LME copper

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This morning in metals news, LME copper bounced back Thursday after a down Wednesday, Saudi steel producers are happy about a cut in export tariffs and Volvo made a major announcement regarding the future of its vehicle inventory.

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Copper Rebounds Slightly After Hitting One-Week Low

After a Wednesday that saw a 0.9% drop for LME copper, the metal bounced back Thursday, ticking up by 0.1%, Reuters reported.

The metal moved up from its one-week low, which on Wednesday stood at $5,815 per ton.

In the backdrop was the recent release of the minutes of the Federal Reserve’s June meeting, revealing “policymakers were increasingly split on the outlook for inflation and how it might affect the future pace of interest rate rises,” according to Reuters.

Saudi Steel Gets Tariff Cut Relief

Steel producers in Saudi Arabia received good news this week as the government announced it would stop export duties on steel for two years, according to Reuters.

According to the report, the government also cut cement export duties by 50%.

While Saudi stocks overall were down early Thursday, stocks in the building materials sector showed well, including Al Yamaha Steel Industries, which surged by 2.1%, according to Reuters.

Volvo Looks to Go All-In on Green Rides

The traditional combustion engine took a hit this week when automaker Volvo announced it would build only electric or hybrid vehicles beginning in 2019, The New York Times reported.

While the “green” vehicle market is still relatively small, it is growing. As Autodata Corp numbers released this week show, sales of Tesla vehicles, for example, have surged. In the year to date, Tesla sold 23,550 vehicles, good for a 42.7% increase in sales from the same point last year.

Of course, those sales figures are tiny when compared with traditional automakers, like GM and Ford, which sold 1.41 million and 1.29 million units, respectively, in the calendar year to date. Sales for those giant automotive brands, however, are down (albeit down from a big 2016 in sales for automakers).

Clearly, battery-powered and hybrid vehicles are picking up steam. What does this green wave mean for metals? The boom presages increased demand for metals like cobalt, for example. Also, according to Seeking Alpha, the coming electric vehicle revolution bears bad news for platinum group metals (PGMs), like platinum and palladium.

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This morning in metals news, copper slipped from its two-month high on the London Metal Exchange (LME), Canadian researchers have discovered a way to make metals processing greener and nickel hits its lowest price in a year.

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Copper Falls in Anticipation of Federal Reserve Interest Rate Decision

Copper fell from a two-month high on the LME — and dropped 1.1% on the Shanghai Futures Exchange — ahead of the U.S. Federal Reserve’s decision this week regarding raising the interest rate (which many expect it to do), Reuters reported.

The decision is scheduled to be announced Wednesday afternoon, after the conclusion of a two-day policy meeting.

An uptick in the interest rate is expected to shore up the dollar, making dollar-based commodities more expensive for holders of other currencies and leading to a dip in demand, Reuters reported.

Researchers Announce Environmentally Friendlier Way to Process Metals

A Canadian team of researchers recently announced a new method for processing metals without toxic chemicals or reagents, Science Daily reported.

The team outlined its approach in a recently published article in Science Advances. Through their method, the scientists seek to perfect a process that curbs the negative environmental impacts of processing metals, using easily recyclable compounds instead of toxic materials.

The discovery was the result of a collaboration between Jean-Philip Lumb and Tomislav Friscic at McGill University in Montreal, and Kim Baines of Western University in London, Ont.

As demand for electric vehicles grows and green initiatives become more visible, it’s not surprising to see movement toward making the entire production process going green — for example, from the processing of raw metals all the way to a final product itself (a “green” vehicle).

Nickel Falls to One-Year Low

It isn’t a good time for nickel, which fell to its lowest price in a year Tuesday in a climate of falling Chinese steel prices and a weak forecast for the Chinese economy, Reuters reported.

As the Chinese government tackles credit debts — the nation was recently downgraded by rating agency Moody’s for the first time since 1989 — many expect growth to slow in the second half of the year. That prediction has already been borne out by weak April and May Chinese economic data, according to the article.

Caroline Bain, chief commodities economist at Capital Economics in London, told Reuters that China’s efforts to rein in credit growth and curb excessive behavior on the property market is “bad news” for metals.

