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MetalMiner’s Stuart Burns touched on the rapid swing back downward for the aluminum price, which surged on news of U.S. sanctions on Russian oligarchs and companies but quickly dropped when the U.S. Treasury opened the door to potential easing of sanctions.

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But aluminum wasn’t the only metal to see its price drop precipitously in the last week.

LME nickel rose 15.8% between April 3 and April 19, from $13,555/mt to $15,700/mt. That surge has reversed, however, in recent days.

From that $15,700/mt mark, the price has dropped 10.7%, down to $14,025/mt as of April 23.

LME nickel price. Source: LME

The nickel price jumped 10% in a single day last week, the Financial Times reported, marking the biggest one-day jump since 2008, on concerns regarding the potential for sanctions to spread to Russian firm Norilsk Nickel.

Norilsk, however, was not among the 12 companies listed in the sanctions announced by the U.S. Treasury April 6.

Nonetheless, with the U.S. Treasury opening the door for the easing of sanctions if Russian oligarch Oleg Deripaska steps down from his role with aluminum giant Rusal — one of the companies listed in the initial sanctions announcement — the price of aluminum and other metals, like nickel, have tracked back down.

Given Rusal’s stake in Norilsk, last week’s fears regarding a potential supply crunch have for now been somewhat allayed. As such, with the Treasury’s softened stance on sanctions, prices have come back down.

On Monday, the Treasury extended the deadline for U.S. individuals to wind down activities with Rusal to Oct. 23.

“RUSAL has felt the impact of U.S. sanctions because of its entanglement with Oleg Deripaska, but the U.S. government is not targeting the hardworking people who depend on RUSAL and its subsidiaries,” Treasury Secretary Steven Mnuchin said in a prepared statement. “RUSAL has approached us to petition for delisting.  Given the impact on our partners and allies, we are issuing a general license extending the maintenance and wind-down period while we consider RUSAL’s petition.”

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At least for now, that’s good news for electric vehicle manufacturers, who are increasingly looking to nickel for use in lithium-ion batteries.

What goes up must come down, goes the old adage.

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Although that adage does not always hold true, it has for aluminum this week following a change of tone from Washington.

According to the Financial Times, the U.S. Treasury made two important announcements this week, the first being that if Oleg Deripaska sold his stake in Rusal, it could cut or lift sanctions on the firm. The second announcement was a postponement until Oct. 23 for U.S. firms and those dealing with them to wind up their affairs with the aluminum producer.

As a result the perceived tightness created by Rusal effectively being frozen out of the market has evaporated — for the time being, at least — and the price has fallen back to the high $2,200’s, some 10% above the level aluminium was at before the sanctions were announced.

The Treasury’s move is seen as an acknowledgement that it misjudged the impact on America’s own aluminum market and the damage such a disruption to the supply chain was going to cause.

Not only did prices react strongly, but primary and downstream supply became extremely problematic, with some consumers unable to access metal and smelters questioning where they would source alumina. Alumina prices reacted even more sharply than aluminum, rising as much as 80% since the sanctions were introduced.

Treasury Secretary Steven Mnuchin was at pains to explain the target was Oleg Deripaska, not Rusal per se, and is hoping the latest move will drive a wedge between him and the company, allowing U.S. consumers to continue to access Rusal metal while achieving the original objective of penalizing Putin supporters.

The FT reports Deripaska controls 48% of the company, with another 26.5% owned Viktor Vekselberg (who was also on the sanctions list) and some 8.75% in the hands of Glencore.

The Treasury’s move may negate the need for Moscow to nationalize Rusal. While not openly admitting that option was on the table, it has been rumored and may yet be an option if Deripaska decides his only option is to exit from the firm. Chinese buyers are also said to be circulating, but for such a key Russian asset the Kremlin may not be too enthusiastic about that option. Deripaska now has some five months to act, which is a long time in politics and the metal markets.

Source: Financial Times

Constraints remain, though, on the aluminium market. Both the U.S. and Europe are in deficit, and supplies from Brazil being temporarily reduced is not helping sentiment. But most would see the relaxation of tension around consumption of Rusal material as a pressure release valve that has taken the steam out price rises for now.

