It was another busy month in the world of metals.

Then again, these days quiet months in metals or in trade, generally, are few and far between.

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Trade tensions continued to rise, as $34 billion in tariffs on Chinese goods went into effect (China responded in kind), and an additional $16 billion in tariffs are under review. This week, President Donald Trump announced the intention to impose an additional $200 billion in tariffs on China, ratcheting up the stakes even further.

Meanwhile, a Section 232 investigation focusing on imports of automobiles and automotive components is unfolding. More than 2,300 public comments were submitted as part of the U.S. Department of Commerce’s review process, and public hearings are scheduled for next week.

Meanwhile, in metals markets, most base metals were down last month, with steel being the exception.

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A few highlights from this month’s round of Monthly Metal Index (MMI) reports:

• Since peaking at $7,316/mt in June, the LME copper price dropped 12%.
• The subindex for grain-oriented electrical steel was the only MMI to post an increase on the month.
• The U.S. silver price hit its lowest level since January 2017, while U.S. gold bullion dropped to a one-year low.
• Aluminum prices were also part of the general downtrend, as prices continued to move away from this year’s April peak (after Russian companies and their owners, including aluminum giant Rusal, were slapped with sanctions by the U.S.).

Read about all of the above and much more by downloading the July MMI report below.

The Stainless Steel Monthly Metals Index (MMI) skyrocketed this month, increasing by seven points. The current reading stands at 84.

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The index inched higher driven by the increase in stainless steel surcharges and a sharp increase in LME nickel prices in May. Other related metals in the stainless steel basket also increased.

LME Nickel

Nickel price momentum seems to have recovered again.

LME nickel prices increased at a quicker pace in May. The increases continued through the beginning of June, driving prices to 2014 highs. 

Source: MetalMiner analysis of FastMarkets

LME nickel prices keep moving away from 2017 lows.

MetalMiner previously recommended buying some volume forward. Given the current uncertainty in the steel and stainless industries, nickel prices remain supported for the short term.

In addition, a fundamental tightness in the nickel market has added support to the latest nickel price increases.

Domestic Stainless Steel Market

Following the recovery in stainless steel momentum, domestic stainless steel surcharges increased again this month. The 316/316L-coil NAS surcharge reached $1.02/pound.

Source: MetalMiner data from MetalMiner IndX(™)

The pace of stainless steel surcharge increases, however, appears to have slowed again this month. Yet stainless steel surcharges remain in a clear uptrend and rest well above 2015-2017 lows.

What This Means for Industrial Buyers

Stainless steel momentum appears stronger this month, as steel prices are skyrocketing. As both steel and nickel remain in a bull market, buying organizations may want to follow the market closely for opportunities to buy on the dips.

To understand how to adapt buying strategies to your specific needs on a monthly basis, take a free trial of our Monthly Outlook now.

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

Actual Stainless Steel Prices and Trends

Chinese 304 stainless steel coil prices increased again this month by 2.02%, while Chinese 316 stainless steel coil prices rose further by 6.61%. Chinese Ferrochrome prices increased this month by 2.9%, to $1,990/mt.

Nickel prices increased by 10.5% to $15,210/mt.

In May, the Stainless Steel Monthly Metals Index (MMI) once again inched one point higher. The current reading stands at 77 points.

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The subindex inched higher driven by increasing LME nickel prices. Meanwhile, other related metals in the stainless steel basket traded flat. Chinese ferrochrome alloy decreased for the second consecutive month, this month by 3.2%.

LME Nickel

In April, LME nickel prices increased sharply, following some of the other base metals uptrends (such as aluminum and copper).

LME nickel prices went up to $16,685/mt and then corrected. LME nickel prices in May remain in an uptrend, with current prices around $13,900/mt.

Source: MetalMiner analysis of FastMarkets

LME nickel prices remain in a long-term uptrend that started back in June 2017, when LME nickel prices hovered around $8,900/mt.

However, nickel price momentum seems slower now than it was back in 2017.

Since February, LME nickel prices have traded more sideways. Buying trading volume still supports the uptrend, which may result in increasing nickel prices in the coming months.

