Markets – DJ

In a pre-holiday weekend session the Dow industrials ended the week falling just short of a sixth­ straight sub-­0.15pc move in what was described as the slowest week for US stock trading since the year-end holidays. The S&P 500 fell just short of a fifth record closing in seven sessions. Economic news from both the US and China continued to be bearish, emphasizing more negative statistics than positive. The US dollar versus the euro ended the week very close to where it started the week.

Aluminum

London Metal Exchange (LME) aluminum closed the week lower after data from China showed further contraction in manufacturing. Three-month aluminum contract prices dropped despite data from the World Bureau of Metal Statistics showing that aluminum was the only base metal in deficit during the first quarter of this year. The agency said that demand outstripped supply by 95,000t during Q1, which follows a deficit of 738,000t during all of 2014.

Economic data out of China continues to show a slowdown in the economy with manufacturing PMI dropping to 49.1 against an expected 49.4. Numbers below 50 indicate a contraction, which has left traders worried that demand for metals will continue to decline throughout this year.

LME premiums in Europe were unchanged for P1020 aluminium but dropped to $520/t from $560/t for 6000-series aluminum extrusion billet. Meanwhile, US Midwest premiums for P1020 continued to trade below 10¢/lb this week. The MetalPrices.com MW premium was unchanged this week at 9-10¢/lb with little traded as market participants seek clearer signals for price direction.

Despite weaker LME aluminum prices, Chinese aluminum scrap import prices were unchanged this past week. Prices for zorba grade scrap (94-95pc metallic content and 4-5pc copper and brass content) stayed flat at 71-73¢/lb cif China. Pricing remains stable in a falling market because supplies of zorba have recently declined as weak steel prices forced lower automotive shredding rates.

Though supply of zorba is tighter, it remains balanced with demand as Chinese smelters continue to battle an aluminum market oversupplied with prime material.

Prices of mixed aluminum castings, also known as “tense,” delivered to Chinese ports were similarly unchanged this week at 71-72¢/lb.

LME Ali:           May 18 – $1,795.50/t                 May 22 – $1,726/t

Copper

A fall in LME copper prices was dampened by some consumer buying in Europe and the Middle East. Comex copper took its biggest hit on 19 May when prices fell 6.85¢/lb and ended the week down around 10¢/lb. The drop was mainly caused by strengthening of the dollar which forces buyers using other currencies to pay more for copper priced in dollars. This results in fewer copper buyers which lowers prices.

The International Copper Study Group reported a surprisingly high copper surplus of 115,000t in the first two months of this year. In the same period last year the market was in a deficit of 193,000t. The group expects total surplus this year to reach 364,000t although some traders believe this is a conservative estimate.

North American premiums for copper cathode slipped to 5.75-6.75¢/lb this week for June delivery from a 6-7¢/lb range a week ago as supply continues to outpace demand and business was fairly flat.

New data from the National Association of Home Builders Housing Market Index contributed to weaker cathode prices as the housing index dropped two points from April to a reading of 54 for May. On a more positive note, the housing index is still above the all-important 50 mark that most builders believe is a good market for new homes.

Bad weather has kept US housing starts down and spring is typically when construction season kicks off. Home building in May was reported up by 20.2pc from April which some took as a sign that the housing market will pick up along with the demand for copper.

North American copper scrap prices fell this week in step with terminal market prices as supply is still running ahead of demand. No. 1 bare bright price spreads were unchanged this week at 3-7¢/lb under Comex copper prices. No. 1 copper scrap price spreads were also flat at 8-12¢ under Comex, while brass scrap price spreads stayed at 5-9¢ under Comex.

Market participants said business levels remained weak and that mills are moving inbound appointments for delivery of scrap to June. Buyers have built sufficient inventory of copper and brass scrap to take care of demand.

Market participants said more copper and brass scrap has hit the market since prices for aluminum and iron scrap have underperformed in recent weeks. Scrap dealers are trying to generate cash flow by offering more red metal scrap to the market.

COMEX Copper:    May 18 – $2.9300/lb           May 22 – $2.8335lb

LME Copper:          May 18 – $6,383/t               May 22 – $6,197.50/t

Nickel

LME nickel was sold off by speculators this week. Three-month nickel futures fell almost 8pc on the week, with prices falling below $13,000/t after nickel stocks in LME warehouses rose by around 9,000t in one day to a record high of 446,868t on 21 May.

Data released by the World Bureau of Metal Statistics confirmed what traders are already aware of, that the global nickel market remains in surplus. According to WBMS, nickel production outstripped demand by 32,900t in the first three months of this year.

Despite the drop in prices, North American 18-8 stainless steel scrap prices remained flat at 56-57¢/lb with 316 stainless steel scrap trading at 75-76¢/lb. There is an abundance of inventory available and many are holding on in hopes of higher scrap prices in the near future. One major mill purchased a larger than expected amount of stainless steel scrap earlier this month but then held back from purchasing additional scrap for the remainder of the month.

US stainless steel mills raised nickel-based surcharges for June shipments, the first increase in five months. AK Steel has raised June’s Type 304 surcharges to 59.07¢/lb from 56.56¢/lb and Type 316 to 78.42¢/lb from 76.57¢/lb previously. Allegheny Technologies Type 304 surcharges, meanwhile, are at 59.11¢/lb with Type 316 at 78.48¢/lb.

