monthly metal buying outlook€¦ · lme aluminum stocks fell again, re;lecting the de;icit in the...

FORECAST REPORT OCTOBER 2018

Monthly Metal Buying Outlook

[email protected] Tel. 773.525.9750

Disclaimer

CONTENTNOTTOBECONSTRUEDASASOLICITATIONORRECOMMENDATIONOFANYKIND.

Theopinionsexpressedinthisreportaresubjecttochangewithoutnotice.Thisreportincludesinformationfromsourcesbelievedtobereliableandaccurateasofthedateofthispublication,butnoindependentveri;icationhasbeenmadeandwedonotguaranteeitsaccuracyorcompleteness.ThisreporthasbeenpublishedforinformationalpurposesONLY.MetalMinerdoesnotintendtheinformationinthisreporttobeconstruedtobepersonalizedadvice,orrecommendationstobuy,hold,orsellsecuritiesand/or;inancialderivativesofanykind.Theriskoflossintradingcanbesubstantial,andinvestorsshouldcarefullyconsiderallpotentialoutcomesandtheinherentrisksinlightoftheirparticular;inancialconditionpriortomakinganyinvestment.Theinformationpresentedshouldnotberelieduponasthesolebasisformakinganyinvestmentdecision.Pleaseconsultyourbusinessadvisor,attorney,andtaxandaccountingadvisorsconcerninganycontemplatedtransaction.

AnyreproductionorretransmissionofthisreportwithouttheexpresswrittenconsentofMetalMinerisstrictlyprohibited.

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Index

3Editor'sHighlights

6Aluminum

7Copper

8Nickel

9Lead

10Zinc

11Tin

12HRC

13CRC

14HDG

15Plate


Editor's HighlightsHighlightsduringthemonthofSeptember

Lisa ReismanExecutive Editor, [email protected]. 773.525.9750

TheCRBandtheDBBindexesincreasedinSeptember.Highercrudeoilpricesdrovetheincreaseincommodities.Meanwhile,basemetalpricesrecoveredattheendofthemonth.

TheU.S.dollardecreasedthismonth,failingtobreachpreviousresistancelevels.AweakerU.S.dollarsupportshigherDBBandCRBindexes.Followingmarketexpectations,onSept.25theFedraiseditsrangeforthefederalfundsrateby25bpsfrom2%to2.25%.TheFedalsocon;irmedsimilarmeasuresforlaterthisyear.ThemarketexpectsanotherratehikeinDecember,followedbythreemorein2019andpossiblyonein2020.

TheTrumpadministrationimposed10%tariffson$200billionworthofimportsfromChina,whichwentintoeffectSept.24.TheU.S.didnotincluderareearthelementsinthe;inallistoftariffson$200billionworthofChinesegoods,astheyareconsideredstrategicminerals.Thelistincludesmagnets,radarsandconsumerelectronics.

PresidentTrumpthreatenedtoslapanadditional$267billionworthoftariffsonChinesegoods.Thesetariffswouldbeinadditiontothe10%and25%tariffsonthe$200billionworthofChina’sexportstotheU.S.

AttheendofSeptember,theU.S.,MexicoandCanadastruckanewNAFTAdeal,namedtheUnitedStates-Mexico-CanadaAgreement(USMCA).Thedealincludeschangesindisputeresolution,limitsontax-freeonlineshopping,languagechangesarounddairyimportsandlimitsonU.S.autotariffs.SteelandaluminumtariffswillremaininplaceforbothCanadaandMexico.However,CanadaandMexicowillseeapartial232steelandaluminumexemptionifthenewagreementleviesautomobiletariffs.

TheISMPMIfell1.5pointsinSeptemberto59.8.Thedeclinecamefromsupplierdeliveriesandpricesincreasingatlowerratesalongwithlowcustomerinventories.However,neworders,productionandrawmaterialinventoriesincreasedthismonth.

TheChineseCaixinManufacturingPMIfelltoa16-monthlowof50inSeptember,downfrom50.6.Manufacturingoutputappearedmoremoderatethismonthandexportsdeclined.Inventoriesandbuyingactivityalsoappearedmodestduetodemandconcerns.Globaltradefrictionmovedcon;idencetoitslowestlevelinayear.

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Thismonth,commoditiesincreasedsharplyandmovedtowardthe200level.Commoditiesappearonanupswingandappeartohaverecoveredfromthepreviousshort-termdowntrend.

CrudeoilpricesalsoincreasedinSeptember.Crudeoilpricestradedhigherandbreachedthe$70/barrellevelagain.Oilpricesremainstrongthisyear,despiteJuly’spricedrop.

AccordingtotheU.S.EnergyInformationAdministration(EIA),U.S.crudeoilstockpilesfellforthesecondmonthinarowandremainatamorethanthree-yearlow.Meanwhile,U.S.re;inershaveprocessedarecordvolumeofcrudesteelinthelastthreemonths.TheEIAalsoreportedtheexpectedincreaseofoiloutputinsevenmajorshaleformationsintheU.S.by79,000barrelsperday(bpd)to7.6millionbpdinOctober.

