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Commodities Roundup: Aluminum Prices, Copper Output and a Resurgent Chinese Jewelry Market

06/08/2018 By

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:

Aluminum Prices Gain Support

As Irene Martinez Canorea notes in her Monthly Metals Index (MMI) report on aluminum, tariffs and Russian sanctions have sent the aluminum price upward to levels not seen since 2012.

The LME aluminum price rose last month by 2.7%, with a closing May price of $2,286/mt. In addition, the U.S. Midwest Premium rose to $0.20/pound, a more than four-year high.

Sideways Copper

Meanwhile, copper is not seeing as much upward price momentum as aluminum.

“The global copper industry faces closures and mine disruptions, which could affect copper supply,” Martinez Canorea wrote. “However, given stronger global copper demand, mines have also tried to increase copper capacity. The supply and demand balance for copper calls for a slight surplus in 2018, but the forecast could change during this quarter.”

In other news, a Vedanta copper smelter in India closed on the heels of violence, as 13 protesters advocating for the plant’s closure were killed by police officers.

“Vedanta produces 400,000 tons of cathode copper per year,” Martinez Canorea added. “Plans to double capacity should have started after receipt of renewal consent. Rising capacity comes as a result of increased Indian copper consumption over the past few years. Current local demand growth is 7%­–8% yearly, positioning the country as a net copper importer at the end of the year.”

Meanwhile, in copper powerhouse Chile, expect output to increase.

“The Caserones copper mine could produce around 110,000 tons of copper concentrate this year to the end of March 2019,” Martinez Canorea wrote. “This equates to a 91,000-ton production increase from last year.

“However, current mine production levels suggest the mine is behind schedule due to technical problems. The Sierra Gorda Chilean mine is also suffering from technical challenges and running behind schedule.”

Chinese Jewelry Market Bouncing Back

After a tough few years for the jewelry market in China, there were signs of a rebound last year, according to a World Gold Council report.

China accounts for 30% of global demand, according to the report, and 2017 saw growth in the market for the first time since 2013.

The Chinese economy has grown exponentially in the last two decades, and so has the Chinese middle class, yielding new buying behaviors. According to a survey of 2,000 Chinese women conducted by the Council, jewelry preferences can vary greatly by region. In addition, gold isn’t the only game in town.

“In recent years, gold jewelry has faced stiff competition from other items of jewelry and luxury goods in Tier 1 (T1) cities,” the report states. “According to our consumer jewelry market research, 18% of women in T1 cities would choose to buy gold jewelry when given RMB 5,000, compared with 14% and 15% who would buy diamond or platinum jewelry respectively.”

Palladium-Platinum Gap Widens

Typically, platinum trades at a premium to palladium, but that hasn’t been the case dating back to September.

In our latest MMI roundup, U.S. platinum bars checked in at $905/ounce, with palladium trading at $982/ounce.

As MetalMiner’s Taras Berezowksy noted in his monthly MMI roundup on precious metals, the automotive market is, if you’ll forgive the pun, driving the palladium price up. (Palladium is valued for its use in catalytic converters, which curb harmful emissions.)