monthly metal buying outlook€¦ · lme aluminum stocks fell again, re;lecting the de;icit in the...
TRANSCRIPT
FORECAST REPORT OCTOBER 2018
Monthly Metal Buying Outlook
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Disclaimer
CONTENTNOTTOBECONSTRUEDASASOLICITATIONORRECOMMENDATIONOFANYKIND.
Theopinionsexpressedinthisreportaresubjecttochangewithoutnotice.Thisreportincludesinformationfromsourcesbelievedtobereliableandaccurateasofthedateofthispublication,butnoindependentveri;icationhasbeenmadeandwedonotguaranteeitsaccuracyorcompleteness.ThisreporthasbeenpublishedforinformationalpurposesONLY.MetalMinerdoesnotintendtheinformationinthisreporttobeconstruedtobepersonalizedadvice,orrecommendationstobuy,hold,orsellsecuritiesand/or;inancialderivativesofanykind.Theriskoflossintradingcanbesubstantial,andinvestorsshouldcarefullyconsiderallpotentialoutcomesandtheinherentrisksinlightoftheirparticular;inancialconditionpriortomakinganyinvestment.Theinformationpresentedshouldnotberelieduponasthesolebasisformakinganyinvestmentdecision.Pleaseconsultyourbusinessadvisor,attorney,andtaxandaccountingadvisorsconcerninganycontemplatedtransaction.
AnyreproductionorretransmissionofthisreportwithouttheexpresswrittenconsentofMetalMinerisstrictlyprohibited.
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Index
3Editor'sHighlights
6Aluminum
7Copper
8Nickel
9Lead
10Zinc
11Tin
12HRC
13CRC
14HDG
15Plate
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Editor's HighlightsHighlightsduringthemonthofSeptember
Lisa ReismanExecutive Editor, [email protected]. 773.525.9750
TheCRBandtheDBBindexesincreasedinSeptember.Highercrudeoilpricesdrovetheincreaseincommodities.Meanwhile,basemetalpricesrecoveredattheendofthemonth.
TheU.S.dollardecreasedthismonth,failingtobreachpreviousresistancelevels.AweakerU.S.dollarsupportshigherDBBandCRBindexes.Followingmarketexpectations,onSept.25theFedraiseditsrangeforthefederalfundsrateby25bpsfrom2%to2.25%.TheFedalsocon;irmedsimilarmeasuresforlaterthisyear.ThemarketexpectsanotherratehikeinDecember,followedbythreemorein2019andpossiblyonein2020.
TheTrumpadministrationimposed10%tariffson$200billionworthofimportsfromChina,whichwentintoeffectSept.24.TheU.S.didnotincluderareearthelementsinthe;inallistoftariffson$200billionworthofChinesegoods,astheyareconsideredstrategicminerals.Thelistincludesmagnets,radarsandconsumerelectronics.
PresidentTrumpthreatenedtoslapanadditional$267billionworthoftariffsonChinesegoods.Thesetariffswouldbeinadditiontothe10%and25%tariffsonthe$200billionworthofChina’sexportstotheU.S.
AttheendofSeptember,theU.S.,MexicoandCanadastruckanewNAFTAdeal,namedtheUnitedStates-Mexico-CanadaAgreement(USMCA).Thedealincludeschangesindisputeresolution,limitsontax-freeonlineshopping,languagechangesarounddairyimportsandlimitsonU.S.autotariffs.SteelandaluminumtariffswillremaininplaceforbothCanadaandMexico.However,CanadaandMexicowillseeapartial232steelandaluminumexemptionifthenewagreementleviesautomobiletariffs.
TheISMPMIfell1.5pointsinSeptemberto59.8.Thedeclinecamefromsupplierdeliveriesandpricesincreasingatlowerratesalongwithlowcustomerinventories.However,neworders,productionandrawmaterialinventoriesincreasedthismonth.
TheChineseCaixinManufacturingPMIfelltoa16-monthlowof50inSeptember,downfrom50.6.Manufacturingoutputappearedmoremoderatethismonthandexportsdeclined.Inventoriesandbuyingactivityalsoappearedmodestduetodemandconcerns.Globaltradefrictionmovedcon;idencetoitslowestlevelinayear.
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Thismonth,commoditiesincreasedsharplyandmovedtowardthe200level.Commoditiesappearonanupswingandappeartohaverecoveredfromthepreviousshort-termdowntrend.
CrudeoilpricesalsoincreasedinSeptember.Crudeoilpricestradedhigherandbreachedthe$70/barrellevelagain.Oilpricesremainstrongthisyear,despiteJuly’spricedrop.
AccordingtotheU.S.EnergyInformationAdministration(EIA),U.S.crudeoilstockpilesfellforthesecondmonthinarowandremainatamorethanthree-yearlow.Meanwhile,U.S.re;inershaveprocessedarecordvolumeofcrudesteelinthelastthreemonths.TheEIAalsoreportedtheexpectedincreaseofoiloutputinsevenmajorshaleformationsintheU.S.by79,000barrelsperday(bpd)to7.6millionbpdinOctober.
