In Part 1 in this series, we provided some background on MetalMiner's ten different MMIs highlighting metal price trends by specific industry (the Auto MMI®, Construction MMI, Renewables MMI) and by vertical metal sector (the Raw Steels MMI, Stainless MMI, Aluminum MMI, Copper MMI, Rare Earths MMI, Global Precious Metals MMI and the world's first GOES MMI). Spend Matters readers can download a detailed report on the June MMI numbers over on MetalMiner. In today's post, we feature the first part of an interview with MetalMiner's Lisa Reisman on what the June MMI numbers suggest.
Spend Matters: What stands out the most in the June MMI Numbers?
MetalMiner: What stands out most is how widespread an initial decline from May to June was across the indexes in total (i.e., all ten indexes fell). This is not common. Usually a few areas remain supported, but in this case, it was across the board. Now, it was not a crash for everything, but all ten indexes were down.
Spend Matters: What fared worst?
MetalMiner: Copper was down the most. The Copper MMI is a useful proxy for examining the global manufacturing and mining economy. They call it Dr. Copper for a reason. It's a good proxy for the health of the economy. Copper is currently well above its current marginal cost of production (unlike aluminum), so the more over-valued it is, the harder it could potentially fall.
My biggest concern is since the MMI published earlier in the month, the steel scrap prices have dropped dramatically (this will be reflected in the closing price of the July MMI numbers -- the Raw Steels MMI).
The fall in steel scrap prices suggests weak global demand for steel. People have long questioned high steel prices. But one needs only to look at the raw materials to see where the support came from even when demand faltered. But now that the raw material prices are coming down, it is likely we'll see continued downward pressure on steel prices. Since raw material costs are coming down, this will take some of the price support away for steel.
The big story in between the headlines for steel and the other MMIs is that we don't have a healthy enough China to pick up the world slack. The supercycle may not be off, but at the least, it's hit the pause button.
Stay tuned as our MMI analysis continues.