Purchasing

Robert J. (Bob) Garino

Indicators look bearish but LME prices could rise
March 31, 2008

Latest in nonferrous comes from the World Bureau of Metal Statistics (WBMS), which placed January’s global copper market in surplus by some 56,000 metric tons. Although that sounds bearish, most analysts have re-thought the global balance for 2008 and now a number see the market trending towards deficit for the year as a whole (for ‘07, global refined copper consumption exceeded production by 42,000 metric tons.)

Barclays Capital, for one, is forecasting a “substantial” shortfall in this first half of the year with London Metals Exchange (LME) cash prices again testing all-time highs…an ever widening backwardation is also lending support. Also, China’s appetite for the red metal is not showing convincing signs of slowing down anytime soon. February imports of refined copper, for instance, were 136,243 metric tons; that’s lower vs. February ’07 but higher than January’s total of 128,071 metric tons.

As for nickel, talks have resumed at the Cerro Matoso ferronickel mine (which has been on strike since February 27). BHP Billiton said, however, it had declared force majeure on nickel deliveries.

In case you missed it: North American replacement battery shipments for January ’08 were 7.7 million units, down 15% from December but 7% above January 2007. January original equipment battery shipments were 1.4 million units, up 2% from last December and virtually unchanged from one year ago.

Latest in ferrous is the fact that AK Steel made news by announcing a $50/ton increase on flat-rolled products, effective immediately last week. The firm cited positive demand and higher steel-making costs…this latest increase places hot-rolled coil at $850 f.o.b. (May delivery). Most sources place the current Midwest HR spot price at $784 - $795 f.o.b. for April/ (Editor’s note: Purchasingdata.com today posted $740 as the March average).

Is that it for awhile? Well, according to Michelle Applebaum Research: “Although domestic HRC (hot-rolled coil) prices have surged so far this year, we believe there may still be room for further increases as we head into the summer as steelmakers in other regions of the world continue to boost prices.” We’re reminded that March sheet prices in the U.S. are down relative to other regions – prices in Europe and Japan, for example, are up at least $100/ton this month. WSD’s SteelBenchmarker, for example, places the world export price for hot-rolled band at $870/metric ton f.o.b., port of export. That’s what’s keeping imports from having an impact (down 7.8% in February.)

Not surprising, but some are revisiting earlier steel forecasts for 2008…Citigroup, for example, now sees HRC averaging $743 this year vs. an earlier $550 estimate...our own Market Forecast story (Scrap magazine, Jan-Feb 2008) recognized that domestic mills will likely be successful in raising prices this year even if demand remains weak due to what sources termed as the U.S.’s inherent net supply shortage of finished steel coupled with relatively low levels of inventories, reduced imports, and cost increases.

Price forecasts at the time (last December) reckoned that HR would average closer to the low to $625/ton range…

In paper, domestic newsprint prices increased last week to $640/metric tons, up $20. The early guess is for another bump up in the second quarter since prices were at $560 this past fall. Total North American newsprint shipments were up 2% last month while consumption by U.S. daily newspapers fell 12%. Containerboard prices were expected to be up this month by $50 to $600-$610—but last week’s Official Board Markets has the national average at $548/ton, unchanged so far this year…Purchasingdata.com is stuck at $555.

Posted by Robert J. (Bob) Garino on March 31, 2008 | Comments (0)