Marketexpectationscallforanincreaseincrudeoilprices.Themarketexpectsthecrudeoilpriceceilingmaybearound$100/barrelthisyear.Lastmonth,MetalMinersettheoilresistancelevelat$80/barrel;indeed,pricesseemheadedinthatdirection.Iraniansanctionsandtighteningsupplyaredrivingthecurrentpriceincreases.IfU.S.sanctionsagainstIrangointoeffectbytheendofQ42018,about2millionbpdofcrudeoilcouldcomeoutofthemarket.
TheU.S.dollarfellto94thismonth,returningtoJulylevels.MetalMinerremainssomewhatbearishontheU.S.dollarbecauseithasfailedtobreachthepreviousresistancelevelof97.
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Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18
165168
171
174
177
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189
192
195
198
201
204207
165168
171
174
177
180
183
186
189
192
195
198
201
204207
195
Thomson Reuters/Jefferies Index (CRB): October 1, 2018
Editor's Highlights
Resistance: 200Support: 189
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Likecommodities,industrialmetalsalsoincreasedthismonth.However,theincreaseappearslesssharpthanforcommodities.Industrialmetalstradedlowerduringthe;irsthalfofthemonthandincreasedagainduringthesecondhalf.Copper,nickelandzincledtheincrease.
Theindustrialmetalsuptrendremainsinplace.Therecentshort-termdowntrendlikelycameasaresultofuncertaintyinthebasemetalscomplexandtradetensions.Inaddition,marketconsensussuggestsaChineseeconomicslowdown,whichmayhavehadaneffectonthebasemetalscomplex.However,thedatadonotyetsuggestlowerdemand.
Steelpricestradedlowerthismonth.Theslideseemssharperthanlastmonth.However,pricesmaynotfalltolastyear’slevelsasuncertaintyandtradetensionswilllikelycontinuetosupportdomesticsteelprices.Stainlesssteelpricesalsoseemweaker,but,likesteel,pricesremainhigh.
RawmaterialpricesforcoalandironoretradeddifferentlyinSeptember.Coalpricesincreasedthismonth,movingtowardthe$117/mtlevel.Meanwhile,ironorepricescontinuedtradinginthe$65-$70/mtband.IronorepricesincreasedinSeptembertowardthehighrangeofthebandandnowappearclosetothe$70/mtlevel.
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Editor's Highlights
Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18
13.013.5
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13.013.5
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16.5
17.0
17.5
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18.5
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20.0
PowerShares DB Base Metal Fund: October 1, 2018
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Aluminum
2,000
2,100
2,200
Current Price
Support and Resistance Indicator
C..
1
2
3
4
U.S.sanctionsonRussianaluminumproducers
MWpremiums
AluminumdeGicit
Aluminashortfall
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
1900
1950
2000
2050
2100
2150
2200
2250
2300
2350
2400
2450
2500
2550
1900
1950
2000
2050
2100
2150
2200
2250
2300
2350
2400
2450
2500
2550
2,054
LME Aluminum: October 1, 2018
Al
Aluminum DriversMarket CommentaryLMEaluminumpricesfellthismonth.Despitethepricedecrease,aluminumpricesstilltradeinashort-termsidewaystrend.LMEaluminumpricescontinuetotradeoverthelong-termsupportlevelof$1,970/mt.However,thelatestrecoveryintheindustrialmetalscomplexcouldboostaluminumpricesthisyear.LMEaluminumstocksfellagain,re;lectingthede;icitinthealuminumindustry.Currentlevelsremainbelow1.1milliontons,wayofftheirhighbackinJanuary2014of5.49milliontons.Thealuminummarketfacesasecondstressduetoaluminasupplyconstraints.ThestrikeinAlcoa’sgiantWestAustraliaoperationscentermaycreateawidershortfallinthealuminumandaluminamarket,whichisalreadyinde;icit.OnAug.8,around1,500workersstartedastrikeinAlcoa’saluminumcomplex,affectingthreealuminare;ineriesandtwobauxitemines.Thepartieshaveyettoreachanagreement.Thealuminare;ineriesaccountfor9.3milliontonsofcapacity,or8%oftheworldsupplyofalumina.AshortfallinaluminacameasaresultofU.S.sanctionsagainstRusalandthepartialclosureoftheworld’sbiggestaluminaplant,NorskHydro’sAlunorteinBrazil.Aluminaproductionfellby15,000tonsinAugust,whileSeptemberdatahasnotyetbeenreleased.