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Previous talk of $2,800-$3,000/ton now seem unlikely in the short term. While aluminum remains in bull territory, much of the strength is probably baked into prices at current levels.

U.S. domestic steel prices steadily increased after the release of the Section 232 report and President Donald Trump’s formal proclamation. However, the pace of the increases has started to slow down, signaling a possible top.

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After what now looks like sluggish steel momentum in 2017, the current steel price rally appears to have no end. Prices climbed to more than seven-year highs. However, MetalMiner previously reported on a possible top for steel prices.

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

So far, steel prices have not dropped. In fact, HRC and CRC prices have moved closer toward the $900/st and $1,000/st, respectively. Also, the approaching date of May 1, when several countries’ tariff exemptions expire, could still add support to domestic steel prices. This expiration date involves the Section 232 country exemptions for the EU, Argentina, Brazil and Australia.

The only exception is South Korea, which is exempted from steel imports under the bilateral trade deal, KORUS. The agreement with South Korea removes steel tariffs permanently but replaces that with a quota. The steel quota is equivalent to 70% of South Korea’s average exports to the U.S. from 2015-2017. In return, South Korea has agreed to improve access for U.S. automakers, who can now export up to 50,000 vehicles per OEM per year. South Korean aluminum tariffs however will go into effect after May 1, similar to the other countries listed above.

Whether the countries remain exempted or not may affect U.S. domestic steel prices. The country exemption could create downward price pressure on steel. However, steel prices could stay well supported if the country exemptions go away.

Global Steel Demand

According to the World Steel Association, global steel demand is forecasted to grow by 1.8% in 2018 and 0.7% in 2019. Despite the steel markets’ risks from current trade tensions (Section 232 tariffs, Section 301), the world’s favorable economic momentum may drive actual demand growth. Global steel demand in 2018 is forecasted to reach 1.616 billion tons, increasing to 1.627 billion tons next year. Read more

As my colleague Sydney Lazarus reported yesterday, even though the European Union has a temporary exemption from the U.S.’s Section 232 tariffs on steel and aluminum, it is demanding compensation at the World Trade Organization as shown in a filing by that trade body two days ago, according to Reuters.

The EU is arguing that the U.S. tariffs were imposed only to protect U.S. industry, rather than for security measures.

MetalMiner Executive Editor Lisa Reisman took readers through how the U.S. Department of Commerce did its homework on the Section 232 steel investigation, in a top-read post originally published Feb. 23, 2018. Read the full text of Lisa’s article below.

By now most MetalMiner steel producers and steel buying organizations have pored over the Section 232 steel report published by the Department of Commerce. In case you missed it, here is a link to the full report.

At its core, the Section 232 investigations represent the only public policy solution put forward by any major government to address the fundamental crisis involving extensive and pervasive global overcapacity for steel, stainless steel and aluminum.

Section 232 buying strategies – download MetalMiner’s Section 232 Investigation Impact Report today!

This overcapacity, the Department of Commerce believes, threatens U.S. national security interests because unfairly traded imports have caused substantial financial harm to U.S. producers.

Before you scream “protectionism!”, read on.

Read more

The U.S. International Trade Commission late last week sent out a note that it is looking for input on a new investigation concerning proposed modifications to the U.S. Korea Free Trade Agreement (KORUS), specifically related to customs duties for motor vehicles.

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Recently, the U.S. and South Korea reached an agreement in principle to revamp the free trade agreement, which originally went into effect in 2012.

“The investigation, U.S.-Korea FTA: Advice on Modifications to Duty Rates for Certain Motor Vehicles, was requested by the U.S. Trade Representative (USTR) in a letter received on April 6, 2018,” a USITC release said. “The letter included an attachment detailing the articles affected by the proposed modifications.”

The USITC will submit its advice to the USTR by June 1, according to the announcement.

On March 28, USTR Robert E. Lighthizer and Republic of Korea Minister for Trade Hyun Chong Kim issued a joint statement announcing they had reached an agreement in principle regarding revisions to KORUS.

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U.S. goods and services trade with Korea was an estimated $144.6 billion in 2016, per the USTR. Exports were $63.8 billion; imports were $80.8 billion, making for a goods and services trade deficit with Korea of $17.0 billion in 2016.

