The Global Precious MMI (Monthly Metals Index) picked up one points this month, rising to 92 for our February reading. Need buying strategies for steel in 2018? MetalMiner’s Annual Outlook has what you need Within the basket of metals, Chinese gold bullion and U.S. silver ingot/bars picked up in price. Palladium, which has bucked the historical trend by…
This morning in metals news, Wisconsin Gov. Scott Walker signed a bill ending the state’s moratorium on gold and silver mining, Chile approaches a busy year for mine union negotiations, and Chinese steel futures drop.
Going for the Gold in the Badger State
Wisconsin Gov. Scott Walker signed a bill ending the state’s moratorium on gold and silver mining, Wisconsin Public Radio reported.
The moratorium was imposed in 1998, when Walker was a member of the state Assembly.
Union Negotiations on the Horizon in Chile
Chile’s copper mining industry has a busy schedule next year, with 32 union contracts on the docket, Bloomberg reported.
Chile, a dominant force in the copper industry, will negotiate the contracts, which represent approximately 75% of the country’s copper output, according to the report.
China Steel Futures Drop
Chinese steel futures took a dip Tuesday as a result of concerns regarding demand in the country, the world’s top steel consumer, according to Reuters.
According to the report, upward price movement driven by supply constriction is expected to be counterbalanced by a drop in demand as winter weather affects construction projects.
This afternoon in metals news, the U.S. renewable energy industry has reason to worry about the Republican tax proposal, union members at the Quebrada Blanca copper mine in Chile move closer to a strike, and precious metal prices fall.
Renewables Market Pushes Against BEAT Tax
While the Republicans’ latest attempt at an overhaul of the U.S. tax system is receiving the usual praise and criticism, the renewable energy sector is concerned – and understandably so. As Dino Grandoni explains in the Washington Post, the bill may inadvertently end investment in wind and solar energy.
Currently, many companies have large multinational corporations finance wind or solar energy projects, and in return, give the latter the renewable energy credit that the government provides. But these credits may be cancelled out as part of the base erosion anti-abuse (BEAT) tax, which is meant to discourage multinationals from moving profits abroad.
According to the American Wind Energy Association’s Peter L. Kelley, the BEAT tax – if it is not amended to exempt renewables credits – could put an end to more than half of the country’s wind projects.
Strike Brewing at Quebrada Blanca Mine
A quarter of the workforce at the Quebrada Blanca copper mine in Chile moved closer to a strike, as the 106-member union rejected Canadian miner Teck Resources’ contract offer on Wednesday, Reuters reports. Ninety-six percent of the union voted to reject the offer and strike, said the president of the union. Read more
Precious metals dynamics have looked similar to base metals during these last couple of months.
The four precious metals (gold, silver, palladium and platinum) rallied since July, and peaked in September. In September, precious metals saw a price pullback, as did the base metals.
Gold spot prices (see graph below) reflect this movement perfectly.
After the price retracement in September, gold spot prices increased again. The gold rally that started at the beginning of 2017 appears set to continue. More movements to the upside could occur for the rest of the year.
Silver prices, however, have traded sideways, showing less of a bullish sentiment than gold. However, silver has shown the same price movements (in different price ranges) from July to October (see chart below).
Does this set the foundation for a new long-term uptrend?
As Fouad Egbaria noted: “As of Oct. 1, palladium closed higher than platinum. The last time that happened? Sixteen years ago.” Palladium prices rallied, as did gold prices, while platinum prices traded sideways, similar to silver.
However, both palladium and platinum showed the same price pattern since July. Those price movements may point toward an ongoing bullish market.
As reported by Reuters, the commodities outlook for Q4 looks bullish. MetalMiner also remains bullish on both commodities and base metals, and expects more movements to the upside while the U.S. dollar remains weak.
A complete analysis of commodities and base metals for 2018 is published in our free Annual Outlook report.
This morning in metals, the U.S. dollar index is up, while gold and silver prices are on a downward trend and oil prices dip slightly from Monday’s high. In addition, there’s a very intriguing potential source of renewable energy on the horizon.
A drop in U.S. oil inventories has helped oil prices stay more or less steady, Reuters reports. The biggest factor supporting oil prices has been Turkey’s threat to cut off oil exports from Kurdistan, and this past Monday, the price of oil came close to $60/barrel for the first time since June 2015.
U.S. Dollar Index Rises, Precious Metals Fall
As Stuart Burns wrote earlier this morning, “Trump’s United Nations speech threatening annihilation on North Korea failed to support the gold price, as investors took a cue from central bank announcements that the Fed intends to start unwinding its multi-trillion dollar balance sheet in October.”
A New Renewable Energy Source?
Could 70% of U.S. energy come from plain old H2O? According to new research, energy from water evaporation could provide a staggering 325 gigawatts of power. Read more
Investors sometimes have short attention spans.
Just a month ago, worried by the escalating tension between the U.S. and North Korea, the gold price was rising, hitting its highest level in over a year at $1,358 an ounce as the dollar weakened and tensions ratcheted up.
However, Trump’s United Nations speech threatening annihilation on North Korea failed to support the gold price, as investors took a cue from central bank announcements that the Fed intends to start unwinding its multi-trillion dollar balance sheet in October.
The Financial Times reports the prospects of higher interest rates make gold less attractive, since the metal provides no yield.
After peaking in early September, gold remains up 13% on the year. Silver prices are up 6% in the year-to-date. The Fed seems set on a rate hike by December, followed by probably two more next year.
Yet, the gold price is merely the most visible of many undercurrents caused by the Fed’s gradual withdrawal of liquidity as it unwinds its eight-year stimulus program.
Little attention has been given of the impact this gradual draining of liquidity will have on emerging markets.
Already, a few alarm bells are beginning to sound.