Domestic Stainless Steel Market

Following the recovery in stainless steel price momentum, domestic stainless steel surcharges increased again this month. The 316/316L-coil NAS surcharge reached $1.01/pound, while the 304/304L-coil NAS surcharge increased to $0.71/pound.

Source: MetalMiner data from MetalMiner IndX(™)

After last month’s sideways trend for NAS stainless steel surcharges, the uptrend has started again. The 316/316L-coil NAS surcharge is currently moving toward the January 2013 peak of $1.12/pound. The surcharge has breached previous high peaks already.

China Stainless Steel Market

An abundance of stainless steel in China came as a result of new production in Indonesia. The Chinese-owned stainless company Tsingshan started production last August in Indonesia, with an annual capacity of around 3 million tons by the end of 2018. This annual capacity equates to 6% of last year’s global stainless steel capacity.

Due to this increased production, China became a net importer of hot-rolled stainless coil already in December 2017 for the first time in more than seven years, according to the International Steel Statistics Bureau. Chinese stainless steel stocks have risen, while Chinese stainless steel prices have not. In fact, Chinese stainless steel price currently trade sideways.

The current divergence between increasing LME nickel prices and Chinese stainless steel prices, plus increasing stainless steel stocks, may drive some mills to cut production. 

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

What This Means for Industrial Buyers

Stainless steel price momentum appears to be strong this month, as stainless steel surcharges increased sharply.

With nickel in a bull market, buying organizations may want to follow the market closely for opportunities to buy on the dips. Hedging nickel may result in potential savings opportunities for buying organizations.

To understand how to adapt buying strategies to your specific needs on a monthly basis, take a free trial of our Monthly Outlook now.

As my colleague Fouad Egbaria wrote last week, the U.S. administration’s relaxation of the timescale for implementation of sanctions against Rusal has had the effect of taking the panic out of the market. As a result, prices have fallen for several days, not just for aluminum but for other metals that the market feared could face the same threat — most notably nickel, in which Russian oligarch Oleg Deripaska has an interest.

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But the vagaries of Washington policy aside, the underlying fundamentals for the nickel market remain firm.

Global Nickel Production and Usage Projected to Grow This Year

Reuters reports that according to the International Nickel Study Group, world stainless steel melting production rose by 5.8% last year, while projecting that global nickel production and usage is expected to rise to 2.344 million tons (MT) in 2018.

In terms of tonnage, world nickel production is expected to grow from 2.07 MT last year to 2.22 MT this year, while usage is expected to increase from 2.19 MT in 2017 to 2.34 MT in 2018.

As a perspective on fundamentals reasserts itself, the nickel price has recovered, rising back about $14,000 per ton. Demand has remained robust among stainless producers, with production forecast to rise 4% this year to over 52 million tons, while fears remain around supply.

Philippines Industry Aims to Navigate Government Land Regulations

The Philippines was top supplier to China last year, but the government of President Rodrigo Duterte is not letting up on its efforts to curb environmental damage from the extraction industry and threats remain of nickel mining being curtailed.

Nickel Asia, the Philippines’ top nickel ore producer and operator of the only two nickel smelters in the country, is quoted by Reuters as saying it intends to ship 20 million tons of ore this year — up 17% on last year.

But the government is limiting the amount of land miners can develop at any one time in a spur to rehabilitate old workings.

The limits are highly restrictive, amounting to only 100 hectares for mines producing 9 million tons or more, or 162 hectares if the project has a processing plant on site. The biggest of Nickel Asia’s mines covers 5,000 hectares and even the smallest covers 700, so it will be interesting to see if the firm manages the expansion in output it is projecting.

Indonesian Output on the Rise

Output in Indonesia is recovering following a lifting of the 2014 ban. The country has reasserted itself as the No. 1 supplier to China in the first half of this year.

The ban was lifted partly as the country looked to make up for the loss of revenue when exports collapsed and partly as firms invest in the downstream processing the ban was intended to force through.

Further increases in output, however, are limited, and investment in new reserves has been poor, while the nickel price was lower over recent years so the ability of the market to respond to predicted increases in demand from electric car and battery makers is in question.