Marketexpectationscallforanincreaseincrudeoilprices.Themarketexpectsthecrudeoilpriceceilingmaybearound$100/barrelthisyear.Lastmonth,MetalMinersettheoilresistancelevelat$80/barrel;indeed,pricesseemheadedinthatdirection.Iraniansanctionsandtighteningsupplyaredrivingthecurrentpriceincreases.IfU.S.sanctionsagainstIrangointoeffectbytheendofQ42018,about2millionbpdofcrudeoilcouldcomeoutofthemarket.

TheU.S.dollarfellto94thismonth,returningtoJulylevels.MetalMinerremainssomewhatbearishontheU.S.dollarbecauseithasfailedtobreachthepreviousresistancelevelof97.


Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18

165168

171

174

177

180

183

186

189

192

195

198

201

204207

165168

171

174

177

180

183

186

189

192

195

198

201

204207

195

Thomson Reuters/Jefferies Index (CRB): October 1, 2018

Editor's Highlights

Resistance: 200Support: 189

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Likecommodities,industrialmetalsalsoincreasedthismonth.However,theincreaseappearslesssharpthanforcommodities.Industrialmetalstradedlowerduringthe;irsthalfofthemonthandincreasedagainduringthesecondhalf.Copper,nickelandzincledtheincrease.

Theindustrialmetalsuptrendremainsinplace.Therecentshort-termdowntrendlikelycameasaresultofuncertaintyinthebasemetalscomplexandtradetensions.Inaddition,marketconsensussuggestsaChineseeconomicslowdown,whichmayhavehadaneffectonthebasemetalscomplex.However,thedatadonotyetsuggestlowerdemand.

Steelpricestradedlowerthismonth.Theslideseemssharperthanlastmonth.However,pricesmaynotfalltolastyear’slevelsasuncertaintyandtradetensionswilllikelycontinuetosupportdomesticsteelprices.Stainlesssteelpricesalsoseemweaker,but,likesteel,pricesremainhigh.

RawmaterialpricesforcoalandironoretradeddifferentlyinSeptember.Coalpricesincreasedthismonth,movingtowardthe$117/mtlevel.Meanwhile,ironorepricescontinuedtradinginthe$65-$70/mtband.IronorepricesincreasedinSeptembertowardthehighrangeofthebandandnowappearclosetothe$70/mtlevel.


Editor's Highlights

Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18

13.013.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

19.5

20.0

13.013.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

19.5

20.0

PowerShares DB Base Metal Fund: October 1, 2018

!

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Aluminum

2,000

2,100

2,200

Current Price

Support and Resistance Indicator

C..

1

2

3

4

U.S.sanctionsonRussianaluminumproducers

MWpremiums

AluminumdeGicit

Aluminashortfall

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

1900

1950

2000

2050

2100

2150

2200

2250

2300

2350

2400

2450

2500

2550

1900

1950

2000

2050

2100

2150

2200

2250

2300

2350

2400

2450

2500

2550

2,054

LME Aluminum: October 1, 2018

Al

Aluminum DriversMarket CommentaryLMEaluminumpricesfellthismonth.Despitethepricedecrease,aluminumpricesstilltradeinashort-termsidewaystrend.LMEaluminumpricescontinuetotradeoverthelong-termsupportlevelof$1,970/mt.However,thelatestrecoveryintheindustrialmetalscomplexcouldboostaluminumpricesthisyear.LMEaluminumstocksfellagain,re;lectingthede;icitinthealuminumindustry.Currentlevelsremainbelow1.1milliontons,wayofftheirhighbackinJanuary2014of5.49milliontons.Thealuminummarketfacesasecondstressduetoaluminasupplyconstraints.ThestrikeinAlcoa’sgiantWestAustraliaoperationscentermaycreateawidershortfallinthealuminumandaluminamarket,whichisalreadyinde;icit.OnAug.8,around1,500workersstartedastrikeinAlcoa’saluminumcomplex,affectingthreealuminare;ineriesandtwobauxitemines.Thepartieshaveyettoreachanagreement.Thealuminare;ineriesaccountfor9.3milliontonsofcapacity,or8%oftheworldsupplyofalumina.AshortfallinaluminacameasaresultofU.S.sanctionsagainstRusalandthepartialclosureoftheworld’sbiggestaluminaplant,NorskHydro’sAlunorteinBrazil.Aluminaproductionfellby15,000tonsinAugust,whileSeptemberdatahasnotyetbeenreleased.

