Greece once again dominates the economic backdrop as it has rejected an offer from creditors on its bailout deal despite what seemed like a breakthrough agreement just a few days ago.
Elsewhere, uncertainty over whether China will continue its easing policy to boost growth has offset signs that the Japanese economy is edging ahead as data showed that household spending rose sharply. The mixed picture continues in Europe and the Americas with France confirming a slight uptick in growth while the US reported a slight contraction.
On the corporate front, US rare earths former poster boy Molycorp has filed for Chapter 11 bankruptcy protection and has signed a restructuring support agreement with key creditors of its $1.7bn debt. The agreement provides for a financial restructuring of the company’s $1.7bn in debt and provides up to $225mn in gross proceeds in new financing to support operations while the company completes negotiations with creditors.
London Metal Exchange (LME) three-months aluminum settled at $1,711.5/t on 25 June, marginally down from $1,719/t the prior week and SHFE aluminum closed at RMB13,960/t.
Prices are likely to remain at current levels in the short term but are more likely to slide in the medium term as the market is heading towards a surplus caused by a drop in raw material costs and declining cost of production.
The chief executive of Russian aluminum producer Rusal said this week he expects prices to rally to $1,950/t later this year but this may be overly optimistic given the current supply picture.
Over-production of aluminum continues. The 2015 surplus is forecast by analysts with CRU to be 963,000t. Costs for alumina used for the smelting of aluminum are down which means that aluminum producer costs are down. Even with a lower LME aluminum price, producers are still able to make a profit.
May’s total world production as tallied by the International Aluminum Institute is up 149,000 tons from April with China continuing to lead the way.
LME Ali: June 22 – $1,650.50/t June 26 – $1,668/t
Three-months LME copper futures settled at $5,732/t on 25 June, down from $5,779/t a week earlier, as the market discounted some positive news out of China where rules for retail lending were relaxed in order to boost new lending. On the Shanghai Futures Exchange (SHFE) copper settled at RMB49,620/t.
Speculative investors remained heavily focused on Greece and the potential currency and investment implications. According to the LME’s Commitment of Traders Report last week, speculators nearly halved their net long positions in copper to 16,600 contracts, the lowest since July last year.
The International Copper Study Group (ICSG) said that the global copper market was in a surplus of 136,000t in the first quarter in contrast with a deficit in the same period last year. The group attributed the surplus to weak demand, which fell 3pc globally, and higher supplies. Secondary production rose the fastest, up 12pc on the year.
North American No. 1 bare bright copper scrap price spreads were cut to 3-6¢/lb under Comex from last week’s 3-7¢/lb. while most transactions were reported at 3-4¢/lb under September Comex. Spot month Comex copper settled at $2.6455/lb 25 June compared to $2.6285/lb a week earlier.
Recently stronger US economic data has so far not helped copper and brass scrap businesses and market sources are describing the current market as stagnant, quiet and weak. Many mills are trying to control inventory and are out of the spot market until after the 4 July holiday.
Spot loads that are sold also face the likelihood of adding a 1-2¢/lb freight charge with trucks in short supply for prompt delivery as agricultural produce supplier are claiming most available trucks.
Copper cathode premiums were unchanged from where they have been for several weeks at 5.75-6.75¢/lb. “Premiums won’t drop much since anyone trying to ship copper is likely having to pay higher truck costs due to the produce season,” one source said.
COMEX Copper: June 22 – $2.5880/lb June 26 – $2.6450/lb
LME Copper: June 22 – $5,646/t June 26 – $5,731/t
LME nickel traded higher early this week supported by Chinese import data but then dipped on 25 June. Three months nickel settled at $12,665/t from $12,855/t a week earlier after the release of Chinese import data this week showed that refined nickel imports rose by almost 130pc in May.
Traders said that this indicates that Chinese producers are likely running out of stored nickel ore which they use in nickel pig iron production and that nickel is an attractive buy at current low prices.
