LME copper

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This morning in metals news, President Trump is reviewing the U.S.’s steel and aluminum tariffs with respect to their application to Canada and Mexico, copper prices are up and the World Trade Organization (WTO) has set up a panel for a dispute between Japan and South Korea.

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Could Metals Tariffs on Canada, Mexico be on the Way Out?

Kelly Craft, the Trump administration’s ambassador to Canada, said the president is reviewing the U.S.’s steel and aluminum tariffs on Canada and Mexico, according to a Bloomberg report.

Canada and Mexico initially secured a temporary exemption this spring, but that expired June 1. The countries hope that the U.S. will remove the tariffs before the signing of a finalized trade deal (the recently agreed upon United States-Mexico-Canada agreement, the successor to the North American Free Trade Agreement).

MetalMiner’s Take: Many readers believe Canada and Mexico will be exempt from the Section 232 tariffs with the passage of the new trade agreement. If the tough rules of origin language on USMCA is adopted, the lifting of the tariffs would certainly provide some relief, particularly for semi-finished aluminum products, which remain in short supply within the United States.

But it seems like passage of the deal remains contingent on the lifting of the sanctions, so it remains unclear who will win this game of chicken. Regardless, service center inventory levels have risen; rising inventory levels generally do not support prices.

Copper Prices Rise

LME copper prices were up Monday partially on account of shrinking LME inventories, Reuters reported.

LME copper jumped 1.1% on Monday.

MetalMiner’s Take: It is not just falling LME inventories that are supporting copper. Despite the impact on the Chinese stock market and much media hullabaloo around trade wars, copper consumption in China remains robust (both for refined and scrap).

The copper market is tight and continued global growth, permitting that lack of abundant supply, will continue to support the market.

WTO Launches Panel for South Korea-Japan Dispute

The WTO has set up a panel to deal with a dispute between Japan and South Korea over the latter’s anti-dumping duties on stainless steel bars, according to the Nikkei Asian Review.

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The duty has been in place since 2004, according to the report.

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This morning in metals news, the LME copper price fell Thursday, miner Antofagasta downgraded its 2018 copper production guidance and Norsk Hydro says the global aluminum market is moving toward a deficit.

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Copper Price Slides

The LME copper price dropped to a two-week low Thursday, Reuters reported.

MetalMiner’s Take: Despite the three-week downtrend in copper prices, LME copper prices remain over the $6,000/mt mark, which acted as a psychological ceiling for most of 2017.

The downtrend does not appear sharp. In fact, copper prices have traded sideways since the beginning of the month. Fundamentals support an increase in LME copper prices, as global stocks are decreasing and copper premiums are increasing globally.

The copper supply and demand balance calls for a deficit in both 2018 and 2019. In fact, copper ore grade is starting to deteriorate in some big mines, such as Codelco, creating expectations of shortages over the following years.

Up and Down

Chilean miner Antofagasta announced downgraded cooper production guidance for 2018 but forecast an increase in production for 2019.

“The physical copper market continues to look tight and the outlook for next year remains positive despite ongoing fears about disruptions to global trade,” Antofagasta plc CEO Iván Arriagada said in a release. “We have narrowed our copper production guidance for the full year to 705-725,000 tonnes and looking ahead we expect production in 2019 to increase to 750-790,000 tonnes, driven by higher average grades at Centinela Concentrates and Zaldívar.”

Aluminum at Deficit?

According to Norwegian firm Norsk Hydro, the global aluminum market is moving towards a deficit.

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“The third quarter reflected our continued challenges at Alunorte and increased raw material costs, while higher aluminium and alumina prices, as well as strong Energy results, contributed positively. The market for aluminium is tightening, and we expect the 2018 global primary market in deficit,” President and CEO Svein Richard Brandtzæg said in a release announcing the aluminum and renewable energy firms third-quarter financial results.

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This morning in metals, Ford Motor Co. says prices of U.S. steel are higher than anywhere else in the world, China’s alumina exports surged in September and the LME copper price dropped Tuesday.

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High Prices

U.S. automaker Ford has been vocal about what it views as the negative impact of the U.S.’s steel and aluminum tariffs.

According to a Detroit News report, Ford’s president of global operations on Monday said “U.S. steel is costing more than anywhere else in the world” as a result of the tariffs.

MetalMiner’s Take: It’s a bit difficult to understand what has driven the public complaints from Ford about steel and aluminum tariffs, particularly when most OEMs take long positions on their metal spend.