Meanwhile,Chinesealuminasmeltershavehelpedtopluggapsinthealuminumsupplychain,exportinggreater-than-usualamounts.However,theChinesealuminumproductionsupplychainalsosuffersfromshort-termshortagesasbauxite;lows(theotherrawmaterialforaluminumproduction)haveseendisruptionsduetoenvironmentalinspections.Additionalcapacitycurtailmentscouldlimitsupplyduringtheheatingseason.Approximately,twotonsofaluminaareusedtomakeatonofre;inedaluminum.Aluminarepresents30%ofthetotalaluminumcost.IncreasingChineseexportscombinedwithaluminashortfallscouldsupporthigherprices.Therefore,risingrawmaterialpricesand;latorsidewaysLMEaluminumpricesappearlesssustainable.Oneofthemcouldchangetrendintheshortterm.Meanwhile,sanctionsonRusalhaveimpactedEuropeansalestoo.EuropeancustomershavealsoavoidedRusalaluminum,withsanctionsgoingintoeffectinOctober.However,buyingorganizationshavebegunlookingforalternativesourcesofsupplyfor2019contractnegotiations.
LME aluminum prices fell this month. Current prices suggest a good opportunity to buy on the dip. Buying organizations can commit to some volume(3-5 months’ worth of demand) if needed. However, buying organizations should not lock/hedge on the U.S. Midwest premium, as it remains high. Buyingorganizations may want to wait until the premium falls to 2017 levels.
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Resistance
Support
2018
Industrial Buying Strategy
6
Avg. Resistance (Al..Avg. Support (Alum..Avg. Aluminum Clo..
Midwest Aluminum PremiumTheU.S.Midwestaluminumpremiumtraded;latthismonth,withacurrentreadingof$0.19/pound.Despitetheslowdowninpremiumincreases,currentlevelsremainwellabove2015/2016lows.TheJapaneseQ4aluminumpremiumfellby22%fromtheQ3premiumof$103/ton.JapanisAsia’sbiggestaluminumimporter.SimilartotheMidwestpremium,theJapanesepremiumispaidovertheLMEaluminumprice.
2190
2054
1970
Copper
C..
1
2
3
4 FallingU.S.dollar
IncreasedproductioninChileanmines
Increasingcoppersmeltingcapacity
2018/2019copperdeGicit
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
5600
5800
6000
6200
6400
6600
6800
7000
7200
7400
6,259
LME Copper: October 1, 2018
Cu
Copper DriversMarket CommentaryLMEcopperpricesincreasedsharplythismonth.Pricesbreachedthe$6,000/mtlevel,thelevelthatservedasaceilingin2017.Buyingtradingvolumesappeartobestrongandsupportiveofthelatestuptrend.AccordingtotheInternationalCopperStudyGroup(ICSG),thecoppermarkethada45,000-tonde;icitinJune.Worldre;inedcopperoutputinJunereached1.95milliontons,whileworldre;inedcopperconsumptionhit2milliontons.Thede;icitof50,000tonsappearstobesmallerthaninMay.Duringthe;irstsixmonthsof2018,thecoppermarkethada51,000-tonde;icitversusa148,000-tonde;icitforthesameperiodin2017.Chinatreatmentandre;iningcharges(TC/RCs)areforecastedtodropbelow$80/tonnextyear.TC/RCsarepaidtocoppersmeltersbyminerstoprocessoreintore;inedmetal.Thedecreaseinthesechargescomesasaresultofexpandedprocessingcapacityandacopperconcentratede;icit.Chargestendtodecreasewhenthecopperconcentratemarkettightens.Antaike,theresearcharmoftheChinaNonferrousMetalsIndustryAssociation,forecastsanincreaseof950,000tonsofannualcoppersmeltingcapacityinChinain2019.Chinaremainstheworld’sbiggestcopperconsumer.However,outputfromChinesecopperminesremainsweak,andcopperscrapsupplywillremaintight.Chinaconcentrateimportsareforecastedtoincrease9.2%in2019.However,thecopperconcentratemarketwilllikelyseea12,000-tonde;icitin2018,anda10,000-tonde;icitin2019,farfromtheprevious170,000-tonsurplusin2017.
Meanwhile,productionattheworld’slargestcopperproducerincreasedinJuly.Chileancopperproductionreached3.31milliontonsinthe;irstsevenmonthsof2018,10.48%higherthanthesameperiodlastyear.Julysawproductionof481,700tons,2.9%higherthaninJuly2017.Theincreasecameasaresultofincreasedoutputatthelargeprivatemines,whichavoidedstrikes.
Chile’sCodelco,astate-ownedcopperminingcompany,produced813,000tonsofcopperinthe;irsthalfoftheyear,up2%from2017.Expectationsfor2018callfor1.7milliontonsofcopperproduction.However,theVentanascopperfoundryhadtohaltoperationsduetohighgaslevels.However,theimpactonproductionhasbeenminor.
BaikalMiningGroupstartedtheconstructionofamassiveminingandmetallurgicalplantattheUdokancopperdepositinSiberia.Withtotalreservesinthedepositof26.7milliontons,itcouldbecomethelargestundevelopedcopperdepositinRussiaandoneofthebiggestintheworld.Themetalishardertoextract,however,duetocharacteristicsoftheore.Thecopperplantwillhavethecapacitytoprocessupto12milliontonsoforeperyearandwillstartproductionin2022.TheRussianplantwillfocusoncathodecopperandsulphideconcentrate.
