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The Rare Earths Monthly Metals Index (MMI) posted no movement for this month’s index reading, as President Donald Trump signed an executive order that aims to strengthen the domestic mining industry and mitigate dependence on foreign sources of critical minerals.

October 2020 Rare Earths MMI chart

 

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New executive order again takes aim at U.S. import dependence

Late last month, President Donald Trump issued an executive order that seeks to curb U.S. dependence on foreign sources of critical minerals.

Chief among those foreign sources is China, which controls an overwhelming majority of the world’s rare earths mining and processing.

“Our dependence on one country, the People’s Republic of China (China), for multiple critical minerals is particularly concerning,” the executive order reads. “The United States now imports 80 percent of its rare earth elements directly from China, with portions of the remainder indirectly sourced from China through other countries.”

The order calls for the U.S. to enhance its mining and processing capacity, including some minerals not identified as critical.

“By expanding and strengthening domestic mining and processing capacity today, we guard against the possibility of supply chain disruptions and future attempts by our adversaries or strategic competitors to harm our economy and military readiness,” the order continues.

Furthermore, the report calls for the Secretary of the Interior to consult with several other department heads. They will investigate the U.S.’s reliance on foreign sources for critical minerals. After the investigation, the Secretary of the Interior will submit a report to the president within 60 days.

The report, the order reads, will summarize the investigation’s conclusions and recommend executive action. Potential actions include tariffs, quotas and import restrictions against China and other “non-market foreign adversaries.”

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The Construction Monthly Metals Index (MMI) held flat this month, showing no movement from last month’s index value, as August 2020 construction spending picked up from the previous month.

October 2020 Construction MMI chart

See why technical analysis is a superior forecasting methodology over fundamental analysis and why it matters for your steel buy.

August 2020 construction spending

August 2020 construction spending in the U.S. reached a seasonally adjusted annual rate of $1,412.8 billion, per the U.S. Census Bureau.

The August rate marked a 1.4% increased from the revised July estimate. Meanwhile, August spending marked a 2.5% year-over-year increase.

Spending during the first eight months of this year totaled $927.7 billion, or up 4.2% compared with the first eight months of 2019.

Meanwhile, spending on private construction reached a seasonally adjusted annual rate of $1,061.4 billion, up 1.9% from July.

Within private construction, residential construction reached a rate of $589.4 billion in August, or up 3.7% from July. Nonresidential construction dipped 0.3% to $472.0 billion in August.

As for public construction, spending reached a rate of $351.4 billion, or up 0.1% from July. Under the umbrella of public construction, educational construction spending rose 0.6% for a rate of $82.6 billion. Highway construction rose 1.9% to a rate of $100.6 billion.

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The Automotive Monthly Metals Index (MMI) gained 2.2% for this month’s index value, as Q3 2020 automotive sales showcased some basis for optimism.

October 2020 Automotive MMI chart

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

U.S. Q3 2020 automotive sales

Despite the May restarts of automotive manufacturers, U.S. showrooms faced low inventories this summer, putting a cap on sales despite solid demand.

“Available inventory is far below last year’s levels, yet sales continue to show surprising strength,” said Charlie Chesbrough, senior economist at Cox Automotive. “Going into the fourth quarter, the key question is: Can this continue? Clearly new vehicle buyers haven’t been hit as hard as other consumers during this recession, so demand is likely to remain stable over the near-term.”

General Motors, for example, reported Q3 2020 automotive sales fell 10% year over year to 665,192 vehicles.

“In a sign of a recovering industry, sales improved sequentially each month within the quarter,” GM said in a release. “Industry and GM sales rebounded significantly in September, finishing the month with year-over-year sales increases.”

Meanwhile, Ford reported Q3 2020 sales fell 4.9% year over year. Ford truck sales, however, showed growth. Total truck sales jumped 0.6%, while retail sales gained 8.3%. The quarter marked Ford’s best third quarter for truck sales since 2005, the automaker reported.