Meanwhile,Chinesealuminasmeltershavehelpedtopluggapsinthealuminumsupplychain,exportinggreater-than-usualamounts.However,theChinesealuminumproductionsupplychainalsosuffersfromshort-termshortagesasbauxite;lows(theotherrawmaterialforaluminumproduction)haveseendisruptionsduetoenvironmentalinspections.Additionalcapacitycurtailmentscouldlimitsupplyduringtheheatingseason.Approximately,twotonsofaluminaareusedtomakeatonofre;inedaluminum.Aluminarepresents30%ofthetotalaluminumcost.IncreasingChineseexportscombinedwithaluminashortfallscouldsupporthigherprices.Therefore,risingrawmaterialpricesand;latorsidewaysLMEaluminumpricesappearlesssustainable.Oneofthemcouldchangetrendintheshortterm.Meanwhile,sanctionsonRusalhaveimpactedEuropeansalestoo.EuropeancustomershavealsoavoidedRusalaluminum,withsanctionsgoingintoeffectinOctober.However,buyingorganizationshavebegunlookingforalternativesourcesofsupplyfor2019contractnegotiations.

LME aluminum prices fell this month. Current prices suggest a good opportunity to buy on the dip. Buying organizations can commit to some volume(3-5 months’ worth of demand) if needed. However, buying organizations should not lock/hedge on the U.S. Midwest premium, as it remains high. Buyingorganizations may want to wait until the premium falls to 2017 levels.


Resistance

Support

2018

Industrial Buying Strategy

6

Avg. Resistance (Al..Avg. Support (Alum..Avg. Aluminum Clo..

Midwest Aluminum PremiumTheU.S.Midwestaluminumpremiumtraded;latthismonth,withacurrentreadingof$0.19/pound.Despitetheslowdowninpremiumincreases,currentlevelsremainwellabove2015/2016lows.TheJapaneseQ4aluminumpremiumfellby22%fromtheQ3premiumof$103/ton.JapanisAsia’sbiggestaluminumimporter.SimilartotheMidwestpremium,theJapanesepremiumispaidovertheLMEaluminumprice.

2190

2054

1970

Copper

C..

1

2

3

4 FallingU.S.dollar

IncreasedproductioninChileanmines

Increasingcoppersmeltingcapacity

2018/2019copperdeGicit


5600

5800

6000

6200

6400

6600

6800

7000

7200

7400

6,259

LME Copper: October 1, 2018

Cu

Copper DriversMarket CommentaryLMEcopperpricesincreasedsharplythismonth.Pricesbreachedthe$6,000/mtlevel,thelevelthatservedasaceilingin2017.Buyingtradingvolumesappeartobestrongandsupportiveofthelatestuptrend.AccordingtotheInternationalCopperStudyGroup(ICSG),thecoppermarkethada45,000-tonde;icitinJune.Worldre;inedcopperoutputinJunereached1.95milliontons,whileworldre;inedcopperconsumptionhit2milliontons.Thede;icitof50,000tonsappearstobesmallerthaninMay.Duringthe;irstsixmonthsof2018,thecoppermarkethada51,000-tonde;icitversusa148,000-tonde;icitforthesameperiodin2017.Chinatreatmentandre;iningcharges(TC/RCs)areforecastedtodropbelow$80/tonnextyear.TC/RCsarepaidtocoppersmeltersbyminerstoprocessoreintore;inedmetal.Thedecreaseinthesechargescomesasaresultofexpandedprocessingcapacityandacopperconcentratede;icit.Chargestendtodecreasewhenthecopperconcentratemarkettightens.Antaike,theresearcharmoftheChinaNonferrousMetalsIndustryAssociation,forecastsanincreaseof950,000tonsofannualcoppersmeltingcapacityinChinain2019.Chinaremainstheworld’sbiggestcopperconsumer.However,outputfromChinesecopperminesremainsweak,andcopperscrapsupplywillremaintight.Chinaconcentrateimportsareforecastedtoincrease9.2%in2019.However,thecopperconcentratemarketwilllikelyseea12,000-tonde;icitin2018,anda10,000-tonde;icitin2019,farfromtheprevious170,000-tonsurplusin2017.

Meanwhile,productionattheworld’slargestcopperproducerincreasedinJuly.Chileancopperproductionreached3.31milliontonsinthe;irstsevenmonthsof2018,10.48%higherthanthesameperiodlastyear.Julysawproductionof481,700tons,2.9%higherthaninJuly2017.Theincreasecameasaresultofincreasedoutputatthelargeprivatemines,whichavoidedstrikes.

Chile’sCodelco,astate-ownedcopperminingcompany,produced813,000tonsofcopperinthe;irsthalfoftheyear,up2%from2017.Expectationsfor2018callfor1.7milliontonsofcopperproduction.However,theVentanascopperfoundryhadtohaltoperationsduetohighgaslevels.However,theimpactonproductionhasbeenminor.

BaikalMiningGroupstartedtheconstructionofamassiveminingandmetallurgicalplantattheUdokancopperdepositinSiberia.Withtotalreservesinthedepositof26.7milliontons,itcouldbecomethelargestundevelopedcopperdepositinRussiaandoneofthebiggestintheworld.Themetalishardertoextract,however,duetocharacteristicsoftheore.Thecopperplantwillhavethecapacitytoprocessupto12milliontonsoforeperyearandwillstartproductionin2022.TheRussianplantwillfocusoncathodecopperandsulphideconcentrate.