According to customs data, China imported 3.25mn t of nickel ore in May, up 5pc on the month and down 20pc on the year. Nearly the entire volume came from the Philippines. The country also imported 23,100t of refined nickel, the highest level since October 2011.
The July premium of the Shanghai Futures Exchange (SHFE) over LME prices dipped to $25 on 24 June.
US stainless steel scrap buying prices weakened due to continued declining mill demand and the falling LME nickel prices. The 26 June assessment for 18-8 processors buying prices is $1,200-$1,225/gross ton, down from $1,240-$1,290/gt from the beginning of the week. One processor said: “With the upcoming summer slowdown, demand being dreadful and if nickel continues to erode, we could see 18-8 scrap in the 40-cent range.” The last time 18-8 scrap was in the 40¢/lb range was during the financial crises of 2008-2009.
US stainless steels mills have slightly lowered nickel-based surcharges for July shipments. AK Steel has lowered July’s Type 304 surcharges to 57.15¢/lb., decreasing from 59.07¢/lb. and Type 316 surcharges to 75.15¢/lb., decreasing from 78.42¢/lb. in June. Both Allegheny Technologies and North American Stainless set Type 304 at 57.16¢/lb. and Type 316 surcharges at 75¢/lb. for July shipments.
LME Nickel: June 22 – $12,590/t June 26 – $ 12,495/t
LME zinc continued to slide and traded at $2,038/t on 25 June from $2,098/t one week prior. Earlier in the week prices dipped to $2,025/t as the metal was sold off by funds and speculative investors worried about the implications of a potential Greek exit from the eurozone.
On 24 June the market turned slightly and zinc prices consolidated on volumes higher than aluminum but this was still speculative rather than consumer buying. Traders expect prices to consolidate at current levels over the next few days rather than move higher.
Zinc is still in surplus and zinc customers are now taking their previously booked tonnage but adding no spot business. The North American market was described as “dead – not even slow.” Stronger US economic data has been coming out recently but the zinc business has not seen any upside. The steel business needs to pick up to help zinc but the steel industry is hamstrung by imports.
North American zinc premiums were 7.5-8.5¢/lb this week, down from 8-9¢/lb previously.
LME Zinc: June 22 – $2,027.50/t June 26 – $2,021/t
Lead futures also continued to slide as speculators worried about the fallout of the Greek crisis and settled at $1,790/t on 25 June from $1,829/t a week earlier. Prices rose slightly mid-week on positive Chinese manufacturing data and fund short covering but then slipped again.
LME Lead: June 22 – $1,765/t June 26 – $1,770.50/t
Tin nudged higher as the president of Indonesia, the largest exporter of the metal, called for plans to boost prices. Tin was thinly traded and settled at $15,250/t on 25 June from $15,050/t a week earlier with the strengthening of the dollar capping any significant attempt at higher prices.
On the supply side, Indonesia’ president Joko Windodo visited the Bangka-Belitung province, the country’s main tin producing region and called for a new plan to combat illegal mining and boost prices. He also inaugurated new port facilities on Belitung island which will be used for the transport of tin.
LME Tin: June 22 – $15,175/t June 26 – $14,750/t
Gold prices tumbled as as talk of resolution of the Greek debt crisis weight on trader and investor sentiment. The London Bullion Market Association AM gold price ended 26 June at $1,174.40/ounce, down from $1,198.15/troy ounce a week earlier. The PM fix ended at $1,170.50/troy ounce, up from $1,203.40/troy ounce the previous week. Comex gold futures prices settled at $1,172.90 /troy ounce on 26 June, up from $1,201.50/troy ounce the previous week. Palladium prices also fell to a two-year low of $672.20/troy ounce. Global demand for palladium is forecasted to exceed supply by 100,000 ounces this year or less than the 1.8 million ounce surplus last year, analysts with Johnson Matthey said. Platinum also hit a six and a half year low during the week of $1,055/troy ounce.