Copper prices increased this month, moving closer to September resistance levels. Buying organizations had the opportunity to commit to purchasesduring the buying dip, as prices continued to fall. Current levels remain elevated. Therefore, buying organizations may want to wait until prices retracecloser to support levels, and commit to purchases (3-5 months’ worth of demand) then.
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5,800
6,000
6,200
6,400
Current Price
Support and Resistance Indicator
Resistance
Support
2018
Avg. ResistanceAvg. SupportAvg. Copper Closi..
Industrial Buying Strategy
7
6446
6259
5829
Nickel
Current Value
Support and Resistance Indicator
Nic..
1
2
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5
Philippines’environmentalrestriction
NewIndonesianproduction
Increasingbatterydemand
Decreasingstocks
2018forecasteddeGicit
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
9600
10400
11200
12000
12800
13600
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12,545
LME Nickel: October 1, 2018
Ni
Nickel DriversMarket Commentary
In September, nickel prices fell slightly. Buying organizations had the opportunity to buy some volume when prices decreased toward support levels, asrecommended by MetalMiner in the August MMO. Current price levels still suggest buying some volume if needed (3-5 months’ worth of demand).
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Resistance
Support
2018
Industrial Buying Strategy
8
Avg. Resistance (Ni..Avg. Support (Nick..Avg. Nickel closing ..
In Stainless Markets
LMEnickelpricesfellslightlythismonth.However,thepricetrendappearstohaveshiftedagaintowardamorebullishsentiment.Thisyear,nickelpriceshaveshownlessvolatilitythanothermetals,andhavelargelyoutperformedtheotherbasemetals.Tradingvolumessupportanuptrendinnickelprices.
Combinednickelstockshavefallenby162,000tonssofarthisyear.AccordingtotheInternationalNickelStudyGroup,the;irstsixmonthsoftheyearcreatedanickelsupplyde;icitof81,000tons.ThePhilippines,theworld’stopsupplierofnickelore,willstartlimitingthelandthatminescandevelopfollowingnewenvironmentalrules.Underthesenewrules,mineswillhavea20-meter“bufferzone”orbanonmetalextraction.Nickelminerswillseeproductionlimitsrangingfrom50-100hectares(123-400acres).
PresidentRodrigoDutertehasadvisedminerstoreforestareaswheretheyoperatetoreduceenvironmentalconcerns.Inaddition,allsmall-scaleactivitiesinmountainousregionsstoppedaftertheMarigkhuttyphoon.Accordingtogovernmentdata,nickeloreoutputdecreasedby10%inthe;irsthalfof2018whencomparedtolastyear’s9.43milliontonsinthesametimeframe.Theoutputdropcameasaresultofthesuspensionof11minesthisyear,whichhadzerooutputduringthisperiod.IndonesiannickelorecouldcovertheexpectedsurgeindemandforEVmarkets.SumitomoMetalMiningCo(SMM),Japan’slargestnickelsmelter,intendstobuildanickelprocessingplant.Thecompanyplanstoboostannualnickeloutputbysmeltingupto150,000tonsby2022from90,000tonsinMarch2018.CurrentusageofIndonesiannickeloreprimarilygoestowardstainlesssteel.JapanaskedtheWorldTradeOrganization(WTO)tosetupadisputesettlementpanelregarding14-year-oldSouthKoreananti-dumpingdutiesonJapanesestainlesssteelbars.In2004,SouthKoreaimposed15.39%anti-dumpingdutiesonJapaneseexports.However,JapanclaimsthecheapestmaterialcomesfromChinaandTaiwan,andthecountrydoesnotharmSouthKoreanindustryanymore.TherequestwasdiscussedSept.26.Ifanycountryobjects,anewrequestwillbesentanddiscussedOct.24.
Negotiationsfor2019contractshavebegunand,asexpected,;lat-rolledstainlessmillshavequotedincreasesover2018prices.ByearlyNovember,mostofthe2019contractsshouldbe;inalized,asleadtimesremainlong.Buyingorganizationswillwanttoensuresuppliersagreeuponvolumesneededfor2019,asdomesticmillscontinuetorunathighcapacityutilization.
14990
12545
12430
Lead
Current Price
Support and Resistance Indicator
L..
1
2
3
4 U.S.dollar
Tightleadsupplyvs.increasingdemand
LeaddeGicit
Fallingstocks
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
1,920
2,000
2,080
2,160
2,240
2,320
2,400
2,480
2,560
2,640
2,032
LME Lead: October 1, 2018
Pb
Lead DriversMarket Commentary
Lead prices fell again this month toward support levels. Current price levels suggest buying organizations may want to buy some volume now (3-5months’ worth of demand).
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Resistance
Support
2018
Industrial Buying Strategy
9
Contrarytocopperandnickel,leadpricesfellslightlythismonth.Volatilityinleadpricemovementshasfallen,showingamoresidewaystrend.Tradingvolumesalsoappearlessvolatilethismonth.