FCA US sales dropped 10% year over year in the third quarter. However, third-quarter sales rose 38% compared with the previous quarter.

Similarly, while Honda’s Q3 2020 sales fell 9.5% year over year, sales in September alone rose 11.5%.

“September marks a high-water mark for Honda sales this year with double-digit gains and our first month in positive territory since the pandemic began,” said Dave Gardner, executive vice president of National Operations at American Honda.

Nissan sales fell 32.4% in the third quarter on a year-over-year basis.

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India’s renewable energy sector, the fourth-most attractive renewable energy market in the world today, is all set to get a new player.

U.S.-based ArcVera Renewables, which specializes in consulting and technical services, has announced its entry into India’s solar, wind and hybrid energy storage market.

ArcVera has opened up an office in Bengaluru in the southern part of India. From there, it will deliver its expertise to project developers, lenders and investors — not only in India but also neighboring Southeast Asia and Pacific Rim countries.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

ArcVera joins the fray in India’s renewable energy sector

The Colorado-based ArcVera Renewables has over 40 years of global experience. The firm is now providing expert technical, financial and independent engineering services for stand-alone energy storage or hybrid projects.

Gregory S. Poulos, CEO of ArcVera Renewables, told the Indian media a combination of factors had made the company take this decision to expand. He said, on the one hand, India is a large and rapidly growing renewables market. With the entry of energy tenders and hybrid project requirements, the country presents an even more complex and competitive market.

On the other hand, a competitor departure from the Indian wind market left a vacuum that ArcVera is ideally positioned to fill, Poulos added.

What also drove ArcVera’s decision is the fact that Indian developers and investors are on the lookout for technical expertise to lower project risk and raise project value.

ArcVera’s services cover the full project life cycle. That cycle includes: finance-grade resource assessments, project design, technology assessments, financing, M&A, due diligence, construction, operations and repowering.

The company has atmospheric scientists, engineers, and data analysts.

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The widely, if not universally, held belief that globalization is a win-win panacea for growth has never looked shakier.

While President Donald Trump has led the charge on calling out the failings of unfettered engagement with China and all that entails in terms of loss of manufacturing capability and sharing of hard-won technology, he is by no means alone.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Globalization and China

There is a growing groundswell of opinion that the long-held liberal beliefs that engagement would change China’s behavior have proved flawed.

China today is arguably more centrist, more actively and belligerently nationalistic and worryingly less influenced by world opinion than it has been for decades.

And yet it has, from an economic point of view, proved remarkably successful so far.

China’s economy has bounced back faster than those in the West. Furthermore, its economy has recovered faster than even its close Asian neighbors. That is because, in part, the party’s control meant it could enforce harsh — compared to in the U.S. or Europe — lockdown measures in the face of the pandemic. That enforcement extends to continued adherence to social distancing and hygiene standards since.

It is unlikely that a change of president in January, were that to happen following the November election, would have a meaningful impact on U.S.-China relations. A Biden presidency may try to foster a more collaborative international approach. However, the direction would likely be similar.

Europe, too, is following a less bellicose but similar path.

Europe’s investments in China and reliance on China as a trading partner are greater than that of the U.S., for whom China trade still represents a modest percentage of GDP.

Yet, even in Europe, there is increasing talk of decoupling supply chains and restrictions of technology transfers to China. Furthermore, these is talk of restricting Chinese technology companies’ access to the European market.

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It is not often the world’s largest carmakers engage in mergers and acquisitions among themselves.

Fiat Chrysler and Renault Nissan announced a $35 billion plan to merge back in May 2019. The merger would have created the third-biggest carmaker, behind Volkswagen and Toyota.

But within 10 days of the announcement, FCA pulled out and it came to nothing.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Take two: Fiat Chrysler, PSA to merge

Now, still keen for a tie-up, FCA has announced it will merge with the French group PSA.