Copper prices increased this month, moving closer to September resistance levels. Buying organizations had the opportunity to commit to purchasesduring the buying dip, as prices continued to fall. Current levels remain elevated. Therefore, buying organizations may want to wait until prices retracecloser to support levels, and commit to purchases (3-5 months’ worth of demand) then.


5,800

6,000

6,200

6,400

Current Price


Resistance

Support

2018

Avg. ResistanceAvg. SupportAvg. Copper Closi..


7

6446

6259

5829

Nickel

Current Value


Nic..

1

2

3

4

5

Philippines’environmentalrestriction

NewIndonesianproduction

Increasingbatterydemand

Decreasingstocks

2018forecasteddeGicit


9600

10400

11200

12000

12800

13600

14400

15200

16000

12,545

LME Nickel: October 1, 2018

Ni

Nickel DriversMarket Commentary

In September, nickel prices fell slightly. Buying organizations had the opportunity to buy some volume when prices decreased toward support levels, asrecommended by MetalMiner in the August MMO. Current price levels still suggest buying some volume if needed (3-5 months’ worth of demand).


Resistance

Support

2018


8

Avg. Resistance (Ni..Avg. Support (Nick..Avg. Nickel closing ..

In Stainless Markets

LMEnickelpricesfellslightlythismonth.However,thepricetrendappearstohaveshiftedagaintowardamorebullishsentiment.Thisyear,nickelpriceshaveshownlessvolatilitythanothermetals,andhavelargelyoutperformedtheotherbasemetals.Tradingvolumessupportanuptrendinnickelprices.

Combinednickelstockshavefallenby162,000tonssofarthisyear.AccordingtotheInternationalNickelStudyGroup,the;irstsixmonthsoftheyearcreatedanickelsupplyde;icitof81,000tons.ThePhilippines,theworld’stopsupplierofnickelore,willstartlimitingthelandthatminescandevelopfollowingnewenvironmentalrules.Underthesenewrules,mineswillhavea20-meter“bufferzone”orbanonmetalextraction.Nickelminerswillseeproductionlimitsrangingfrom50-100hectares(123-400acres).

PresidentRodrigoDutertehasadvisedminerstoreforestareaswheretheyoperatetoreduceenvironmentalconcerns.Inaddition,allsmall-scaleactivitiesinmountainousregionsstoppedaftertheMarigkhuttyphoon.Accordingtogovernmentdata,nickeloreoutputdecreasedby10%inthe;irsthalfof2018whencomparedtolastyear’s9.43milliontonsinthesametimeframe.Theoutputdropcameasaresultofthesuspensionof11minesthisyear,whichhadzerooutputduringthisperiod.IndonesiannickelorecouldcovertheexpectedsurgeindemandforEVmarkets.SumitomoMetalMiningCo(SMM),Japan’slargestnickelsmelter,intendstobuildanickelprocessingplant.Thecompanyplanstoboostannualnickeloutputbysmeltingupto150,000tonsby2022from90,000tonsinMarch2018.CurrentusageofIndonesiannickeloreprimarilygoestowardstainlesssteel.JapanaskedtheWorldTradeOrganization(WTO)tosetupadisputesettlementpanelregarding14-year-oldSouthKoreananti-dumpingdutiesonJapanesestainlesssteelbars.In2004,SouthKoreaimposed15.39%anti-dumpingdutiesonJapaneseexports.However,JapanclaimsthecheapestmaterialcomesfromChinaandTaiwan,andthecountrydoesnotharmSouthKoreanindustryanymore.TherequestwasdiscussedSept.26.Ifanycountryobjects,anewrequestwillbesentanddiscussedOct.24.

Negotiationsfor2019contractshavebegunand,asexpected,;lat-rolledstainlessmillshavequotedincreasesover2018prices.ByearlyNovember,mostofthe2019contractsshouldbe;inalized,asleadtimesremainlong.Buyingorganizationswillwanttoensuresuppliersagreeuponvolumesneededfor2019,asdomesticmillscontinuetorunathighcapacityutilization.

14990

12545

12430

Lead

Current Price


L..

1

2

3

4 U.S.dollar

Tightleadsupplyvs.increasingdemand

LeaddeGicit

Fallingstocks


1,920

2,000

2,080

2,160

2,240

2,320

2,400

2,480

2,560

2,640

2,032

LME Lead: October 1, 2018

Pb

Lead DriversMarket Commentary

Lead prices fell again this month toward support levels. Current price levels suggest buying organizations may want to buy some volume now (3-5months’ worth of demand).


Resistance

Support

2018


9

Contrarytocopperandnickel,leadpricesfellslightlythismonth.Volatilityinleadpricemovementshasfallen,showingamoresidewaystrend.Tradingvolumesalsoappearlessvolatilethismonth.