At the end of week before last, aluminum prices seemed to struggle; some thought the metal might have shifted to bearish country.

However, after that LME aluminum prices jumped by more than 13% in a week.

LME aluminum prices retraced to August resistance levels ($1,972/mt), and then increased sharply again.

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The fact that LME aluminum prices rebounded to the current level suggests a sign of price strength. Buying organizations had a chance to commit to some volume last month, to reduce price risks on their aluminum purchases.

In bullish rallies, staying on top of buying dips remains critical.

A Brief Look at Other Base Metals

This latest price rally has extended to  other base metals. The two-month downtrend in copper prices reversed this month, as prices have increased. Copper prices again appear to have moved  toward the $7,000/mt level.

Nickel prices also traded higher so far this month, reaching $13,810/mt. However, 2018 nickel prices did not fall as far as aluminum or copper did.

Both zinc and lead prices show weaker trading volume. The price trend is more sideways and less volatile than the other base metals (copper, aluminum and nickel).

However, LME zinc prices have shown a strong long-term uptrend since the beginning of 2016.

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

What This Means for Industrial Buyers

The LME aluminum price retracement gave buying organizations a good opportunity to buy, as prices skyrocketed again.

Adapting the right buying strategy becomes crucial to reducing price risk. Given the latest jump in LME aluminum prices, buying organizations may want to take a free trial now to our Monthly Metal Buying Outlook to identify future buying dips.

The U.S. Department of Commerce on Tuesday announced it had issued a final affirmative determination in its anti-dumping investigation of imports of cold-drawn mechanical tubing from China, Germany, India, Italy, Korea and Switzerland.

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“Today’s decision allows U.S. producers of cold-drawn mechanical tubing to receive relief from the market-distorting effects of foreign producers dumping into the domestic market,” Secretary of Commerce Wilbur Ross said in a prepared statement. “We will continue to take action on behalf of U.S. industry to defend American businesses, workers, and communities adversely impacted by unfair imports.”

The DOC determined the following dumping margins (value of 2016 imports of the product from each country is included in parentheses):

  • China: 44.92 to 186.89% ($29.4 million)
  • Germany: 3.11 to 209.06% ($38.8 million)
  • India: 8.26 to 33.80% ($25.0 million)
  • Italy: 47.87 to 68.95% ($11.9 million)
  • Korea: 30.67 to 48.00% ($21.3 million)
  • Switzerland: 12.05 to 30.48% ($26.2 million)

The domestic petitioners in the case were: ArcelorMittal Tubular Products (Shelby, Ohio), Michigan Seamless Tube, LLC (South Lyon, Michigan), PTC Alliance Corp. (Wexford, Pennsylvania), Webco Industries, Inc. (Sand Springs, Oklahoma), and Zekelman Industries, Inc. (Farrell, Pennsylvania).

The case now moves to the U.S. International Trade Commission, which will rule on or before May 24. If the commission rules in the affirmative, anti-dumping orders will be issued.

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A full list of foreign respondents in the case is included below.

Source: U.S. Department of Commerce

We could love reading these murky tales about Russian businessmen and their dealings if the reality was not that some of them at least are rather too close to the truth and rather too close to home, (many of them living, as they do, at least part of their time in Western capitals).

Buying Aluminum in 2018? Download MetalMiner’s free annual price outlook

Donald Trump’s latest round of sanctions against Russian oligarchs has again thrown a spotlight on those closest to the throne in Moscow. With so much disinformation around, it is impossible to sift fact from fiction.

Caught up in the latest list identified for sanctions is Oleg Derispaska, boss and major shareholder in Basic Element, owner of Rusal (among other power and metals businesses).

In and of itself, that may not be tectonic for the metals markets, were it not for the cloud it casts over the trade and consumption of Rusal’s aluminum when its boss is on a sanctions list.

Derispaska has stepped back from Rusal recently, a move that predated the sanctions but now looks timely as the firm seeks to keeps its brand acceptable to banks and foreign authorities.

First indications are encouraging for the firm.

