Metals Update – 31 July

A Look Back 

At the end of last week, various nonferrous metals saw positive price action.Copper, in particular, was set to experience a weekly gain. The upward trajectory of these metals can be attributed to optimistic projections regarding a potential demand recovery, mainly driven by economic stimuli enacted in China. The latest US Federal Reserve’s statements were seen as Dovish by the market, driven by a falling US Inflation rate and current expectations for the US Federal reserve to start pausing its monetary tightening cycle. Copper prices on Friday morning were trading up at 1.8 percent.

The market sentiment remained upbeat, owing in part to the resolute commitment displayed by the Chinese authorities in revitalizing the country’s ailing property sector, a significant consumer of metals.

However, it is not all smooth sailing for the metals industry. Industry analysts have made necessary adjustments to their price predictions for copper and other industrial metals. This move comes in light of the persistent expansion of supply, while the demand from China, a dominant metals consumer, has shown signs of remaining relatively subdued.

The International Copper Study Group offered an illuminating perspective on the global copper market, revealing that during January to May, there was a substantial surplus of 287,000 metric tons. This marked a significant departure from the 74,000 metric ton deficit observed during the corresponding period in the previous year.

Apart from copper, other nonferrous metals experienced varying price movements. For instance, LME 3 month aluminium contracts enjoyed a moderate increase, resulting in a value of $2,208.50 per metric ton. Meanwhile, nickel witnessed a notable rise to $21,935. 3 month Cinc advanced by 0.9%, attaining a level of $2,475. Lead (CMPB3), on the other hand, experienced a marginal decline of 0.2%, settling at $2,154.50. Lastly, tin recorded an upward movement of 0.5%, culminating in a price of $28,810 per metric tonne.

The week Ahead

A slew of Economic Data will be driving global markets this week, ranging from US , UK, European & Chinese PMIs, which will indicate the contraction or expansion of the world’s largest economies. Steel Prices remain stable at the lows, spurred by continued lower demand by construction and fabrication companies.

According to Tata Steel Ltd.’s Chief Executive and Managing Director, T.V. Narendran, steel prices are expected to decline in the July-September quarter in both India and Europe. The decrease is anticipated to be driven by a fall in the prices of coking coal, which is a crucial raw material used in steel production.

Narendran revealed in a recent interview with Reuters that in India, the realisation for the second quarter (July-September) is estimated to be around 3,000-3,100 rupees per tonne ($36.65-$37.87) lower than the first quarter (April-June). Similarly, in Europe, steel prices are projected to be 38 pounds per tonne lower during the same July-September period.

These projections indicate a potential shift in the market dynamics, with factors like the cost of coking coal exerting downward pressure on steel prices in the specified regions.

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