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Copper prices continued to trade flat in March. Over this month, strikes at major mines Escondida and Cerro Verde ended while Freeport-McMoran got a temporary export permit for its Grasberg mine.

Escondida’s Strike Ends

The strike at the world’s largest copper mine, Escondida in Chile, ended at the end of March. It took 44 days for the company to reach an agreement with workers, much longer than expected.

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It will take time for the mine to ramp up output back to pre-strike levels. According to Platts, on April 26, Owner BHP Billiton will outline the impact of the strike on Escondida’s output. It is estimated that the mine have lost around 200,000 metric tons in production because of the strike.

Copper MMI

According to CNBC, workers at the mine voted to return to work, despite not having reached an agreement on a new pay deal with management. Instead, workers extended their existing contract by 18 months and they will be able to renegotiate a new deal in 2018 after a new pro-union law in Chile goes into into effect.

Cerro Verde Mine Resumes Operations

According to a recent Commodity Insights article, Cerro Verde, the largest copper in Peru, has only been operating at 50% of capacity due to a strike that began on March 10. At the end of March, workers signed an agreement providing for more generous health care benefits as well as a profit share earlier than in previous years. The mine produced just under half a million mt of the red metal last year.

Grasberg Mine Gets Temporary Export Permit

Reuters reported that Freeport-McMoran was granted a temporary permit to export copper concentrates from its Grasberg mine in Indonesia, the world’s second largest copper mine. The new permit broke a 12-week deadlock that had cut supply to Asian smelters. The new export license will last eight months. The amnesty means the company can renew deliveries of copper concentrates in Asia after declaring force majeure in February, but longer-term discussions over the company’s rights in Indonesia have yet to be determined.

What This Means For Metal Buyers

Copper supply disruptions have lasted longer than expected. Although they seem to have come to an end, their impact on supply still need to be outlined. In addition, these strikes have set the case for wage negotiations across the industry.

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Some major contract negotiations in large mines are due in the coming months. In the meantime, copper investors might focus their analysis on macro factors such as the ongoing China-U.S. trade negotiations, the performance of the U.S. dollar and global demand for industrial metals.

Actual Copper Prices and Trends

The Japanese copper primary stayed flat at $6,075 per mt. Indian copper prices fell 2%, finishing the month at $5.92 per kg. Prices in China also fell 2% to $6,878/mt. The three-month London Metal Exchange primary copper finished the month at $5,880/mt, down 1% from last month.

Copper prices rose nearly 20% in November, a stellar rally that caught many by surprise… except us, of course.

Copper_Chart_December-2016_FNL

Following this sharp move, there were concerns about the pace of the metal’s gains. However, so far, the metal has shown resilience to giving those gains back. Indeed, it looks like copper still has fuel in the tank to move higher.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Investors are pouring money into base metals as Chinese demand from infrastructure and construction continues to beat expectations. Momentum in copper is also being driven by hopes that U.S. President-elect Donald Trump will spend more on infrastructure. Stronger Eurozone and U.S. manufacturing PMIs also contributed support. Domestic PMI rose to 53.2 in November, the highest reading in five months and well above market expectations. Read more

After rising strongly for the last month or more, copper prices now appear to be buffeted by every scrap of news that comes out.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

“Copper prices fell this week as investors cashed in gains after the previous session’s rally,” news.com in Australia reported yesterday. The gist of the argument seems to be the 23% rise in the copper price last month was a step too far. The site quoted Caroline Bain of Capital Economics saying “You only have to look at the levels of investor buying to see that quite a lot of these rallies have been based on euphoria rather than grounded in fundamentals. We think we will see some profit-taking inevitably as we end the year”

Reuters, on the other hand, took a somewhat contrary view, reporting copper prices climbing mid-week, buoyed by a pickup in U.S. manufacturing. The newspaper reported new orders for U.S. factory goods recorded their biggest increase in nearly 1-and-a-half years in October, evidence that the manufacturing sector is gradually recovering after a prolonged downturn and as demand signals from China also improve. Read more

Copper has burst to life on the London Metal Exchange after a year of choppy sideways trading. Benchmark, three-month copper has exploded to the upside, hitting a 15-month high of $5,443 per metric ton on Wednesday.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

As is the way with markets, the move is feeding on itself as shorts buy back positions and momentum-chasing funds join the action.