This morning in metals news, the strike at Freeport McRoRan’s Grasberg copper mine was extended for a second month, oil prices rose in expectation of supply cuts, and silver prices reached a three-week high.
Freeport Indonesia Strike Extended
This past Saturday, the union representing thousands of workers at Freeport’s Grasberg copper mine in Papua, Indonesia announced that the ongoing strike will be extended beyond May 30, Reuters reported. As union industrial relations officer Tri Puspital told Reuters, “We will extend the strike for 30 more days.” Approximately 9,000 workers are participating in the strike.
The reason for the strike revolves around employment. Last month, Freeport laid off about 10% of its 32,000 workers to cut costs, which accrued to the tune of millions thanks to an ongoing dispute with the Indonesian government over rights to the Grasberg mine. “With this problematic combination of protests from workers and tensions with the Indonesian government,” wrote MetalMiner analyst Raul de Frutos earlier this month, “it’s no wonder that investors are concerned about further supply disruptions this year.” It looks like supply disruptions will continue.
A Key Week for Oil
One hopes that this will be the only time when news source after news source mentions Saudi Arabia and glowing orbs in the same headline. In more important news, Bloomberg reported yesterday that Saudi Arabia has received Iraq’s support to extend oil output cuts for nine months, after Saudi Minister of Energy Khalid Al-Falih flew to Baghdad to talk to Jabar al-Luaibi, his Iraqi counterpart. Read more
Now’s the time to buy those solar panels you’ve been saving up for. This week, Tesla announced that it is taking orders and deposits for solar roof tiles that look stunningly like… regular roof tiles. But therein lies the appeal, and the $42-per-square-foot cost isn’t so bad either, lower than what industry analysts expected, Bloomberg reported.
Keep Your Eye on Silver
This growing interest in solar energy has been supporting the demand for silver, according to the Silver Institute’s World Silver Survey 2017, which Taras Berezowsky covered on MetalMiner this week. As Berezowsky wrote, “According to the report, silver demand for photovoltaic applications shot up 34% to reach 76.6 million ounces. This growth was the strongest since 2010, and it was driven by a 49% increase in global solar panel installations.”
In addition, “automotive will be an interesting sector to watch,” Berezowsky wrote. Silver demand could be driven up further as the world moves towards electric vehicles — whose engines and circuit boards require silver — however slowly, as Stuart Burns noted earlier this morning.
“If you are a metal buyer, it doesn’t matter if you buy aluminum, copper, steel or tin,” Raul de Frutos wrote in his commodities outlook this week. “The information in this article is important for you.” Commodities may have enjoyed a bull market in early 2016, but things appear to have shifted to the bear-ish. “Commodities not only have struggled to make new headway,” de Frutos wrote. “In the past few days they have weakened significantly. Recent moves in China have caused a significant shift of sentiment in financial markets.” Read more
Now that Black Sails has signed off and Long John Silver is on to new adventures, it’s time to turn our attention to a different type of silver — one type of material that Silver himself spent many of his buccaneer days trying to amass.
But whereas Silver and his crew may have preoccupied themselves with coins, bars and doubloons (the former two are still big in 2017; doubloons? not so sure), we here at MetalMiner like to see how the precious metal factors into industrial end-use sectors and applications.
Turns out that one of those applications — solar panel installations, specifically — made quite a splash in the Silver Institute’s World Silver Survey 2017, produced by the GFMS team at Thomson Reuters and released just this morning.
But first, a quick high-level overview.
Global silver mine production declined by 0.6% in 2016 to a total of 885.8 million ounces — the first such decline since 2002, according to the report.
In addition, although primary silver production increased 1% last year, silver scrap supply, despite higher silver prices, fell to 139.7 million ounces in 2016. This is a level that has not been seen in 20 years, according to the Silver Institute’s press release for the report.
“If we look forward, we don’t think [this overall mine production drop] will be a one-off, either,” said Johann Wiebe, lead analyst of metals demand at the GFMS Team/Thomson Reuters in London, in an interview. “It’ll be a prolonged drop in supply until 2019-ish. Not large, but maybe a 2% drop annually. That’s quite a shift.”
It’s not surprising, Wiebe added, if one has seen the capital expenditures retreating over the past few years, with miners looking to protect their margins. Other non-precious metal production of base metals such as lead, zinc and copper, among others, affects the silver market — the link between precious metal and base metal commodities, in other words, is tighter than at first glance when it comes to production trends. Read more
The launch of the London Metal Exchange‘s new precious metals contracts will be delayed until July 10, more than a month later than previously announced, it said on Monday.
The new gold and silver contracts, a mix of daily and monthly contracts designed to enable industrial users to hedge specific dates, were due to go live in early June.
Lighthizer Clears Committee for Confirmation as US Trade Rep
President Donald Trump’s nominee for U.S. trade representative cleared a Senate committee on Tuesday, bringing the administration closely to enacting its full trade policy.
Washington lawyer Robert Lighthizer’s nomination cleared the Senate Finance Committee 26-0. Lighthizer is seen as an ally of the manufacturing industries. The panel also voted to approve a legal waiver for Lighthizer from a 1995 law that prohibits people who did work on behalf of foreign governments from serving as the top U.S. trade negotiator.
“Bob Lighthizer understands the issues that the U.S. steel industry faces today and we are certain he will make an outstanding United States Trade Representative (USTR),” said Thomas Gibson, president and CEO of the American Iron & Steel Institute, the largest trade group of North American steelmakers. “We thank Senator Hatch and the other members of the Senate Finance Committee for holding an executive session to progress Bob’s nomination. American manufacturers need a qualified USTR and we urge the Senate to promptly confirm Bob Lighthizer.”
Lighthizer’s confirmation now moves on to the full Senate.