Read more

The April Aluminum MMI (Monthly Metals Index) fell three points. A weaker LME aluminum price led to the price retracement. The current Aluminum MMI index stands at 94 points, 3% lower than in March.

LME aluminum price momentum slowed again this month. LME aluminum prices remain in a current two-month downtrend.

Buying Aluminum in 2018? Download MetalMiner’s free annual price outlook

Source: MetalMiner analysis of FastMarkets

Though some may want to declare a bearish market for aluminum, prices are still over the $1,975 level, when MetalMiner recommended buying organizations buy forward. Prices may retrace back toward that level. However, if prices fall below the blue-dotted line, aluminum prices could shift toward bearish territory.

SHFE Aluminum

SHFE aluminum spot prices also fell this month. The degree of the decline appears less sharp than for LME prices. However, SHFE aluminum spot prices started to fall in October 2017.

Source: MetalMiner data from MetalMiner IndX(™)

Shanghai Futures Exchange (SHFE) aluminum stocks fell in March for the first time in more than nine months. Decreasing stocks sometimes point to falling inventories of aluminum in China, the world’s biggest aluminum producer and consumer. SHFE stocks dropped by 154 tons in March, according to exchange data released at the beginning of April. However, SHFE aluminum stocks still stand at 970,233 tons. 

MW Aluminum Premiums

Meanwhile, U.S. Midwest aluminum premiums fell for the first time since November 2017. The $0.01/pound drop at the beginning of April comes after a sharp uptrend in the premium. Despite the lower premium this month, the pace of the increases may continue for some time.

What This Means for Industrial Buyers

LME aluminum price retracement may give buying organizations a good opportunity to buy, as prices may increase again.

However, as prices are currently trading lower, buying organizations may want to wait until the market shows a clearer direction. Therefore, adapting the “right” buying strategy becomes crucial to reducing risks.

Given the ongoing uncertainty around aluminum and aluminum products, buying organizations may want to take a free trial now to our Monthly Metal Buying Outlook.

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Actual Aluminum Prices and Trends

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The Copper MMI (Monthly Metals Index) traded lower again this month, falling two points to 85. The Copper MMI dropped to December 2017 levels, driven by falling LME copper prices.

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When looking at the long-term trend, copper prices have held above the dotted blue line since September 2016. Although prices dipped a bit below the blue dotted line at the end of March, the line represents the current copper floor. Prices falling below the dotted line could suggest a short-term price correction.

Source: MetalMiner analysis of FastMarkets

Meanwhile, trading volume appears to be about the same as last month, when selling volume appeared weak. As the selling volume remains weak, the downtrend seems more like a short-term price correction than a change of trend.

Buying organizations may want to closely follow copper prices in the coming month or read our Monthly Metal Outlook in order to anticipate copper price movements.

Copper Stocks and Supply

LME copper stocks currently stand at 324,900 tons, up by 13,075 tons since the start of 2017 and 85,500 tons since the start of 2016.

According to the International Copper Study Group (ICSG), the provisional 2017 refined copper deficit was 163,000 tons. The situation for 2018 will also depend on the supply side, as many of the largest copper mines have upcoming labor contract negotiations still pending.

On top of that, the Caserones copper mine in Chile announced a shutdown this month in order to replace a leaking pipe. However, this shutdown is only partial and may not have a big effect on copper production. 

Copper Scrap

Both Chinese copper scrap prices and LME copper prices typically trade together. In March, Chinese copper scrap prices fell to $6,035/mt. LME prices also fell but remain in a long-term uptrend. The same is true for copper scrap.

Source: MetalMiner data from MetalMiner IndX(™)

The spread between Chinese scrap copper prices and LME copper seems to be wider than it was back in 2016 and 2017. A wider spread may boost scrap copper demand for the applications that it are suitable due to its lower price.

What This Means for Industrial Buyers

Copper prices are currently approaching December support (at $6,530/mt) levels, when prices last dipped during the bullish rally.

Buying organizations bought some volume then. As long as copper prices remain bullish, buying organizations may want to buy on the dips. For those who want to understand how to reduce risks, take a free trial now to the MetalMiner Monthly Outlook.

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Actual Copper Prices and Trends

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