Commodities Roundup: Base Metals Hit a Downtrend, The Future of Iron Ore

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For the buyers and category managers out there, especially those of you deep in the weeds of buying and managing commodities, here’s a quick rundown of news and thoughts from particular commodity markets.

From price movements to policy decisions, our MetalMiner editors scour the landscape for what matters. This week:

What’s Up With Gold?

MetalMiner’s Stuart Burns speculated on what is going on with gold, long held up as a safe-haven asset in times of volatility.

Given the trade tensions rippling through the global marketplace, these times would certainly qualify as such. So why has the gold price been dropping, all the way down to a seven-month low?

As with many metals, the U.S. dollar is at least part of the answer.

“Rising U.S. Fed rates and rising real interest rates — up 20% from the start of the year as measured by 10-year bonds — are supporting the dollar,” Burns wrote. “While the dollar remains strong, gold is being depressed.”

LME Copper on the Downswing

June was a generally down month for metals prices, steel gains being the exception.

The retracement also affected copper, that bellwether of economic health.

“LME copper prices have remained in a short-term downtrend since prices peaked in June at $7,316/mt,” MetalMiner’s Irene Martinez Canorea wrote. “Since then, LME copper prices have fallen by more than 12%.”

It remains to be seen, however, if the short-term downtrend will become something greater.

“The downtrend appears sharp, as copper prices have fallen to October 2017 levels,” she continued. “However, trading volumes do not appear in the same sharp downtrend, instead looking flat. Therefore, copper prices may just be seeing a bigger buying dip, caused by weaker summer demand and trade tensions.”

Escalating trade tensions between the U.S. and China, the world’s top copper consumer, have continued to depress the market.

Aluminum Prices Also Decline

Nor was aluminum spared from the down June for base metals.

“At least for the short term, it appears as though trade policies will impact the global aluminum market,” Martinez Canorea wrote.

“After the U.S. tariffs on steel and aluminum in March, plus additional sanctions on Russia, aluminum now waits for its next cue.

“Canada announced punitive measures on C$16.6 billion ($12.63 billion) worth of American goods in response to U.S. tariffs. The measures will stand until Washington changes the current aluminum and steel tariffs on Canada. Europe also responded to the U.S., approving provisional measures.”

SHFE aluminum prices also declined over the past month.

In addition, U.S. Midwest aluminum premiums, which have been rising since the latter part of 2017, held flat this month at $0.20/pound, remaining at a four-year high.

Steel, on the Other Hand…

Steel has bucked the general downward trend for metals.

U.S. steel prices have reached a more than seven-year high, Martinez Canorea noted. Prices have continued to increase so far this month, albeit at a slower pace.

The steel price cycle, however, could see prices come back down.

“Domestic steel prices have stayed in a sharp uptrend since January 2018,” she continued.

“Current prices have started to trade more sideways. Despite the increase in prices, prices may begin to come off slightly at some point this year.”

Nickel Prices Down While Stainless Surcharges Rise

Nickel prices fell off slightly last month, but remain in a general long-term uptrend, Martinez Canorea noted.

Nickel watchers should keep an eye on environmental measures in the Philippines.

“President Rodrigo Duterte of the Philippines announced a possible halt to mining in the country due to environmental damage,” Martinez Canorea wrote. “In June, 23 out of 27 mines passed an environmental review, easing the uncertainty of supply. However, nickel supply uncertainty still remains as a result of environmental measures.”

Domestic stainless steel surcharges, meanwhile, were up for the month. The 316/316L-coil NAS surcharge reached $1.06/pound and the 304/304L went up to $0.7698.

Iron Ore’s Trials and Tribulations

As Burns noted, many have predicted the death of iron ore over the years, but demand and market discipline on the part of suppliers has keep ore afloat.

Nonetheless, the market could be due for a fall.

“Fears over the effects of a trade war with America have not only hit the stock market,” Burns explained.

“A combination of cooling demand as debt tightens and new supply in Brazil and Australia has to find a home and will, it is believed, drive down prices for both steel products and iron ore. Iron ore may get dragged lower in the second half as global mine supply expands, steel prices ease off, and renewed production curbs at mills in China blunt overall demand.”

According to analysts cited by Burns, iron ore could be due for a not-so-glowing fourth quarter.

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