The Outlook

We could see a growing divergence in nickel prices with standard nickel stainless melting grades remaining firm in the short to medium term, but battery Grade A, high-purity nickel premiums rising strongly if demand materializes as expected.

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Supplies of such high-purity nickel are limited, with only major producers like BHP Billiton, Norilsk Nickel, Vale and Sumitomo able to supply.

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.

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

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.

Numerous factors weigh heavily on the base metals and commodity complex: the Chinese copper scrap ban, the Section 232 proclamation on aluminum and steel combined with country-specific exemptions set to expire on May 1, the Section 301 investigation, and multiple strikes at copper and nickel mines to boot. After the turmoil of the first few months of 2018, MetalMiner reviews how base metals and commodities performed during Q1.

Aluminum, copper and nickel on the rise

Aluminum, copper and nickel prices started 2018 weaker than at the end of 2017. The end of 2017 showed a sharp rally for these base metals, following the bullish uptrend that began in the summer of 2017.

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The short-term downtrend sounded alarms as prices dropped significantly, not finding a floor. However, LME prices started to climb at the beginning of April, leaving the downtrend behind.

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LME nickel prices hit $13,200 per ton last Wednesday, the highest level since June 2015 before investors took profits and the price fell back a touch to $12,870 per metric ton.

Prices were led higher by the ShFE, where stock have fallen to 48,920 tons from over 90,000 tons just a year ago — and consumers are worried about a supply squeeze, Reuters reports.

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The Philippines’ ongoing environmental campaign has perpetuated the closure of four key nickel mines in the Zimbales region, according to Wilfredo Moncano, the director or the Philippine mines and geosciences bureau. Moncano said “no extraction, no new mining activities, what’s only allowed is hauling up ores for their stockpiles,” according to Reuters.

The supply squeeze story has been exacerbated by news that Sumitomo Corporation has suspended output from its mine in Madagascar following a cyclone.  Not surprisingly, investment funds are at increased net long positions on the NME and SHFE, with LME positions doubling from early November. LME nickel stocks are still substantial at 368,292 tons, but are down from levels above 470,000 tons in June 2015; however, they’re at double the levels seen in May 2013.

Although nickel prices have pulled back on profit-taking, many are still betting the price could move higher as the market is in deficit. Any supply-side disruption is seen as an opportunity to squeeze supply in the face of continued robust demand.

Nickel supply, however, has picked up.

Current short-term issues accepted, according to Fast Markets, Indonesia had awarded quotas for the export of over 20 million tons of nickel ore after its export ban was relaxed early last year. Only a small portion of this, however, has been shipped. The bulk of 2017 quotas are still to be exported.

The incentive for both miners and authorities is to resolve the current environmental stumbling blocks. Exports are expected to pick up. There should also be nickel pig iron smelters being established in Indonesia in 2018, creating more plentiful NPI availability in the market.

Need buying strategies for steel in 2018? MetalMiner’s Annual Outlook has what you need

Under the circumstances, the recent $13,200 price spike may, if not prove to be a peak, at least come to be in the upper range of what will remain a volatile market until supply concerns ease.

The electric vehicles (EVs) market could increase by 3,400% by 2030 compared to 2015 EVs sales, according to the U.S. Department of Energy.

More powerful, reliable and cost-competitive batteries have driven EV growth. Lithium-ion batteries have effectively replaced lead batteries.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

MetalMiner analyzed the usage of base metals in EVs and their price performance this year. The EV boom has driven investor sentiment for these base metals.

Base Metals’ Role in EVs

The infographic below breaks down car parts by type of base metal. Aluminum, nickel, copper and tin serve as the four main base metal “winners” in which the market could expect demand to grow.

Source: MetalMiner analysis of Business Insider data

Aluminum, Copper and Nickel

Of the exchange-traded metals, all three of these base metals commonly have high trading volumes. Copper, in particular, tends to have high trading volume as the market considers it an economic indicator (often referred to by the nickname “Dr. Copper”).

