Metals Update – 24 July

A Look Back 

Copper prices in London experienced a slight increase on Tuesday due to the weakness of the dollar, making dollar-priced metals more affordable to holders of other currencies. However, the sentiment was weighed down by disappointing Chinese economic data.

The dollar index remained near its one-year low as investors awaited fresh catalysts to assess its potential downside risk after lower-than-expected U.S. inflation.

Despite the negative data, the Chinese state planner announced plans to implement policies to boost consumption recovery and expansion, increase demand for automobiles and electronics, and raise household income, potentially benefiting the demand for metals in the long run.

Copper is a vital component of the green energy transition, playing a significant role in solar panels, electric vehicles, and wind turbines. However, the narrative of a looming supply shortfall due to inadequate investment in new mine capacity to meet the growing green demand has been put on hold, as per analysts at Citi. Nevertheless, copper remains the bullish energy transition trade within the commodities market.

As of the time of writing, Three-month copper on the London Metal Exchange rose 0.23% to $8,472/tonne, recovering from a weekly loss caused by disappointment over modest China stimulus measures. LME aluminium CMAL3 gained 0.1% to $2,201/tonne, tin CMSN3 climbed 0.5% to $28,599, zinc CMZN3 was up 0.2% at $2,373, nickel CMNI3 rose 1.5% to $21,126, while lead CMPB3 nudged down 0.18% to $2,129.

Steel prices in Turkey have been stable with low demand, leading to discounts provided by Turkish re-rollers.
Additionally, iron ore output is expected to be on the higher end of this year’s guidance, but forecasts for refined copper have been reduced, even with the early start of the Oyu Tolgoi project. Shares in Rio Tinto saw a slight decline following a mixed update from its second quarter, which highlighted strong iron ore production but issues in other areas, particularly in copper.

Aluminium prices continued to slide in June but seemed to stabilize in early July, with relief patterns forming in the short term. Cooling inflation data improved market sentiment, and the U.S. dollar index dropped below 100 amid expectations of no further rate hikes from the Fed. However, aluminium markets remain uncertain, and the overall trend could either continue or reverse. Russian-origin aluminium now dominates over 75% of LME warehouse inventories, despite concerns about the impact of rising Russian stocks due to sanctions.
Looking Ahead
The market is anticipating interest rate decisions from the U.S. Federal Reserve and the European Central Bank.

The steel industry is expected to recover by the end of the year, despite the current fall in prices and low demand. In Vietnam, construction steel production and sales have declined compared to the same period last year, showing a slowdown in the industry.

The market is eagerly anticipating interest rate decisions from both the U.S. Federal Reserve and the European Central Bank this week. Despite ongoing declines in steel prices and persistently low demand, the steel industry is projected to experience a recovery by the end of this year.

According to a recent monthly report from the Việt Nam Steel Association (VSA), construction steel production witnessed a month-on-month decline of 8.5%, amounting to 738,150 tonnes. Sales also fell by 5%, reaching 874,400 tonnes, with international market sales experiencing a significant drop of 20% to 149,604 tonnes.

During the first half of the year, construction steel manufacturing output totalled nearly 5.5 million tonnes, marking a substantial decrease of 24% compared to the same period last year. Sales and exports also saw notable declines of 21% and 36% over the previous year, amounting to approximately 4.9 million tonnes and 829,000 tonnes, respectively.

Foenix Partners, 26 Curtain Road, London, EC2A 3NY