SHFEleadpricesalsodecreasedthismonth.ContrarytoLMEprices,SHFEpricessawmorevolatilitythismonthandincreasedduringthe;irsthalf.However,pricesendeduplowerbytheendofthemonth.

Leadstocklevelsalsofellthismonth.Leadstocksinallmajorexchangeshavedecreasedforthreeconsecutivemonths,leavingalargerleadde;icit.Typically,lowerstocklevelstendtomoveLMEpriceshigher.Giventhecurrentleadsupplyanddemandbalanceandtheshiftinbasemetalpricesleadpricesmayfollowshortly.

AccordingtotheInternationalLeadandZincStudyGroup(ILZSG),leadmineproductionincreasedinJulyto370.3ktfrom345.2inJune.However,leadmetalproductionincreasedoverthesameperiod,reaching969.4ktfromtheprevious940.3kt.Leaddemandalsoincreasedonamonthlybasis,reaching948.8ktinJuly.

Avg. Resistance (Le..Avg. Support (Lead)Avg. Lead closing p..

Aug-16 Feb-17 Aug-17 Feb-18 Aug-18

1360014400

1520016000

1680017600

18400

1920020000

20800

2160022400

SHFE Lead Spot prices (CNY/ton)2260

2032

1919

Zinc

Current Price


Z..

1

2

3

4 Smeltingcapacityconstraints

Newzincsupplyprospects

Fallingglobalzincdemand

DeGicitin2018


2300

2400

2500

2600

2700

2800

2900

3000

3100

3200

3300

3400

3500

3600

2,598

LME Zinc: October 1, 2018

Zn

Zinc DriversMarket Commentary

Zinc prices appear to have recovered from the recent short-term downtrend. Despite prices increasing this month, current price levels still suggest buyingsome volume if needed. Buying organizations may want to lock now and commit to short-term purchases (3-5 months’ worth of demand).


Resistance

Support

2018


10

Avg. Resistance (Zi..Avg. Support (Zinc)Avg. Zinc closing pr..

Despitetherecentpriceincreases,LMEzincpricelevelsstillsuggestcommittingtosomevolume.Zincpricesinitiallyfellclosetosupportlevels,butreboundedfromthere.Buyingorganizationsmaywanttopaycloseattentiontohowzincpricesreacttothatlevel.Tradingvolumesappearhigherforthebuys,whichsuggestssupportforthiscurrentshort-termuptrend.

AccordingtotheILZSG,thezincsupplyanddemandbalancecallsforade;icit.ZincmetaldemandfellslightlyinJulyto1,083.9ktversusthe1,092.8ktinJune.

Onthesupplyside,zincmineproductiondecreasedto995.9ktinJulyfromtheprevious1025.8ktreadinginJune.Zincmetalproductionalsodecreasedthismonth,fallingto1,051.4ktfromthe1,078.6ktproducedinJune.

Alsoonthesupplyside,GrupoMexicocouldreopenthecountry’slargestundergroundmine,theSanMartinmine,inQ12019.

Theminehasbeenclosedfor10yearsduetoalaborcon;lictbackin2007,whenworkerstherewentonstrike.Theminehasgonethrougharefurbishmentandalsocontainszinc,lead,silverandcopperore.

In2005,theSanMartinmineproduced19,000tonsofzincand8,000tonsofcopper.

NexaResources,theBrazilianminingcompany,alsohasplanstoinvestinzincproducts.

PeruandBrazilmaysee$1.17billioninvestmentsinprojectsforcopperandzincproduction.The;irstminewillbeazincprojectinAripuana(Brazil),whichmaystartproductionin2020.

ThenextprojectwillcovertheShalipaycomineinPeru,whereproductioncouldstartin2021.Thecompanycurrentlyhas;iveminesinBrazil,inadditiontotwominesandare;ineryinPeru.

Nexaexpectstoproducearound600,000tonsofzincthisyear.

2748

2284

2598

Tin

Current Price


Tin..

1

2

3

4

5

TradetensionsandChineseslowdown

Slowingdemand

IncreasingproductioninIndonesia

GlobalforecasteddeGicit

LowertinproductioninMyanmar


18400

18800

19200

19600

20000

20400

20800

21200

21600

22000

18,845

LME Tin: October 1, 2018

Sn

Tin DriversMarket Commentary

Tin prices traded sideways this month. Current prices remain close to the last buying dip at the beginning of the year. Buying organizations may want tocommit to short-term purchases if needed (3 months’ worth of demand).