September Steel Shipments Down From August

The American Iron and Steel Institute (AISI) reported that for the month of September, U.S. steel mills shipped 6,769,312 net tons, a 10.3% decrease from the 7,542,605 nt shipped in the previous month, August 2016, and a 4.9% decrease from the 7,120,663 nt shipped in September 2015.

Shipments year-to-date in 2016 are 65,803,018 nt, a 0.5% decrease from shipments of 66,162,973 nt in the first nine months of 2015.

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A comparison of September 2016 shipments to the previous month shows the following changes: hot dipped galvanized sheets and strip, down 8%; cold rolled sheets, down 8%, and hot rolled sheets, down 13%.

Copper inventories are suddenly low on the London Metal Exchange and U.S. shale gas drillers are still beating the odds and producing oil for a profit.

Low LME Copper Inventory

A slide in copper inventories on the London Metal Exchange to the lowest levels in 18 months is prompting some speculators to shift bets away from volatile benchmark futures to spreads.

Free Download: The March 2016 MMI Report

The low levels of LME stocks is expected to send spreads between contract months rising as those holding short positions scramble to cover or roll over their positions.

Trading the spreads allows an investor to avoid having to take a directional view on the benchmark futures market, which has whipsawed back and forth recently, analysts said.

Reshalience

The long-anticipated fall-off in U.S. shale oil output is still proving slower and more tempered than anticipated, impeding the process of correcting the global glut that has walloped prices.

Free Sample Report: Our March Metal Buying Outlook

This month, the Marcellus shale formation of the eastern U.S., the country’s biggest gas play, will yield 17.4 billion cubic feet a day, the U.S. Energy Information Administration said last week. That’s almost 2 billion cubic feet, or 11%, more than the agency had forecast last month.

Copper prices continued to make new lows in January. Prices fell below $2 per lb. for the first time since May 2009. Our Copper MMI tracking prices globally fell 5% to 58 points.

Free Sample Report: Our February Metal Buying Outlook

Some investors see copper not only as a benchmark for base metal prices, but also as a benchmark for the state of the global economy. Right now, there is not much going in favor of copper. The global economy is having its worst moment since the global recession of 2009, at least from an investor’s perspective. Meanwhile, commodity markets continue to slide driven in part by a slump in oil prices.

The combination of lower copper and oil prices is specially hurting some copper producers that also have energy assets such as Freeport-McMoRan. The company is the world’s largest copper producer while oil and gas accounts for almost one-sixth of Freeport’s revenues. The company’s stock price fell 45% just in the first two weeks of January, after it hit a 13-year low in December.

Copper_Chart_February-2016_FNL

Copper investors are closely watching Chinese economic data, as China is the world’s largest consumer of copper. The year started on a weak note after the China’s PMI came at 48.4 in January. The index has been in contraction territory (below 50) since March 2015. Read more

The monthly Copper MMI® registered a value of 66 in September, a decrease of 1.5% from 67 in August.

Copper_Chart_September-2015_FNLThe red metal has done nothing but fall since its peak in 2011. A series of lower highs and lower lows put this metal in what we call a textbook bear market.

Copper downtrend since 2011

Copper’s downtrend since 2011. Source: MetalMiner.

The declines, however, were steeper this year. Investors particularly dislike copper, as worries about China’s economy are rising. 

Free Sample Report: Our Monthly Metal Buying Outlook

China’s stock market crash and the devaluation of its currency are just aggravating copper’s bear market. Read more

US auto sales remain the bright spot in the drivers of the monthly Automotive MMI®.

The Real Steel Story

Seasonally adjusted annual rate of sales for light vehicles rose to 17.8 million compared with 17.3 million a year earlier and was the highest since July 2005, according to researcher Autodata Corp. August was the fourth consecutive month that adjusted sales remained above the 17 million mark.

Automotive August-2015The Automotive MMI® still registered only a value of 73 in September, a decrease of 3.9% from 76 in August. Weak prices for most of the base metals that make up the index (HDG, copper, aluminum and lead) abound despite strong end user sales in the US. In China, auto sales are falling with the rest of the domestic economy there.

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