19 juillet 2007
Steel prices drop for third straight month
Steel sheet prices in North America have fallen for a third consecutive month and hot-rolled sheet in coil (HRC) may even be lower than the $520/ton July price forecast by Purchasingdata.com. Subscription-only CRU Steel Monitor says its “latest assessments put HRC prices for medium-sized buyers at $520/ton, fob Midwest mill.” Analyst David Lipschitz at Merrill Lynch says “current pricing is $510/ton” but suggests that pricing may be near bottom.
The latest Steel Flash Report and Cold-Rolled Sheet Steel Report and Forecast both are available for sale at Purchasingdata.com. The reports point out that the overall economy is advancing at its slowest pace in five years, the struggling U.S. manufacturing sector is weaker than expected, steel buying is wilting in the early-summer heat, integrated steelmakers have increased production and carbon and alloy steel prices in general tumbled in June to the same averages as in March.
Just this week, with fresh market data providing evidence that mill and service center shipments are sliding in the face of very weak demand, analyst Mike Willemse at CIBC World Markets says “demand may not rebound enough in the third quarter for a firm pricing rebound to take place.”
Aluminum price forecasts vary widely
Why there is such a broad spread now? “It comes down to whether you feel we are heading into a U.S. slowdown that will drag global growth down with it and, hence, metal prices, or whether you are in the stronger for longer camp, in which case metal prices will hold higher longer,” says analyst William Adams of BaseMetals.com, a subscription news service, in an e-mail to Purchasing.com. “Also, Chinese exports are being curbed, which should reduce supply to the West and may even lead to some more production in China being curbed.” Adams says he believes that “analysts will gravitate to the ‘stronger for longer’ outlook so the lower-priced forecasts will be revised higher over the next quarter and as we approach LME Week in October.” LME Week is when metals forecast seminars and a big commodity exchange dinner are held, and when some year-ahead supply contracts are negotiated. At present, economists at Rio Tinto in London and analysts at Morgan Stanley in New York are at the high end of the range ($1.30) as both expect the bull market to continue next year. In fact, Rio Tinto, the mining company that’s buying Alcan of Montreal, expects the global demand outlook for aluminum to remain positive for the next ten years. The company expects world demand growth to be above 6% until 2011—paced by an annual average 15% growth in use in China. A report to clients by metals consultancy Harbor Aluminum in Laredo, Texas, points out that “there was a recent aluminum price forecast poll by the Reuters News Service, consisting of 28 analysts, which showed the average price forecast for 2008 was around $1.13/lb.” More bearish, however, are the economists at Macquarie Bank of Sydney, who expect a lower price average next year ($1.10/lb) as they believe that Chinese aluminum supply growth has more than matched Chinese aluminum demand growth. But, the most bearish to date are analysts at the J.P. Morgan Securities’ base metals desk in London and Deutsche Bank’s offices in London, who see $1.02 as the 2008 price average because of perceived explosion ahead in Chinese supply. Goldman Sachs of New York also projects that aluminum prices are set to weaken in 2008 (and probably 2009, as well) as the analysts there forecast Chinese aluminum production to increase by 35% versus Chinese aluminum demand growth increasing by 32%. |
02 juillet 2007
Cobalt prices have slipped
Cobalt prices are falling back to earth after reaching a cyclical peak in April of $32.57/lb that was almost double the $16.70 average of 2006, lifted off by strong demand from the aerospace, commercial aircraft and industrial gas turbines sectors. Now, U.S. market prices have slipped and are slightly above $28 this month. The U.S. Geological Survey says nearly one-half of the cobalt consumed in the U.S. is for use in superalloys, which are used mainly in aircraft gas turbine engines; 9% was for use in cemented carbides for cutting and wear-resistant applications; 18%, for various other metallic applications; and 24%, for a variety of chemical applications.
Traders had expected continued price increases this spring but that isn’t happening, with benchmark world prices in Rotterdam warehouses actually as low as $27.60 this week. What’s happening? Most 2007 supply contracts for cobalt and cobalt-bearing superalloys have been filled and superalloys producers have been unable or unwilling to offer fixed-price terms for next year’s deliveries because of uncertainty about future cobalt market pricing. So, spot transactions are thin.
Cobalt supply has been somewhat tight worldwide but there’s a chance that supply will expand. Reuters reports that the International Monetary Fund now sees expanded output in the Congo, as private investment boosts the mining sector in a mineral-rich nation that finally has stabilized after years of civil strife. And there are news reports of expanded production in Zambia, China and India, as well.