Resistance

Support

2018


11

Tinpricestradedsidewaysthismonthandshowedlowervolatility.Smalldailypricechangessignallessinterestinthebasemetal.Inaddition,tradingvolumesremainquitelow.Infact,theLondonMetalExchangerevealedthattincontractsappeartooilliquidanddonotattractalotofspeculativeplayers.SHFEtinstockshaveincreasedby1,819tonssincethebeginningoftheyear,reaching6,734tons.Meanwhile,LMEtinstocksincreasedbyjust450tonsto2,885tons.AccordingtotheInternationalTinAssociation(ITA),globalusageofre;inedtinincreasedby4%in2017,reaching362,000tons.However,2018mayresultinasharpslowdownindemandgrowth,showingjusta1%increase.MarketexpectationsofaChineseslowdownandtariffshavecreatedexistingdemandchallenges.

TheITArecentlypublishedtinusagewith2017demandinformation.50%oftindemandgoestowardsolderinginelectronicapplications.ExistingtariffsimposedbyboththeU.S.andChina,whichtargetelectronicproducts,couldgreatlyimpacttindemand.

Chemicalapplications—thesecond-largestusage—accountfor18%oftindemand.In2017,tinusedforthisapplicationincreasedby7.5%;forecastsforthisyearsignalsimilargrowth.However,tinplateusageisexpectedtoremainsteady,withU.S.tariffsonsteelproductsaffectingtinplateaccountsfor14%oftindemand.

Onthesupplyside,tinremainsresilient.Indonesia,theworld’slargesttinexporter,increasedproductionby12%inthe;irsteightmonthsof2018.Exportsreached54,000tons,andmarketexpectationscallforanincreaseintinexportsoverlastyear,whenIndonesiantinexportsgrewby23%.AlthoughIndonesiantinexportssawaninterruptionatthebeginningoftheyearduetonewrulesaffectingoverseasshipments,therulesdidnotnegativelyimpacttinsupply.

Meanwhile,ChinacontinuestorelyuponMyanmartinresources.Myanmarbecamethe;irstChinesetinsourcebackin2013,whensigni;icanttonswenttoChina.ITAestimatesshipmentsinthe;irstsevenmonthsoftheyeartotaled34,000tons,5%lowerthanlastyear.However,thisdatahasnotbeenof;iciallypublishedbytheChineseCustomsDepartmentsinceMarch2018.

TheforecastforMyanmartinoutputin2018callsforadecreaseof13,000tons,downto54,000tonsthisyear.

Avg. Resistance (Ti..Avg. Support (Tin)Avg. Tin closing pri..

20176

18339

18845

HRC

850

860

870

880

Current Price


H..

1

2

3

4

U.S.steeltariffs

RisingChineseprices

Increasingdomesticproduction

Domesticsteelsupply

Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov

500

550

600

650

700

750

800

850

900

Valu

e

500

550

600

650

700

750

800

850

900

861

MetalMiner IndX (SM) HRC: October 1, 2018

HRC

Market CommentaryHot-rolledcoilpricesfellagainthismonth.Thedowntrendappearssharperthanlastmonth,withHRCpricesfallingbacktoApril2018levels.

HRCpricemomentumcontinuestoweaken.Despitetherecentdowntrendindomesticsteelprices,currentpricelevelsremainhigh.Annualcontractnegotiationsareunderway;historically,pricestendtodriftduringthe;irstpartofQ4andthenbegintorise.

Meanwhile,ChineseHRCpricescontinuedtoincreaseagainthismonth.ChinesesteelpricesaretradingslightlylowersincethebeginningoftheyearbutstartedanuptrendbackinApril2018.ArobuststeelsectorcurrentlysupportsChinesesteelprices.SteeldemandinChinaremainsstrong,whilepollution-relatedrestrictionsandthecomingwinterseasoncouldhelpsupporthigherprices.

ThespreadbetweenU.S.domesticHRCpricesandCRCpriceshasstartedtoagaintrendoutsidethehistoricalrange.Historically,thespreadbetweenhot-rolledcoilandcold-rolledcoilproductsisaround+/-$100/st.Thespreadwentdownto$70/st,butrecoveredtoreach$90/st.

AccordingtotheAmericanIronandSteelInstitute(AISI),year-to-datedomesticsteeladjustedproductionincreased4.4%fromayearago.ProductioninSeptemberreached68,601,000nettons,withacapabilityutilizationrateof77.5%vs.74.4%inthesameperiodlastyear.

MexicowantstoendthesteelandaluminumtariffdisputebeforesigningtheNAFTAagreementwiththeU.S,afterayearofnegotiations.ThecountryaimstosignoffonthetradedealbytheendofNovemberandhasplacedpressureonCanadatojoinit.

SomespecialtySouthKoreansteelmakerssawidleproductionlinesduetoSection232tariffquotas.Thequotaallowedfortwo-thirdsofthepreviousyear’svolumeswhichhadbeenreachedbyMay.Steelmills,suchasNextsteelandHusteel,loweredfactoryutilizationratesuntilOctober-November,butcannowresumeshippingtotheU.S.for2019.