PSA is the owner of brands like Peugeot, Citroen, Vauxhall, and DS. The deal, valued at $50 billion, would form a 50/50 partnership with a turnover of some €170 billion ($200 billion) a year and annual production of some 8.7 million units.

As such, the deal would put them, again, third. By other measures, they would be fourth, behind at least Volkswagen and Toyota, and possibly the Renault–Nissan–Mitsubishi Alliance (if you consider that one entity).

The combined FCA-PSA company will be renamed Stellantis. The name comes from the Latin “stello,” meaning “to brighten the stars.” (Yes, I know, who thinks up these names?)

According to AutoExpress, based on 2018 figures, Stellantis will have approximately 46% of its revenues from Europe and 43% from North America. PSA has long held ambitions to expand into North America. As such, a merger with FCA would make that much easier.

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We may be coming out of the first pandemic lockdown and business does, broadly, appear to be picking up; however, but some sections of manufacturing, including U.K. car manufacturing, are still suffering badly.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

U.K. car industry, supply chain face challenges

An article in the Financial Times starkly outlines the continued pain the U.K. car industry is experiencing and, by extension its extended supply chain.

U.K. car manufacturing fell 44% last month compared with a year earlier. Domestic orders and exports remain severely depressed. Last month’s performance marked the sector’s second-worst since car plants restarted after lockdown.

The Financial Times went on to advise that just 51,039 cars rolled off British production lines. The total fell from 92,153 in August 2019. Meanwhile, August output for U.K. buyers fell 58% to just 7,795 vehicles. The number of cars made for export fell 41% to 73,443 cars.

To be fair, several plants working during summer 2019 boosted August 2019 performance. Summer output followed a three-week closedown in the spring to prepare for the expected Brexit in 2019, which in the end did not transpire.

So, looking at the first half of each year gives a fairer comparison. Yet, even in that view the decline remains dramatic.

Between January and August, the U.K. produced 40.2% fewer cars than in the same months a year earlier. The period included several weeks of complete stoppages during the first lockdown in March and April.

Year-to-date production is now down by 348,821 units worth more than £9.5 billion to U.K. carmakers, according to the Society of Motor Manufacturers and Traders (SMMT). Furthermore, projections suggest U.K. car manufacturers are now on track to produce just below 885,000 cars this year – down 34% on 2019.

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As copper prices have continued to rise over the last six months, copper mine production has fallen.

According to the International Copper Study Group (ICSG), copper mine production fell 1% during the first half of the year.

Furthermore, the global copper market posted a deficit of 235,000 tons during the first half of 2020, according to the ICSG.

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Mine production drops 4% in April-May

The most significant slowdown in mine production came in April and May. The ICSG estimated mine production fell 4% during the two-month period, when coronavirus-related lockdown measures affected output.

Peru, the second-largest copper producer, saw its copper output impacted by the pandemic.

“In Peru, stoppages resulting from the COVID-19 pandemic combined with operational issues/adverse weather that affected a few major mines, led to a 20% decline in mine output over the first half of 2020 including a significant decline of 38% in April-May compared to the same period of 2019,” the ICSG reported.

Mine production also fell in Australia, Canada, Mexico, Mongolia and the U.S.

Meanwhile, Chile, the top copper producer, increased its mine production by 2.6%.

Refined copper production up 1%

However, global refined copper production in the first half of the year increased by 1%.

Primary production rose 2.3%, while secondary production fell 5.2%.

“Globally, constrained scrap supply due to the COVID-19 lockdown and lower copper prices have negatively impacted world secondary refined production,” the ICSG reported.

Total refined copper output in Chile increased 12.5%.

Copper price gains

As readers of the MetalMiner Monthly Metal Outlook know, copper prices have been on the rise this year, supported by both Chinese demand and supply concerns.

The average LME cash price in August jumped 2.3% from the previous month’s average, up to $6,497 per metric ton.

