Metals Update – 7 August

A Look Back
At the start of August, the steel markets experienced a subdued atmosphere. Chinese rebar and hot rolled coil futures remained stagnant on Tuesday, patiently anticipating new catalysts to drive movement. On the Shanghai Futures Exchange, the rebar contract for October 2023, which saw the highest trading volume, closed $536 higher than the previous day. Similarly, the corresponding contract for hot rolled coil (HRC) registered marginal gains.
However, a downturn was observed in Chinese rebar and hot rolled coil futures on Wednesday afternoon. This shift was prompted by the circulation of market data revealing a decline in weekly demand. This drop in demand was largely expected due to the recent devastation caused by Typhoon Doksuri, which swept through China from south to north over the past week.
Ternium, a prominent steel producer, reported a 21.4% decrease in second-quarter net profit on Tuesday. This decline was attributed to stagnant shipments and a drop in steel prices, leading the company to predict lower core earnings for the current quarter. Similarly, Ferrexpo PLC reported significant decreases in interim profit and revenue on Wednesday. The decline in profits was driven by substantially lower iron ore pellet production and reduced prices. Ferrexpo, known for its iron ore pellet production and export operations in Ukraine, attributed the decrease in iron ore pricing to tightening monetary policies, reduced stimulus from central banks, and the resulting negative impact on steel demand, particularly in China, the world’s largest steel producer.
Copper retreated from its three-month peak last week, following weak manufacturing data from China, which added to concerns surrounding the economic recovery in the world’s largest consumer of the metal. Copper, along with other base metals, witnessed a downward trend in the previous week, raising apprehensions about the anticipated economic rebound in the country. The price of three-month copper on the London Metal Exchange, denoted as CMCU3, experienced a 0.3% slide to reach $8,548 per metric ton. This decline followed a modest decrease in the previous week’s trading.
LME Aluminium (CMAL3) experienced a slight 0.2% decrease, settling at $2,225 per metric ton. Zinc (CMZN3) followed suit, shedding 0.18% to reach $2,496. Meanwhile, Nickel (CMNI3) saw a 0.6% decline, with its price reaching $21,216. In contrast, Lead (CMPB3) managed to gain 0.2%, reaching $2,138. Lastly, Tin (CMSN3) inched up by 0.32%, reaching $27,754.
A Look Forward
As of writing this, copper prices opened lower, influenced by a steady dollar. Investors remained cautious, awaiting economic data releases from both the United States and China throughout the week to gain further insights into the demand outlook.
Indian steel manufacturers are pressing the government to implement an import levy on steel as a safeguard for the local sector against unjust competition. However, the government is apprehensive about potential elevated expenses for Indian consumers that could result from this measure. If a decision is made this week by the Indian Government to increase import levies, further market fluctuations could be expected.

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