On the production side, Norilsk Nickel said it plans on making progress on its massive nickel-copper-palladium Talnakh field by 2018. According to the company, this is one of the largest undeveloped global nickel deposits.

Norilsk can keep its cost of production fairly low because of the high precious metals content in the ore. If the project goes ahead it would add a large amount of new nickel into an already oversupplied market. This would further cement Norilsk’s dominant position in the market and could spell the end of many smaller producers. For many smaller producers a nickel price of around $15,000/t is a cut-off point for profitability.

LME Nickel:            May 18 – $13,685/t            May 22 – $12,710/t

Zinc

LME zinc futures settled lower as the market took the better part of the week to digest data from a recent International Lead and Zinc Study Group showing that, against expectations, the zinc market moved into a surplus in the first quarter of this year. Traders said that the next piece of negative economic news from China could trigger a further slide.

Volumes of trade were high with zinc now the second most traded metal on the LME, after aluminium. On Thursday 12,551 lots of zinc were traded, compared with 10,020 lots of copper.

CME Group said 18 May it will launch trading of physically delivered zinc futures contracts on 29 June, pending relevant regulatory approvals. The new zinc futures contracts will build on CME’s suite of physically and financially settled base metals products. The futures contracts will represent 25 metric tons of physical material, beginning with an October 2015 listed month. The contract will be physically delivered in approved US warehouses.

Production from Hudbay Minerals’ zinc plant in Flin Flon, Manitoba, and area mines was threatened after two more unions representing 620 of 1,420 Hudbay employees voted to join a work stoppage of another 180 workers that began on 2 May. The Hudbay Minerals operation mines zinc, copper, gold and silver and processes ore to produce concentrates and zinc in Flin Flon and Snow Lake, Manitoba. The Flin Flon zinc plant has capacity to produce 115,000t of cast zinc per year

US zinc premiums were unchanged this week as limited trading in a balanced market left little room for changes in any direction. Market participants said that supply and demand for primary zinc has not changed with supply exceeding demand. Consumers were content keeping premiums in the 8.5-9.5¢/lb range. Rotterdam zinc premiums stayed flat for the week at $140-150/t.

LME Zinc:         May 18 – $2,294.50/t              May 22 – $2,168.50/t

Lead

LME lead prices dipped during the week to a low of $1,929/t but recovered slightly on 22 May due to a slightly weaker dollar. Like most base metals other than aluminium, the lead market is in oversupply. The ILZSG reported that world refined lead metal supply exceeded demand by 11,000t during the first quarter of 2015. Over the same period, despite a rise in LME stocks, total reported inventory levels decreased by 10,000t.

LME Lead:         May 18 – $1,960/t              May 22 – $1,942.50/t

Tin

Tin attracted very little trading interest this week and only 101 lots were traded on the LME on 21 May. Indonesia, the world’s largest exporter of tin, continues to tighten the rules on tin exports and from the beginning of August will only allow exports of tin in the form of ingot, solder or plate. Exporters will be asked to provide documents proving that the metal came from government-certified mines. This could slow down exports of the metal but is likely to have only a marginal effect on prices.

LME Tin:            May 18 – $16,005/t            May 22 – $15,820/t

Precious Metals

Gold prices hit a three-month high above $1,232 an ounce in London trading on 18 May and then weakened for the remainder of the week as investors and traders weighed minutes from the US Federal Reserve’s latest meeting that lead to fears of higher interest rates. The London Bullion Market Association AM gold price ended 22 May at $1, 220.50/ounce, down from $1,216.30/ounce a week ago. The PM fix ended at $1,204.10 an ounce, down from $1,186 an ounce the previous week. Comex gold futures prices settled at $1,204.30 an ounce on 22 May, down from $1, 225.50 an ounce the previous week.

Iron Ore

Seaborne iron ore prices deteriorated for the first three days of the week and then reversed direction. In weekly comparisons, the Argus ICX price for 62pc Fe Chinese imported iron ore dropped by 90¢/t to $58.25/t on 22 May, while the 58pc Fe assessment fell by $2.40/t to $52.05/t. Meanwhile, the 65pc Fe assessment gained 55¢/t to $65.90/t.

About 20 steel mills in China’s Yangtze river region had a closed‐door meeting 21 May to discuss the market. The consensus was that iron ore prices will keep weakening through June, as the steel market is unlikely to revive, an attendee said. His own short‐term forecast for 62pc basis prices was $50‐55/t. Several mills at the meeting said they were operating with around 15 days of iron ore stocks. But another South China-based trader said: “I think iron ore prices will hover around the $60/t mark, with further gains being tough due to weak steel market conditions.”

Ferrous Scrap

The ILWU approved a five-year West Coast worker contract with the PMA, bringing an end to a dispute that crippled freight movements earlier this year.

Southern sheet mills are caught in a supply/demand imbalance and even the modest price increases paid to their local suppliers have not erased the shortfalls. Nor will it get them much of the higher priced industrial scrap that has been stacked up in many dealers’ yards since last fall. Scrap prices were at $350/gross ton (gt) and higher at that time. Steel prices have inched upward to about $460/gt for the bellwether hot-rolled steel coils, but that is still too low to justify spending more than $300/gt for the scrap to make more steel coils.

(For a full report on ferrous scrap, please read Marley’s Heavy Melt, a weekly report included with your MetalPrices.com subscription.)

 

For full article: http://www.metalprices.com/news/article/MP/197067/this-week-in-metals-may-18–may-22

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