Meanwhile,JapanincreasedU.S.exportsdespitethe25%steeltariffs.Demandforhigh-techpipesfortheU.S.oilindustryledtheincrease.AccordingtotheU.S.CommerceDepartment,importsofpipeandtubeproductsfromJapanrose50%involumeintheJanuary-Julyperiodwhencomparedtolastyear’sdata.SouthKoreanimportsdecreasedby18%.

Although HRC prices fell this month, prices remain high. Buying organizations will want to hold off on mid- to long-term purchases until prices retracetoward support levels. Since steel prices remain in a downtrend, buying organizations may want to buy only what they need.



12

20182017

HRC Drivers

Resistance

Support

Avg. Resistance (HR..Avg. Support (HRC)Avg. HRC price

824

861

881

CRC

900

950

1000

Current Price


C..

1

2

3

4

U.S.steeltariffs

StrongChinesesteeldemand

IncreasingChineseprices

China’scapacitycutsandproduction


700

750

800

850

900

950

1000

700

750

800

850

900

950

1,000

951

MetalMiner IndX (SM) CRC: October 1, 2018

CRC

Market CommentaryCold-rolledsteelpricesdroppedagaininSeptember,followingtheprevioustwo-monthdowntrend.Thefallappearssharperthismonth,butlesssharpthanforHRCprices.However,steelpricesmaycontinuefallingintheshorttermandreboundtowardtheendofthequarter.Thisyear,domesticsteelpriceshaveseenmorethaneight-yearhighs.

ApotentialstrikeatArcelorMittalfacilitiescouldimpactbothcoldandhotrolledproductionandavailabilityassoonasthismonth.In2017,ArcelorMittalproduced93.136millionmetrictonsofcrudesteelgloballyofwhich25%or23.284mmtcamefromNorthAmerica.AccordingtoArcelorMittal’sFactbook2017,ArcelorMittal’sNAFTAsteelproduction(thecurrentUSMCA)was27%toHRCproducts(6.28mmt)and15%toCRCproducts(3.49mmt).TotalUS.steeldomesticproductionwas82mmtin2017.AnArcelorMittalstrikewouldsigni;icantlyimpactUSsteelproduction.

ChineseCRCpricesalsoincreasedthismonth.Chinesesteelpricesseemtohaverecoveredmomentumandremaininanuptrend.Priceshavesupportfromstrongdomesticsteeldemand.

AccordingtodatapublishedbytheNationalBureauofStatistics,Chinesesteeloutputincreasedby5.8%to617.4milliontonsduringthe;irsteightmonthsofthisyear.However,steeloutputdecreasedinAugustafterreachingarecordinJuly.

Accordingtoof;icialdata,Augustcrudesteeloutputfell1.1%fromthe81.24milliontonsrecordedinJuly,to80.33milliontons.However,whencomparedtolastyear’sdata,crudesteeloutputinAugustremains7.7%higherthanthe74.59milliontonsinAugust2017.Dailyaverageoutputfellto2.59milliontons,thelowestreadingsinceApril.

Pollutioncurbscontinuedtolowersteeloutput.ProductionfellsharplyinTangshan,the;irststeel-makinghub.Thiscameasaresultofanordertocutcapacityoutputby30-50%betweenJuly20-Aug.31.

Chinawillallownorthernprovincestodecidetheirownindividualoutputcutstoreducepollution.Allheavyindustrymustreduceemissionsduringwinter,butlocalauthoritieswillmakespeci;iccuts.

Indiaproposedincreasingtheeffectiveimportdutyonsomesteelproductsto15%,fromthecurrent5-12.8%range.Thecountryistryingtosupporttherupeeandencourage“MadeinIndia”products.Indiahasbecomeanetsteelimporterinthethree-monthperiodofApril-June2018forthe;irsttimeintwoyears.Foreignsuppliesenteringthecountryincreasedby15%,reaching2.1milliontons.

TheproposeddutieswilllikelyaffectChina,SouthAfrica,Malaysia,RussiaandIndonesia.JapanandSouthKorea,whichhavefreetradeagreementswiththecountry,willnotbesubjecttoduties.

Buying organizations may want to hold off on purchases until prices retrace toward support levels. Since steel prices remain in a downtrend, buyingorganizations may want to buy only what is needed.



13

20182017

CRC Drivers

Resistance

Support

Avg. Resistance (C..Avg. Support (CRC)Avg. CRC price

997

910

951

HDG

950

1000

1050

1100

1150

Current Price


HD..

1

2

3

4

5

U.S.steeltariffs

StrongChinesedemand

IncreasingChineseprices

Chinesepollutionplan

Automotiveandconstructionsectors


750

800

850

900

950

1000

1050

1100

750

800

850

900

950

1,000

1,050

1,100

1,022

MetalMiner IndX (SM) HDG: October 1, 2018

HDG

Market CommentaryChineseHDGpricesincreasedthismonth.TheriseinChineseHDGpricesappearssharperthanforotherformsofsteel.

Buyingorganizationsknowthat,historically,ChineseandU.S.priceshaveastrongcorrelation.ThismeansrisingChinesesteelpricestendtosupportdomesticsteelprices.

