Metal Price News - August 2024
Commodity prices have fallen significantly over the summer because of 2 market shocks. It seems that the prices are recovering now, but how high will they go?
On stainless, the move downwards seems to continue in the foreseeable future.
Macroeconomic developments
Over the summer, the commodity markets went down on two different occasions.
The first drop occurred in mid-July after a disappointing announcement from the Chinese Party Convention. The second drop occurred on August 1 and is due to carry trades in Japan.
However, the markets have calmed down now, and commodity prices have started to rise again.
China
On July 18, the Chinese Communist Party held a party convention. The government was expected to announce financial support to the commodity industry and the ailing real estate sector, but that did not happen. This caused commodity prices to fall by about 5%.
In general, foreign investors have been less optimistic about China recently. Foreign investors have withdrawn $15 billion from China during Q2 2024.
Last week's key figures from China also showed several worrying trends:
- The housing market is falling at the fastest pace in 9 years
- Industrial production is declining
- Unemployment is increasing
US and Japan
On Monday August 5th, the Japanese stock market fell 12% - the biggest drop since "Black Monday" in 1987. This caused a simmering panic in the stock market.
The reason was an unfortunate combination of the Japanese central bank raising interest rates, thereby strengthening the Japanese currency (JPY), while the US unemployment figures were higher than expected.
This caused many investors to close their carry trades in Japan, shocking the stock market. The total value of carry trade loans in JPY is estimated to be around USD 20,000 billion.
What are carry trades?
Carry trades are a form of investment where you borrow money in a currency with a low interest rate and invest the money in an asset where you expect higher returns.
As the interest rate on JPY rose, loans became more expensive. At the same time, the high unemployment rate figures from the United States made investors fear for the global economy. Their global investments could yield lower returns than expected.
This caused many investors to sell off their investments and repay the Japanese loans, which caused a dramatic drop in the Japanese market.
However, the markets quickly calmed down, and the situation in the United States turned out to be less sinister than expected. Stocks and commodities have started to rise again.
Middle East
The conflict in Gaza has escalated further over the summer, especially after Israel hit several targets in both Lebanon and Iran. The uncertainty pulled up the price of oil, but the price has now fallen again after peace talks have resumed.
Copper
For copper, prices fell from USD 10,000 / EUR 9,180 to USD 9,330 / EUR 8,570 in mid-July and continued down to USD 8,850 / EUR 8,150 on August 1.
Aluminium
The production of aluminium in China has increased in the recent period, so right now supply is higher than demand.
This caused prices to fall from USD 2,550 / EUR 2,350 to USD 2,350 / EUR 2,150 in mid-July and continue down to around USD 2,250 / EUR 2,060 on August 1.
Stainless steel
Sheets/plates
The situation has turned around over the summer.
This is primarily due to the fact that the strike at Acerinox has finally ended after almost 6 months. This has eased the pressure on the other European mills, and supply is now on the rise.
All mills report an 8-10 week delivery time, i.e. October.
The alloy surcharge is on a downward trajectory, as are the prices – but not quite at the same pace.
This is because the mills are still trying to maintain a higher material price in order to maintain their margin on the material, as we have mentioned in the last few months.
The preliminary prognosis for alloy surcharges is that 4301 will decrease by 4.2% and 4404 by 4.5% - but the final surcharges are not yet known.
Bars
Prices on bars are also going down. The alloy surcharges have not been announced yet, but everything points to relatively large decreases. Right now, the forecasts point to a 6-6.5% decrease across the board.
Nickel
Nickel is low at the moment as the stocks are relatively high and the demand is not.
However, there has been one piece of news that could move the market:
Indonesia is the largest supplier of nickel and an important player in the market. Until now, the country has traded according to the price of SHFE (Shanghai Futures Exchange), but in an attempt to become more independent from China, Indonesia will start its own nickel exchange.
This exchange will trade as early as 2025, and this will change the price dynamics for nickel.