Some OEMs have locked-in contract prices that simply do not fluctuate, according to MetalMiner benchmark data. The manufacturing organizations that make stronger arguments against tariffs are those that remain subject to spot-price movements, have a corporate policy that forbids hedging or lack the buying power to demand fixed prices.

Perhaps the vocalization of the complaints have heated up because many OEMs have entered the fourth quarter contract negotiation season and the producers want to open discussions at much higher price levels. In defense of Ford’s complaints, the multi-tier extended supply chain remains far more exposed to metal price volatility than a company like Ford.

In this environment, OEMs will need to work double time to create programs and opportunities for aggregating volumes across supply chains, developing directed buy and enablement programs, aggregation opportunities and using technology to better support the entire extended global supply chain.

China’s Alumina Exports Rise in September

China’s exports of alumina hit a 2018 high in September, Reuters reported.

Exports of alumina in September hit 165,839 tons, up from 29,722 tons in August.

LME Copper Falls

The LME copper price fell 1.1% on Tuesday, Reuters reported.

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The drop comes a day after London copper had reached a one-week high.

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This morning in metals news, mills in the Chinese city of Tangshan have increased steel production despite the official start of winter cuts, LME copper prices fell and U.S. imports of aluminum from Australia have been on the rise.

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Tangshan Boosts Steel Production

The Chinese city of Tangshan, a steelmaking hub in the country, has seen its steel mills boost production despite the start of winter cuts, Reuters reported.

According to the report, local officials did not give precise instructions on the targeted emissions curbs. Recently, Beijing delegated the imposition of its annual winter caps — part of the government’s effort to tackle pollution in the country — to local governments.

LME Copper Price Falls 1%

Also according to Reuters, the price of LME copper fell 1% Thursday as a result of a stronger U.S. dollar — the two are inversely correlated — and pressure on the Chinese economy.

MetalMiner’s Take: LME copper fell slightly this month. However, LME copper prices have shown a recovered momentum since September, when prices breached the psychological level of $6,000/mt.

Copper prices tend to react to Fed index rate increases — or, at least, the expectation of Fed rises. When that happens, the U.S. dollar tends to have a short-term trend reaction and prices move higher for a week. However, the long- and mid-term trend does not change for that reason.

Therefore, copper prices may continue their uptrend. Buying organizations can expect LME copper prices to trade higher.

Imports of Aluminum From Australia Rising

Imports of aluminum from Australia into the U.S. have been increasing of late, according to an S&P Global Platts report.

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Per the report, imports of aluminum from Australia have jumped 23% from July to August.

MetalMiner’s Take: It should come as no surprise to anyone that Australian P1020 aluminum ingots have started to arrive on U.S. shores at a discount.

Interestingly, the discount represents two driving factors: the fact that Australia is exempt from Section 232 aluminum tariffs and that U.S. buyers prefer T-bar or sows and not ingot (which is the form coming from Australia).

The U.S. does not produce enough primary material domestically and the tariffs have driven the trade shift from Canada (the previous dominant supplier) to Australia. What will become more interesting to OEMs and other large buying organizations, however, involves the semi-finished material market, in which the U.S. currently operates with a significant deficit.

MetalMiner expects large volumes of semi-imports from Europe to help mitigate domestic supply shortages.

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This morning in metals news, Chinese steel prices are not running in the same direction as the Chinese stock market, copper hit a two-week high and automaker shares were up on yesterday’s NAFTA news.

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Chinese Steel Surging

The Chinese stock market has been on the decline, but steel prices aren’t following suit, as CNBC reported.

The Nanhua rebar steel futures index is up 22% this year, while the Shanghai composite is down 16%, according to the report.

MetalMiner’s Take: From a domestic steel price perspective, the health of the Chinese economy remains less critical than the actual prices of Chinese steel. From a short-term perspective, buying organizations should pay much more attention to actual steel prices in China as opposed to the Chinese stock market, PMI or overall GDP numbers because they tend to lead domestic steel prices. The Chinese government will do its part to shore up the economy to keep China growing at 6.7 -6.8% GDP annually, despite the tariff situation. Meanwhile Chinese domestic steel prices — at least for HRC, CRC and HDG — remain on the rise.

Copper Rises

Copper prices showed signs of upward movement Tuesday, hitting a two-week high, Reuters reported.

LME copper rose 0.3% Tuesday and has risen nearly 6% since it hit a 15-month low Aug. 15, according to the report.