However,U.S.tariffshavemovedU.S.priceshigherduring2018andpriceshavestayedattheselevelslongerthanusual.Therefore,risingChinesepricesmayminimizetherecentdropindomesticsteelprices.

StrongChinesedomesticdemandsupportsrisingsteelprices.Chinaannouncedconstructionprojectsinseveralcities,suchasShenzhen,SuzhouandChangchun.Theseconstructionprojectswillfocusonbuilding44subwaylinestotalingupto1,600kilometers(or1,000miles).Thismeansaround80milliontonsofsteelwillbeneeded,or10%ofChina’scurrentdemand.Someofthesesteelproductswillincludehigh-strengthsteel,reinforcedsteelandalloysteelsheet.

U.S.constructionspendingincreased0.1%inJuly,goinguptoanannualrateof$1.32trillion.AJune0.8%decreasewasthelargestdeclineinconstructionspendingsinceApril2017.Privateconstructionspendingdecreased0.1%,whilepublicconstructionspendingincreased0.7%.However,constructionspendingincreased5.8%year-on-yearinJuly.

Despite the drop in HDG prices, current prices remain high. Since steel prices remain in a downtrend, buying organizations may want to buy only what isneeded until prices come off support levels and start to increase.



14

20182017

HDG Drivers

Resistance

Support

Avg. Resistance (H..Avg. Support (HDG)Avg. HDG price

Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18

4000

4500

5000

5500

6000

6500

China HDG Domestic Price in RMB/mtDomesticlightvehicleproductionincreasedsharplyinAugust,drivenbyaseasonaladjustment.Julyistheslowestautoproductionmonthoftheyear.Productionrose50.8%fromJulydata,reaching1,032units.Whencomparedtolastyear,productioninJuly2018increasedby6.1%.

Lighttruckproductionhasshownthebiggestincreaseyear-on-year,whilecarproductioncontinuestofall.

Carproductionslid14.7%fromAugust2017.Year-to-datelightvehicleproductionslid0.4%fromthesametimelastyear.

1084

963

1022

Plate


550

600

650

700

750

800

850

900

950

1000

1050

550

600

650

700

750

800

850

900

950

1000

1050

992

MetalMiner IndX (SM) Plate: October 1, 2018

950

1000

1050

Current Price


P..1

2

3

4

5

U.S.steeltariffs

U.S.dollar

Rawmaterialpricetrends

Crudeoilprices

Chineseprices

PLATE

Market CommentaryPlatepricesalsofellthismonth.Platepriceshaveoutperformedallotherformsofsteel,asthedowntrendappearslesssharp.Platepricestradedmostlysidewaysthismonth,fallingslightlytowardtheendofthemonth.Platepricesremainsupportedbylowproductavailability.Buyingorganizationsmaywanttorememberthatplatepricestendtofollowatrendandmoveinonedirection.Pricechangesappearmoresharpthanwithotherformsofsteel.

Chineseplatepricesincreasedthismonth.Chinesepricesappearinashort-termuptrend,drivenbystrongdemandandenvironmentalcurbsbeginninginthewinterseason.

RawmaterialpricesforcoalandironoretradeddifferentlyinSeptember.Coalpricesincreasedthismonth,movingtowardthe$117/mtlevel.Meanwhile,ironorepricescontinuedtradinginthe$65-$70/mtband.IronorepricesincreasedinSeptembertowardthehighrangeofthebandandnowappearclosetothe$70/mtlevel.

ChineseironoreimportsdecreasedinAugustby0.7%.Accordingtocustomsdata,shipmentsarrivingtoChineseportsfellto89.35milliontonsfromtheprevious89.96milliontonsinJuly.Outputcurbsonsteelmillsduetothenewenvironmentalpolicyhaveloweredironoreimports.Year-to-dateimportsfell0.5%to710milliontonswhencomparedtolastyear’sdata.

Plate prices remain high. Buying organizations may want to hold off on purchases until prices retrace toward support levels. Since steel prices remain in adowntrend, buying organizations should buy only what they need.



15

20182017

Plate Drivers

Resistance

Support

Avg. Resistance (Pl..Avg. Support (Plate)Avg. Plate price (co..

However,ironoreshipmentsfromAustralia’sPortHedland,theworld’slargestironoreport,increasedby10%inAugustfromlastmonth’sdata.Accordingtoportdata,shipmentstoChinareached35.5milliontonsinAugust.

U.S.shreddedscrappricesalsofellthismonth.Similartosteel,scrappricemomentumappearstohaveslowed;pricescouldfallslightlyinthecomingmonths.

Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18

2000

2400

2800

3200

3600

4000

4400

4800

China Plate Domestic Price in RMB/mt

922

992

1040

Metal prices fluctuate. Key is knowing when to buy.Improve your metal purchase timing and mitigate price risk: Use MetalMiner’s buying strategies and pinpoint when to adjust your metal spend.

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