Both aluminum and copper appear in an uptrend, especially since the summer when prices started to rally.

Nickel prices have also seen high volatility due to electric battery demand. This makes sense — if investors consider a metal  “hot,” then volume and transactions may increase. Prices may change based on  this, as they did for nickel.

Source: MetalMiner analysis of FastMarkets

And What About Tin?

Contrary to the other three base metals, tin prices do not look bullish.

Tin plays an important role in EVs, as it is used for electronic solder and batteries. However, tin prices appear both stagnant and weak.

Source: MetalMiner analysis of FastMarkets

Tin’s price momentum has diverged from EV supply/demand fundamentals and the LME price.

EV batteries have evolved toward technologies that include more tin alloys. According to the International Tin Research Institute (ITRI), tin used for batteries increased by 95% in 2016 compared to 2010 data (14,400 tons). Tin mine output has increased in 2017 compared to last year’s data (18% in China, 26% in Indonesia and 7% in Myanmar).

However, the ITRI forecasts a 7,300-ton deficit in 2017. Tin stocks remain low, with only a slight increase in SHFE stocks.

Free Download: The December 2017 MMI Report

Current macro indicators support the bullish rally. However, tin prices still seem reluctant to react.

Have investors forgotten about tin?

Judging by the reception for aluminum, copper and nickel, perhaps 2018 will bring tin into the bull party.

Pavel Ignatov/Adobe Stock

This morning in metals news, raw steel production in the U.S. jumped last week, Century Aluminum was down 10.8% on Monday and nickel prices are aided by steel on Tuesday.

U.S. Raw Steel Production Up 9.7%

Raw steel production was up 9.7% year-over-year for the week ending Nov. 18, according to weekly data from the American Iron and Steel Institute (AISI).

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Domestic raw steel production was 1,745,000 net tons while the capability utilization rate was 74.9%. Production for the week ending Nov. 18 was up 0.3% from the previous week, when production was 1,739,000 net tons and the rate of capability utilization was 74.6%.

Century Aluminum Has a Down Monday

Shares of Century Aluminum closed 10.8% lower on Monday, according to an AP report on Madison.com.

The question is, why?

“Market pundits aren’t entirely certain what to make of this development, noting that aluminum stocks may simply have been shifting away from expensive LME warehouses to cheaper warehouses and other countries,” the report states.

Nickel Prices Get a Boost

Steel-dependent nickel got a boost Tuesday, when prices in the Shanghai and London markets saw a jump, Reuters reported.

Free Sample Report: Our Annual Metal Buying Outlook

The most-traded nickel contract on the Shanghai Futures Exchange was up 1.3% at 94,710 yuan ($14,285) a ton by 0126 GMT, according to Reuters. Meanwhile, three-month LME nickel rose to $11,677 per ton.

The ongoing turmoil over Donald Trump has increased investors’ worries over political stability in the U.S. In addition, investors worry that under these political turbulences, the Trump administration will struggle to implement pro-growth initiatives.

The dollar is one asset that was affected by the news, falling to a 6-month low. Investors have been selling dollars and buying euros as political risks rise in the U.S. and, following the French elections, fall in Europe.

Two-Month Trial: Metal Buying Outlook

Usually, a falling dollar would give a boost to industrial metal prices, but that wasn’t the case here. Precious metals like gold did benefit from a falling dollar, but it didn’t prevent base metals from declining. This is because investors are now focused on what looks like a slow down in China.

Investors were disappointed when China’s Caixin Manufacturing PMI came at 50.3 in April, the lowest reading since September 2016. In addition, as Beijing talks about curbing credit, investors have come to realize that lower funding for the construction of infrastructure projects will hurt demand for industrial metals.

Just about two weeks ago we noticed that commodity markets were getting in trouble. As time goes on, that weakness is spreading out into industrial metals. Some specific metals are holding their value better than others due to their specific supply narrative, but overall we would expect them to move in tandem, as they always do. Here are some charts suggesting that the bull cycle in industrial metals could be ending:

Nickel falls to a 10-month low. Source: MetalMiner analysis of fastmarkets.com data

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