SHFEleadpricesalsodecreasedthismonth.ContrarytoLMEprices,SHFEpricessawmorevolatilitythismonthandincreasedduringthe;irsthalf.However,pricesendeduplowerbytheendofthemonth.
Leadstocklevelsalsofellthismonth.Leadstocksinallmajorexchangeshavedecreasedforthreeconsecutivemonths,leavingalargerleadde;icit.Typically,lowerstocklevelstendtomoveLMEpriceshigher.Giventhecurrentleadsupplyanddemandbalanceandtheshiftinbasemetalpricesleadpricesmayfollowshortly.
AccordingtotheInternationalLeadandZincStudyGroup(ILZSG),leadmineproductionincreasedinJulyto370.3ktfrom345.2inJune.However,leadmetalproductionincreasedoverthesameperiod,reaching969.4ktfromtheprevious940.3kt.Leaddemandalsoincreasedonamonthlybasis,reaching948.8ktinJuly.
Avg. Resistance (Le..Avg. Support (Lead)Avg. Lead closing p..
Aug-16 Feb-17 Aug-17 Feb-18 Aug-18
1360014400
1520016000
1680017600
18400
1920020000
20800
2160022400
SHFE Lead Spot prices (CNY/ton)2260
2032
1919
Zinc
Current Price
Support and Resistance Indicator
Z..
1
2
3
4 Smeltingcapacityconstraints
Newzincsupplyprospects
Fallingglobalzincdemand
DeGicitin2018
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
2300
2400
2500
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2700
2800
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3000
3100
3200
3300
3400
3500
3600
2,598
LME Zinc: October 1, 2018
Zn
Zinc DriversMarket Commentary
Zinc prices appear to have recovered from the recent short-term downtrend. Despite prices increasing this month, current price levels still suggest buyingsome volume if needed. Buying organizations may want to lock now and commit to short-term purchases (3-5 months’ worth of demand).
[email protected] Tel. 773.525.9750
Resistance
Support
2018
Industrial Buying Strategy
10
Avg. Resistance (Zi..Avg. Support (Zinc)Avg. Zinc closing pr..
Despitetherecentpriceincreases,LMEzincpricelevelsstillsuggestcommittingtosomevolume.Zincpricesinitiallyfellclosetosupportlevels,butreboundedfromthere.Buyingorganizationsmaywanttopaycloseattentiontohowzincpricesreacttothatlevel.Tradingvolumesappearhigherforthebuys,whichsuggestssupportforthiscurrentshort-termuptrend.
AccordingtotheILZSG,thezincsupplyanddemandbalancecallsforade;icit.ZincmetaldemandfellslightlyinJulyto1,083.9ktversusthe1,092.8ktinJune.
Onthesupplyside,zincmineproductiondecreasedto995.9ktinJulyfromtheprevious1025.8ktreadinginJune.Zincmetalproductionalsodecreasedthismonth,fallingto1,051.4ktfromthe1,078.6ktproducedinJune.
Alsoonthesupplyside,GrupoMexicocouldreopenthecountry’slargestundergroundmine,theSanMartinmine,inQ12019.
Theminehasbeenclosedfor10yearsduetoalaborcon;lictbackin2007,whenworkerstherewentonstrike.Theminehasgonethrougharefurbishmentandalsocontainszinc,lead,silverandcopperore.
In2005,theSanMartinmineproduced19,000tonsofzincand8,000tonsofcopper.
NexaResources,theBrazilianminingcompany,alsohasplanstoinvestinzincproducts.
PeruandBrazilmaysee$1.17billioninvestmentsinprojectsforcopperandzincproduction.The;irstminewillbeazincprojectinAripuana(Brazil),whichmaystartproductionin2020.
ThenextprojectwillcovertheShalipaycomineinPeru,whereproductioncouldstartin2021.Thecompanycurrentlyhas;iveminesinBrazil,inadditiontotwominesandare;ineryinPeru.
Nexaexpectstoproducearound600,000tonsofzincthisyear.
2748
2284
2598
Tin
Current Price
Support and Resistance Indicator
Tin..
1
2
3
4
5
TradetensionsandChineseslowdown
Slowingdemand
IncreasingproductioninIndonesia
GlobalforecasteddeGicit
LowertinproductioninMyanmar
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
18400
18800
19200
19600
20000
20400
20800
21200
21600
22000
18,845
LME Tin: October 1, 2018
Sn
Tin DriversMarket Commentary
Tin prices traded sideways this month. Current prices remain close to the last buying dip at the beginning of the year. Buying organizations may want tocommit to short-term purchases if needed (3 months’ worth of demand).