MetalMiner’s Take: The short-term downtrend in copper prices has been driven by sentiment. The threat of a future economic slowdown has driven the current copper price slide, rather than supply and demand issues. In fact, the current supply-and-demand picture is a deficit in 2018. The three major exchanges have registered stock shortfalls in the June-July period, with a 40% decrease in the SHFE. Chinese demand seems strong, with imports reaching records in July. Therefore, copper prices may start to recover again in the short term.

Automaker Shares Rise on NAFTA News

Automaker stocks were up Monday on the heels of the announcement of a preliminary deal between the U.S. and Mexico regarding certain provisions of NAFTA, Bloomberg reported.

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General Motors and Fiat Chrysler were up 4.8%, while Ford jumped 3.2%, according to the report.

MetalMiner’s Take: The North American automotive supply chain is a traditional sandwich with part suppliers, assemblers and OEMs in Canada, America and Mexico. The deal announced so far is more an open danish — just Mexico and the U.S. That is great news for automakers working across the Mexico-U.S. border. However, there is a large part of the equation still to be resolved: Canada. All the same, the Mexico deal — caveat details will be in the small print — heaps pressure on Canada to come to a deal. At least for automakers, the NAFTA renegotiation appears to be paying off.

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This morning in metals news, U.S. steel mills saw their shipments rise in June, Shanghai rebar steel prices hit a nearly seven-year high and copper recovers on optimism regarding U.S.-China trade talks.

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Steel Shipments Surge

Shipments from U.S. steel mills rose 3.2% year over year in June, according to the Times of Northwest Indiana.

In the year to date, U.S. steel shipments are up an estimated 3.6%, according to the report.

Rebar Price Hits Seven-Year High

According to Reuters, the Shanghai rebar steel price has surged to a near seven-year high.

Supply concerns gave rebar price support. Rebar prices rose as much as 4.5% on Monday, according to Reuters.

Copper Bounces Back

The copper price has plunged in recent months, but showed signs of bouncing back Monday, according to Reuters.

The London copper price ticked up on positive sentiment vis-a-vis talks to resolve the simmering trade conflict between the U.S. and China.

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According to Reuters, LME copper jumped 0.9% Monday after closing down 0.2% Friday.

Steel and aluminum are getting all the attention these days — and perhaps rightfully so, given the international row over the U.S.’s steel and aluminum tariffs and the subsequent crossfire of counter-tariffs.

But copper, often referred to as “Dr. Copper” for its usefulness as an overall indicator of economic health, is also undergoing important developments.

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The LME copper price, however, has been on the downswing for much of June.

Three-month copper reached $7,268/mt as of June 11, but it has been all downhill from there. In the ensuing nearly two weeks, the LME three-month price has plunged 6.4% to $6,801/mt, according to MetalMiner IndX data.

The price, however, seemed to be begin to stabilize last week after closing at a one-month low.

Source: LME

Chinese Prices

Similarly, Chinese prices have dropped in recent weeks.

From June 11-24, China primary cash copper dropped from 53,840 yuan/mt ($8,226.38) to 51,470 yuan/mt ($7864.26), good for a 4.4% decline, according to MetalMiner IndX data.

Labor Talks in Chile

As is always the case with copper, labor negotiations in Chile, the world’s top copper producer, play a key role in the metal’s price.

Earlier this month, in an ongoing dispute at BHP’s Escondida mine, the company responded to a contract proposal from its unionized workers at the mine, Reuters reported.

“The company hopes … to reach a mutually beneficial agreement, and to touch on issues like the bonus and salary increases, which were not addressed in our response,” BHP said in a statement, according to the Reuters report. Per the report, the company must present a final contract offer by July 24.

In the same vein, Reuters reported Monday that workers at Codelco’s Chuquicamata mine are threatening to strike. The mine produced approximately 19% of Codelco’s total output in 2017, according to the report. Again, a strike there would certainly put support under the copper price.

U.S. Dollar

Meanwhile, the U.S. dollar, which is inversely correlated with base metals like copper, picked up steam from June 7-19, in line with the metal’s drop.

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However, the U.S. dollar index has tracked back in recent days, dropping from 95.50 as of Thursday to 94.30 late Monday afternoon.

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This morning in metals news, India has plans to impose tariffs on U.S. goods in response to the latter’s steel and aluminum tariffs, workers at the Port Talbot facility in Wales are wary of the impacts of the U.S. steel tariff and copper approaches a two-week low.

