Geopolitical concerns, softer Chinese growth and a stronger dollar have weighed on a range of commodity prices in recent months. But aluminum prices bucked the trend, rising on the back of tight supply conditions outside of China and falling inventories. The LME official 3-mo. aluminum price rose as high as $2,113 per mt in late August, up 17 percent since the end of 2013. Meanwhile, the U.S. Midwest premium rose to over 20 cents per pound in August amid reports of reduced truck and container availability and healthy domestic demand. At the same time, LME warehouse stocks decreased by more than 655,000 metric tons since the end of last year to just under 4.8 million metric tons as of late August. With LME warehouse reforms still on hold and global market fundamentals improving, Goldman Sachs (New York) is forecasting an average aluminum price of 94 cents per pound in 2015, up from an expected 85 cents per pound in 2014.
Refined copper prices have continued to hover near $7,000 per ton recently as concerns about Chinese demand and a stronger dollar offset positive market fundamentals. The International Copper Study Group (Lisbon) reports that global demand for refined copper exceeded global supply by 466,000 metric tons during the first 5 months of the year, as compared to a supply surplus of 251,000 tons during the corresponding period in 2013. While an uptick in U.S. manufacturing has led to better domestic copper scrap market conditions, data from the Commerce Department show U.S. copper scrap exports through July were down 8.3 percent year-on-year to 597,000 metric tons as Chinese copper scrap demand cooled. As China attempts to curtail metal financing deals in the aftermath of the Quingdao port scandal, analysts mostly remain neutral on copper. JP Morgan (New York) is forecasting an average copper price of $7,000 per ton in 2015, down from their second half 2014 forecast of $7,075 per ton.
Ferrous scrap tags have been remarkably steady over the last several months as reports of balanced domestic market conditions offset a sharp contraction in overseas demand. The U.S. Census Bureau (Suitland, Md.) reports U.S. ferrous scrap exports (excluding stainless and alloy steel scrap) through July were down 21 percent year-on-year to 8.3 million metric tons due to weaker demand in key overseas markets including Turkey and China. A stronger dollar, slower growth and weaker iron ore prices have been cited as factors contributing to the drop-off in U.S. ferrous scrap exports. The Steel Index (London) reports their iron ore reference price dropped to multi-year lows below $84 per dry metric ton in early September. With overseas steel offered at steep discounts to domestic prices, the American Iron and Steel Institute (Washington, DC) estimates U.S. steel imports through August rose 35 percent year-on-year to 28.5 million net tons, raising the question of how long domestic steel prices can remain elevated.
Investors have turned bullish on zinc as rising Chinese demand and stable zinc production resulted in a global zinc deficit in the first half of the year. According to estimates from the International Lead Zinc Study Group, zinc demand in China grew 13.1 percent year-on-year during the first six months of 2014 as compared to a 3.5 percent increase in world refined zinc production. In July, LME 3-mo. zinc prices crossed the $2,400 per ton level for the first time since 2011. Lead prices have been far more subdued – hovering around $2,100 to $2,200 per ton recently as ILZSG reports world lead demand exceeded supply by just 23,000 metric tons through June 2014, versus a zinc market deficit of 234,000 metric tons. But Macquarie Research (London) has a more positive outlook for lead, forecasting an average lead price of $2,344 a ton in 2015 as compared to their zinc price forecast of $2,250 per ton next year.
Nickel prices have benefitted from a series of supply-related concerns this year starting with the Indonesian export ban on unprocessed ores, followed by worries about sanctions on Russia and most recently compounded by talk of export restrictions in the Philippines. While officials in the Philippines have recently indicated that a ban on nickel ore exports in the near term is unlikely, the possibility of an additional supply constraint helped push LME 3-mo. nickel prices back up over $19,000 per ton in early September. The rise in nickel prices has been accompanied by improved North American demand for stainless steel. According to figures from Metal Service Center Institute (Rolling Meadows, Ill.), U.S. distributors shipped 163,400 tons of stainless steel in July, a year-on-year increase of nearly 10 percent, while Canadian shipments increased 12.7 percent year-on-year to 13,600 tons in July. Given the rise in domestic stainless steel production and favorable global nickel market fundamentals, Goldman Sachs is forecasting an average nickel price of $22,000 per ton in 2015.
Paper & Recovered Fiber:
As with the metals, softer overseas demand for recovered paper early this year was accompanied by tight domestic market availability thanks to the extreme winter weather conditions. According to Commerce Department data, U.S. exports of recovered paper dropped to 1.85 million short tons in January, a 4 percent decrease from January 2013. Meanwhile, RISI (Bedford, Mass.) reported in early March that domestic prices for old corrugated containers in the Eastern U.S. jumped anywhere from $10 - $25 per short ton as compared to February, the largest monthly price increase in the last 2 years. The harsh winter weather, high trucking costs and diminished trailer availability were listed as contributing factors to the market tightness. Given the slow start on the export front, RISI reported relatively minor changes in West Coast export prices to China in March. Whether Chinese demand for recovered paper picks up in the aftermath of the Lunar New Year celebrations will be a key market determinant heading into the 2nd quarter of 2014.”