[email protected] Tel. 773.525.9750
Resistance
Support
2018
Industrial Buying Strategy
11
Tinpricestradedsidewaysthismonthandshowedlowervolatility.Smalldailypricechangessignallessinterestinthebasemetal.Inaddition,tradingvolumesremainquitelow.Infact,theLondonMetalExchangerevealedthattincontractsappeartooilliquidanddonotattractalotofspeculativeplayers.SHFEtinstockshaveincreasedby1,819tonssincethebeginningoftheyear,reaching6,734tons.Meanwhile,LMEtinstocksincreasedbyjust450tonsto2,885tons.AccordingtotheInternationalTinAssociation(ITA),globalusageofre;inedtinincreasedby4%in2017,reaching362,000tons.However,2018mayresultinasharpslowdownindemandgrowth,showingjusta1%increase.MarketexpectationsofaChineseslowdownandtariffshavecreatedexistingdemandchallenges.
TheITArecentlypublishedtinusagewith2017demandinformation.50%oftindemandgoestowardsolderinginelectronicapplications.ExistingtariffsimposedbyboththeU.S.andChina,whichtargetelectronicproducts,couldgreatlyimpacttindemand.
Chemicalapplications—thesecond-largestusage—accountfor18%oftindemand.In2017,tinusedforthisapplicationincreasedby7.5%;forecastsforthisyearsignalsimilargrowth.However,tinplateusageisexpectedtoremainsteady,withU.S.tariffsonsteelproductsaffectingtinplateaccountsfor14%oftindemand.
Onthesupplyside,tinremainsresilient.Indonesia,theworld’slargesttinexporter,increasedproductionby12%inthe;irsteightmonthsof2018.Exportsreached54,000tons,andmarketexpectationscallforanincreaseintinexportsoverlastyear,whenIndonesiantinexportsgrewby23%.AlthoughIndonesiantinexportssawaninterruptionatthebeginningoftheyearduetonewrulesaffectingoverseasshipments,therulesdidnotnegativelyimpacttinsupply.
Meanwhile,ChinacontinuestorelyuponMyanmartinresources.Myanmarbecamethe;irstChinesetinsourcebackin2013,whensigni;icanttonswenttoChina.ITAestimatesshipmentsinthe;irstsevenmonthsoftheyeartotaled34,000tons,5%lowerthanlastyear.However,thisdatahasnotbeenof;iciallypublishedbytheChineseCustomsDepartmentsinceMarch2018.
TheforecastforMyanmartinoutputin2018callsforadecreaseof13,000tons,downto54,000tonsthisyear.
Avg. Resistance (Ti..Avg. Support (Tin)Avg. Tin closing pri..
20176
18339
18845
HRC
850
860
870
880
Current Price
Support and Resistance Indicator
H..
1
2
3
4
U.S.steeltariffs
RisingChineseprices
Increasingdomesticproduction
Domesticsteelsupply
Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
500
550
600
650
700
750
800
850
900
Valu
e
500
550
600
650
700
750
800
850
900
861
MetalMiner IndX (SM) HRC: October 1, 2018
HRC
Market CommentaryHot-rolledcoilpricesfellagainthismonth.Thedowntrendappearssharperthanlastmonth,withHRCpricesfallingbacktoApril2018levels.
HRCpricemomentumcontinuestoweaken.Despitetherecentdowntrendindomesticsteelprices,currentpricelevelsremainhigh.Annualcontractnegotiationsareunderway;historically,pricestendtodriftduringthe;irstpartofQ4andthenbegintorise.
Meanwhile,ChineseHRCpricescontinuedtoincreaseagainthismonth.ChinesesteelpricesaretradingslightlylowersincethebeginningoftheyearbutstartedanuptrendbackinApril2018.ArobuststeelsectorcurrentlysupportsChinesesteelprices.SteeldemandinChinaremainsstrong,whilepollution-relatedrestrictionsandthecomingwinterseasoncouldhelpsupporthigherprices.
ThespreadbetweenU.S.domesticHRCpricesandCRCpriceshasstartedtoagaintrendoutsidethehistoricalrange.Historically,thespreadbetweenhot-rolledcoilandcold-rolledcoilproductsisaround+/-$100/st.Thespreadwentdownto$70/st,butrecoveredtoreach$90/st.
AccordingtotheAmericanIronandSteelInstitute(AISI),year-to-datedomesticsteeladjustedproductionincreased4.4%fromayearago.ProductioninSeptemberreached68,601,000nettons,withacapabilityutilizationrateof77.5%vs.74.4%inthesameperiodlastyear.
MexicowantstoendthesteelandaluminumtariffdisputebeforesigningtheNAFTAagreementwiththeU.S,afterayearofnegotiations.ThecountryaimstosignoffonthetradedealbytheendofNovemberandhasplacedpressureonCanadatojoinit.
SomespecialtySouthKoreansteelmakerssawidleproductionlinesduetoSection232tariffquotas.Thequotaallowedfortwo-thirdsofthepreviousyear’svolumeswhichhadbeenreachedbyMay.Steelmills,suchasNextsteelandHusteel,loweredfactoryutilizationratesuntilOctober-November,butcannowresumeshippingtotheU.S.for2019.
Meanwhile,JapanincreasedU.S.exportsdespitethe25%steeltariffs.Demandforhigh-techpipesfortheU.S.oilindustryledtheincrease.AccordingtotheU.S.CommerceDepartment,importsofpipeandtubeproductsfromJapanrose50%involumeintheJanuary-Julyperiodwhencomparedtolastyear’sdata.SouthKoreanimportsdecreasedby18%.