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India Strikes Back With Retaliatory Tariffs

India announced that it plans to impose tariffs on U.S. goods, a move that strikes back against the U.S. for its tariffs on steel and aluminum, CNN reported.

According to the report, the proposed tariffs would impact 30 U.S. goods at a value of $241 million.

Port Talbot Workers Apprehensive of Tariff Repercussions

Workers at the Port Talbot Steelworks plant in Wales are worried the U.S. tariff on steel will lead to even more steel being dumped from China, The Guardian reported.

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According to the report, the Port Talbot plant sells 10-12% of its output to the U.S.

LME Copper Draws Near a Two-Week Low

The price of LME copper slipped to near a two-week low, Reuters reported.

Copper fell 0.2% Monday to $7,006.50 per ton, according to the report.

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This afternoon in metals news, London copper reached its highest price since late 2014, exchange-traded funds tracking palladium are losing cash and one analyst looks at how high zinc can go.

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LME Copper Keeps Rising

LME copper hit a three-year high Tuesday, lifted by strong Chinese steel prices and positive news from the mining sector, Reuters reported.

LME copper soared to $6,642.50 per ton, its highest since November 2014.

What’s the Deal with Palladium ETFs?

According to a Bloomberg report, investors have made quite a bit of money on palladium this year, yet ETFs that track the metal are losing cash, fast.

Why?

“The explanation for the outflows lies in part in the scarcity of physical palladium and a robust borrowing market that has developed among users and speculators,” the Bloomberg report states.

According to data compiled by Bloomberg, more than $49 million has flowed out of the two main palladium ETFs in the U.S. and Europe (the ETFS Physical Palladium Shares and the ZKB Palladium fund) through Aug. 21 of this year.

The Zinc Ceiling

Like copper, zinc has also had a record-setting time, recently hitting a high not seen in a decade ($3,180.50).

On Monday, Reuters’ Andy Home wrote about just how high zinc can be expected to go.

“But right now the LME zinc market is bubbling away with stocks falling and spreads tightening,” Home writes. “Volatility seems assured but can zinc return to the heady days of late 2006/early 2007, when the price peaked out at $4,580?

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This morning in metals news, European steel association Eurofer predicted increased steel demand in its Monday forecast, but also sounded a cautionary note regarding the U.S. potentially imposing steel tariffs (as a product of the Department of Commerce’s Section 232 investigation); Norwegian metals company Norsk Hydro inks a $3.2 billion deal to buy a 50% stake in aluminum products maker Sapa; and LME copper stabilized Monday after U.S. jobs report news.

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Demand To Go Up … But Eurofer Wary of Section 232 Tariffs

Eurofer, the European steel association, offered a mix bag of news in its Monday steel forecast.

On the one hand, it predicted an uptick in demand for steel, according to Reuters. According to the report, the forecast predicts a 1.9% rise in apparent EU steel demand, to 159 million tons, up from a previously forecasted 1.3%.

On the other hand, Eurofer sounded a warning note regarding the potential for “market distortions,” including tariffs, like the ones the U.S. Commerce Department may impose on steel and aluminum imports at the conclusion of its Section 232 investigations.

“In particular, measures potentially stemming from the U.S. section 232 investigation may lead to a proliferation of disastrous global trade flow distortions,” Eurofer director general Axel Eggert said in a statement quoted by Reuters.

Norsk Hydro Buys Aluminum Products Maker Sapa

Norwegian metals firm Norsk Hydro, in a deal worth $3.2 billion, bought a 50% stake in aluminum products maker Sapa, Reuters reported Monday.

Norsk Hydro’s acquisition allows it to spread its business across the value chain — the Norwegian firm makes primary aluminum from scratch, while Sapa presses, cuts and shapes it, according to the report.

Sapa, which has 22,400 employees and in 2016 recorded sales of 53 billion crowns ($6.84 billion), has been jointly owned by Orkla and Hydro since 2013, according to Reuters.

LME Copper Steadies

Copper prices stabilized Monday after news of a solid U.S. jobs report inspired optimism in a U.S. economic recovery, Reuters reported Monday.

This follows June’s news of expansion in Chinese manufacturing, which also buoyed prices by virtue of increased demand for the metal.

Since late June, copper prices have been consolidating in the range of $5,800-$5,965, according to the report.

For more on copper, come back to check out Irene Martinez Canorea’s Copper MMI piece this afternoon, which will survey the month that was and market trends for the metal.