The average for the year, however, remains down 4.4% compared with the 2019 annual average.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices.

OPEC+’s production cuts have been pretty successful at steadying the oil price this year.

First, the cuts steadied the market. Furthermore, rising prices came in the face of oversupply and a pandemic-induced collapse in demand.

However, the alliance of producers remains far from a solid coalition.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021.

Attempts to support the oil price

Elements of game theory have long plagued OPEC’s attempts to control oil prices.

The incentive to cheat is huge. The sense by many smaller players that they suffer from output agreements more than the “big boys” breeds a sense of resentment at times.

That is particularly true among parties that have little else in common other than a desire to maximize oil revenues.

So, the Saudi oil minister’s thinly veiled dressing down of OPEC partners UAE, Nigeria and Iraq for overproducing is met with protestations but little in the way of immediate compliance.

OPEC’s production cuts have tapered from 9.7 million barrels per day in May to 7.7 million barrels per day now.

Overproduction by some players has contributed to a failure to lift Brent Crude prices past U.S. $46 per barrel. Even the current U.S. $42 level is looking vulnerable.

For example, the UAE fell in the region of 520,000 barrels over its quota last month, the Financial Times reported.

Saudi losing patience with fellow oil producers

Saudi Arabia may be losing patience with its less disciplined partners.

The kingdom is reportedly cutting its benchmark Arab Light crude more than expected. In addition, Saudi Arabia is lowering the grade to a discount for the first time since June for buyers in Asia. As such, it marks the second-consecutive month of cuts for barrels to Asia, World Oil reported.

Aramco will also trim pricing for lighter barrels to northwest Europe and the Mediterranean region.

Other Middle Eastern suppliers — including Iraq and the UAE, the second- and third-largest producers in OPEC — are expected to follow suit.

High stocks, low demand depress oil price

Refined petroleum stocks, particularly diesel stocks, are high, according to OilPrice.com.

Furthermore, demand remains weak.

Supply is being met by drawdown on high refined stocks and not feeding through to crude demand with little on the horizon likely to change that anytime soon.

Nevertheless, Goldman Sachs remains positive. The investment banker sees Brent crude rising to $49 per barrel before the end of the year.

“We estimate that the oil market remains in deficit with speculative positioning now at too low levels,” OilPrice quoted Goldman Sachs as saying to clients.

It is hard to see the price pushing much through that level before the end of this year. The oil price last reached that point at the beginning of March 2020.

Such a rise would require market conditions to be heading back to where they were this time last year, when the oil price traded at in the U.S. $60-65 range.

Much will depend on U.S. demand during the winter months. Sentiment will no doubt be supported by falling virus infection rates.

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FurAccording to the Indian Financial Express, the country is intending to take a leaf out of the European Union’s book and introducing an import surveillance scheme for aluminum and copper imports.

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India’s rising copper, aluminum imports

Like the E.U.’s scheme, the scheme will require importers to first register and then report imports. That way, the authorities can track the source and volume of imports.

Specifically, the government is focused on imports from China and other southeast Asian markets, the article notes.

Only by accumulating hard data can the country develop sensible policies, promoters of the scheme argue.

As such, China, Japan, Malaysia, Vietnam, and Thailand are among the major exporters of copper. Those countries accounted for 45% of India’s $5 billion in copper imports for 2019-2020, the article reports.

Meanwhile, aluminum imports amounted to nearly as much at $4.4 billion worth in 2019-2020. Of those imports, some 58% has been in the form of scrap this year.

China checked in as the biggest supplier, shipping aluminum worth just over $1 billion. Furthermore, the country has been a major supplier of semi-finished products, sometimes competing directly with India’s substantial domestic producers.

“China is a huge threat to India’s aluminium industry,” said B.K. Bhatia, joint secretary general at Federation of Indian Mineral Industries (FIMI), the country’s biggest mining lobby.

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