Although HRC prices fell this month, prices remain high. Buying organizations will want to hold off on mid- to long-term purchases until prices retracetoward support levels. Since steel prices remain in a downtrend, buying organizations may want to buy only what they need.
[email protected] Tel. 773.525.9750
Industrial Buying Strategy
12
20182017
HRC Drivers
Resistance
Support
Avg. Resistance (HR..Avg. Support (HRC)Avg. HRC price
824
861
881
CRC
900
950
1000
Current Price
Support and Resistance Indicator
C..
1
2
3
4
U.S.steeltariffs
StrongChinesesteeldemand
IncreasingChineseprices
China’scapacitycutsandproduction
Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
700
750
800
850
900
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1000
700
750
800
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1,000
951
MetalMiner IndX (SM) CRC: October 1, 2018
CRC
Market CommentaryCold-rolledsteelpricesdroppedagaininSeptember,followingtheprevioustwo-monthdowntrend.Thefallappearssharperthismonth,butlesssharpthanforHRCprices.However,steelpricesmaycontinuefallingintheshorttermandreboundtowardtheendofthequarter.Thisyear,domesticsteelpriceshaveseenmorethaneight-yearhighs.
ApotentialstrikeatArcelorMittalfacilitiescouldimpactbothcoldandhotrolledproductionandavailabilityassoonasthismonth.In2017,ArcelorMittalproduced93.136millionmetrictonsofcrudesteelgloballyofwhich25%or23.284mmtcamefromNorthAmerica.AccordingtoArcelorMittal’sFactbook2017,ArcelorMittal’sNAFTAsteelproduction(thecurrentUSMCA)was27%toHRCproducts(6.28mmt)and15%toCRCproducts(3.49mmt).TotalUS.steeldomesticproductionwas82mmtin2017.AnArcelorMittalstrikewouldsigni;icantlyimpactUSsteelproduction.
ChineseCRCpricesalsoincreasedthismonth.Chinesesteelpricesseemtohaverecoveredmomentumandremaininanuptrend.Priceshavesupportfromstrongdomesticsteeldemand.
AccordingtodatapublishedbytheNationalBureauofStatistics,Chinesesteeloutputincreasedby5.8%to617.4milliontonsduringthe;irsteightmonthsofthisyear.However,steeloutputdecreasedinAugustafterreachingarecordinJuly.
Accordingtoof;icialdata,Augustcrudesteeloutputfell1.1%fromthe81.24milliontonsrecordedinJuly,to80.33milliontons.However,whencomparedtolastyear’sdata,crudesteeloutputinAugustremains7.7%higherthanthe74.59milliontonsinAugust2017.Dailyaverageoutputfellto2.59milliontons,thelowestreadingsinceApril.
Pollutioncurbscontinuedtolowersteeloutput.ProductionfellsharplyinTangshan,the;irststeel-makinghub.Thiscameasaresultofanordertocutcapacityoutputby30-50%betweenJuly20-Aug.31.
Chinawillallownorthernprovincestodecidetheirownindividualoutputcutstoreducepollution.Allheavyindustrymustreduceemissionsduringwinter,butlocalauthoritieswillmakespeci;iccuts.
Indiaproposedincreasingtheeffectiveimportdutyonsomesteelproductsto15%,fromthecurrent5-12.8%range.Thecountryistryingtosupporttherupeeandencourage“MadeinIndia”products.Indiahasbecomeanetsteelimporterinthethree-monthperiodofApril-June2018forthe;irsttimeintwoyears.Foreignsuppliesenteringthecountryincreasedby15%,reaching2.1milliontons.
TheproposeddutieswilllikelyaffectChina,SouthAfrica,Malaysia,RussiaandIndonesia.JapanandSouthKorea,whichhavefreetradeagreementswiththecountry,willnotbesubjecttoduties.
Buying organizations may want to hold off on purchases until prices retrace toward support levels. Since steel prices remain in a downtrend, buyingorganizations may want to buy only what is needed.
[email protected] Tel. 773.525.9750
Industrial Buying Strategy
13
20182017
CRC Drivers
Resistance
Support
Avg. Resistance (C..Avg. Support (CRC)Avg. CRC price
997
910
951
HDG
950
1000
1050
1100
1150
Current Price
Support and Resistance Indicator
HD..
1
2
3
4
5
U.S.steeltariffs
StrongChinesedemand
IncreasingChineseprices
Chinesepollutionplan
Automotiveandconstructionsectors
Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
750
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1000
1050
1100
750
800
850
900
950
1,000
1,050
1,100
1,022
MetalMiner IndX (SM) HDG: October 1, 2018
HDG
Market CommentaryChineseHDGpricesincreasedthismonth.TheriseinChineseHDGpricesappearssharperthanforotherformsofsteel.
