Buy American” policy that the Biden administration plans to implement.

The plan would promote the U.S. manufacture of essential components in construction, appliances, electronics and automotive.

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

Global copper demand

As mentioned above, it’s not likely that copper demand will slow down in 2021.

In the US, new home and home renovation demand spiked since the pandemic started, along with electronics demand. Analysts at CitiBank expect the copper market to shift into a deficit in the second half of the year with a minor surplus overall for 2021, Reuters reported. They also forecast deficits in 2022 and 2023.

The US Census Bureau and the US Department of Housing and Urban Development reported building permits in December increased by 4.5% compared to November and 17.3% above the December 2019 rate. Privately owned housing continued to increase in December, rising by 5.8% from the previous month and by 5.2% compared to December 2019. The uptrend started in September 2020.

China will continue to play an important role in the copper market. The country accounts for about half of global primary consumption, which is then used to manufacture export goods.

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metals prices

Petr Ciz/Adobe Stock

When discussion of metals markets — indeed, any markets — considers likely price trends, it nearly always starts off looking in the rear-view mirror.

Last year’s copper market suggests a bull market driven by vociferous Chinese demand. Imports surged after China relaxed its spring lockdown. Prices rose strongly, up some 48% on the LME from March lows, led by speculative interest (particularly on the SHFE).

Bulls would have you believe we have much further to go.

But 2021 is not 2020.

The combination of stimulus and demand catchup will not be the feature in 2021 that it was in 2020. That will be true in China and the wider global economy.

Metals prices in 2021: what’s next?

Reuters recently reported the consensus price for copper this year is US $7,600 per metric ton, up 23% from last year’s consensus. However, it’s some $200 per metric ton below the current price.

However, on the other hand, 2021 is not likely to show the volatility we saw last year. Major black swans like a killer new mutant strain emerging excepted, expectations are prices will trade in a relatively narrow band this year compared to last.

Furthermore, 2022 is likewise expected to be much more stable. Still some years away from major electrification demand outpacing copper supply, 2022 is forecast to see a median price of US $7,625 per metric ton.

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Price movements elsewhere

Accepting that the one thing you can be sure of with forecasts is they will be wrong, the underlying rationale has some merit because it applies to pretty much the whole base metals complex. Recent price movements suggest it applies to steel, as well.

Supply is recovering fast. While exchange stocks do not necessarily reflect this across all metals — some, like aluminum and zinc, have far larger off-market stocks — a realization that they are there will temper expectations of higher prices.

As economies recover from 2020 and the impact of ongoing lockdowns, Chinese demand (equivalent to roughly half the world’s output of many metals) will likely ease as the tailwinds of the stimulus measures wane and the economy pivots more toward consumption. China cannot afford to allow continued rising debt levels or stoke its hot property market. Regarding the latter, the authorities have already signaled their intent to damp down demand.

Local distortions may still support local markets – to the extent President Joe Biden’s “Buy American” plan may support local producers of steel and, in particular, should be beneficial for North American USMCA steel mills – but such price premiums will be relative to the rest of the world. In short, they won’t be sufficient to send the market in the opposite direction.

Reuters reported all the base metals, with the exception of tin, will likely be in surplus this year and next.

If there is one silver lining for metals consumers to look forward to in 2021, apart from an effective jab, it is that prices may be more stable. Furthermore, they will likely be more predictable and, for some, a little lower than they have been of late.

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