Buyingorganizationsknowthat,historically,ChineseandU.S.priceshaveastrongcorrelation.ThismeansrisingChinesesteelpricestendtosupportdomesticsteelprices.
However,U.S.tariffshavemovedU.S.priceshigherduring2018andpriceshavestayedattheselevelslongerthanusual.Therefore,risingChinesepricesmayminimizetherecentdropindomesticsteelprices.
StrongChinesedomesticdemandsupportsrisingsteelprices.Chinaannouncedconstructionprojectsinseveralcities,suchasShenzhen,SuzhouandChangchun.Theseconstructionprojectswillfocusonbuilding44subwaylinestotalingupto1,600kilometers(or1,000miles).Thismeansaround80milliontonsofsteelwillbeneeded,or10%ofChina’scurrentdemand.Someofthesesteelproductswillincludehigh-strengthsteel,reinforcedsteelandalloysteelsheet.
U.S.constructionspendingincreased0.1%inJuly,goinguptoanannualrateof$1.32trillion.AJune0.8%decreasewasthelargestdeclineinconstructionspendingsinceApril2017.Privateconstructionspendingdecreased0.1%,whilepublicconstructionspendingincreased0.7%.However,constructionspendingincreased5.8%year-on-yearinJuly.
Despite the drop in HDG prices, current prices remain high. Since steel prices remain in a downtrend, buying organizations may want to buy only what isneeded until prices come off support levels and start to increase.
[email protected] Tel. 773.525.9750
Industrial Buying Strategy
14
20182017
HDG Drivers
Resistance
Support
Avg. Resistance (H..Avg. Support (HDG)Avg. HDG price
Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18
4000
4500
5000
5500
6000
6500
China HDG Domestic Price in RMB/mtDomesticlightvehicleproductionincreasedsharplyinAugust,drivenbyaseasonaladjustment.Julyistheslowestautoproductionmonthoftheyear.Productionrose50.8%fromJulydata,reaching1,032units.Whencomparedtolastyear,productioninJuly2018increasedby6.1%.
Lighttruckproductionhasshownthebiggestincreaseyear-on-year,whilecarproductioncontinuestofall.
Carproductionslid14.7%fromAugust2017.Year-to-datelightvehicleproductionslid0.4%fromthesametimelastyear.
1084
963
1022
Plate
Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
550
600
650
700
750
800
850
900
950
1000
1050
550
600
650
700
750
800
850
900
950
1000
1050
992
MetalMiner IndX (SM) Plate: October 1, 2018
950
1000
1050
Current Price
Support and Resistance Indicator
P..1
2
3
4
5
U.S.steeltariffs
U.S.dollar
Rawmaterialpricetrends
Crudeoilprices
Chineseprices
PLATE
Market CommentaryPlatepricesalsofellthismonth.Platepriceshaveoutperformedallotherformsofsteel,asthedowntrendappearslesssharp.Platepricestradedmostlysidewaysthismonth,fallingslightlytowardtheendofthemonth.Platepricesremainsupportedbylowproductavailability.Buyingorganizationsmaywanttorememberthatplatepricestendtofollowatrendandmoveinonedirection.Pricechangesappearmoresharpthanwithotherformsofsteel.
Chineseplatepricesincreasedthismonth.Chinesepricesappearinashort-termuptrend,drivenbystrongdemandandenvironmentalcurbsbeginninginthewinterseason.
RawmaterialpricesforcoalandironoretradeddifferentlyinSeptember.Coalpricesincreasedthismonth,movingtowardthe$117/mtlevel.Meanwhile,ironorepricescontinuedtradinginthe$65-$70/mtband.IronorepricesincreasedinSeptembertowardthehighrangeofthebandandnowappearclosetothe$70/mtlevel.
ChineseironoreimportsdecreasedinAugustby0.7%.Accordingtocustomsdata,shipmentsarrivingtoChineseportsfellto89.35milliontonsfromtheprevious89.96milliontonsinJuly.Outputcurbsonsteelmillsduetothenewenvironmentalpolicyhaveloweredironoreimports.Year-to-dateimportsfell0.5%to710milliontonswhencomparedtolastyear’sdata.
Plate prices remain high. Buying organizations may want to hold off on purchases until prices retrace toward support levels. Since steel prices remain in adowntrend, buying organizations should buy only what they need.
[email protected] Tel. 773.525.9750
Industrial Buying Strategy
15
20182017
Plate Drivers
Resistance
Support
Avg. Resistance (Pl..Avg. Support (Plate)Avg. Plate price (co..
However,ironoreshipmentsfromAustralia’sPortHedland,theworld’slargestironoreport,increasedby10%inAugustfromlastmonth’sdata.Accordingtoportdata,shipmentstoChinareached35.5milliontonsinAugust.
U.S.shreddedscrappricesalsofellthismonth.Similartosteel,scrappricemomentumappearstohaveslowed;pricescouldfallslightlyinthecomingmonths.
Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18
2000
2400
2800
3200
3600
4000
4400
4800
China Plate Domestic Price in RMB/mt
922
992
1040
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