China has come under a lot of adverse press during the last year or two over its investments in mining resources around the world, particularly in Africa. The suggestion is that China is trying to corner the world market on raw materials, depriving the rest of the world from access. What is the reality, and are these accusations justified? [Read more →]

We don’t necessarily share the analysts‘ predictions that there is an imminent risk of aluminum rising to $3300/mt and beyond this summer — but we can see good support for the metal around current levels af $2900/mt. Where slowing demand is finally resulting in an easing of prices for most metals, aluminum is exposed to the risk of power brown outs disrupting supplies in many markets: Brazil, New Zealand, South Africa and most notably China. Consumption is forecast to grow in China, although we doubt the figure noted of 20-30% will be met this year as the economy cools slightly. Demand is softening in western markets, which will partially counterbalance Asian demand growth, but aluminum is almost uniquely sensitive to power costs as on average one third of the final ingot price is down to electricity. China is particularly at risk as the country has invested heavily in smelter capacity, currently 12.5 million tons per annum, on the back of historically cheap power. With power costs rising on the back of oil, gas increases, and most importantly thermal coal increases, many of these smelters could be marginal as the latest price rises feed through this year.

If capacity is idled and China becomes a net importer, the availability of metal on the world stage will change from the current comfortable balance to dwindling stocks in short order. It’s the risk which is giving aluminum its support.

–Stuart Burns

Our thoughts and prayers are with the people of China after the Sichuan earthquake this Monday, a 7.9 magnitude earthquake and the second deadliest earthquake in Chinese history. The Sichuan death toll has nearly reached a devastating 15,000, and the numbers continue to escalate.

Aftershocks continue to hit the region, and the horrific earthquake and aftershocks will have an affect on the metals industry. Yesterday, the Financial Express predicted that the earthquake will cause lead, zinc and aluminum, major commodities from China, to see some disruptions in their production. The Express also noted that “damaged facilities and disrupted power supplies are expected to affect aluminum smelters.”

In addition, zinc smelters in China have halted production, which we expect will result in a definite impact for zinc. Zinc price increases of seven percent were witnessed this week, likely due to fears about the supply base. However, when we look to the long-term, only damaged zinc plants will be affected, since these smelters need more time for repairs. For others, the production is halted short-term for safety reasons and aftershocks. [Read more →]

China is without a doubt the most dynamic emerging market of the decade. For the world’s largest communist state, it must feel like they are sailing a ship driven by the wind in one direction and the tides in another. After tax and regulatory changes last year that would have stopped most economies in their tracks, China’s growth has slowed a fraction – from 11.9% for 2007 to 10.6% for the first quarter 2008. But the story is anything but a gentle reduction in growth. Under the surface, there have been changes in investment with winners and losers all around. [Read more →]

There’s a new type of event on the social scene: Gold parties.

Interested in throwing a party, but worried about costs? If a host wants to make money instead of spending it, a gold party allows them to convert unworn and unfashionable jewelry and knick-knacks into cool cash.

USA Today explains, “Rather than wait for bold gold to come back in fashion – a return to the ’80s, anyone? – women are scrapping their unwanted gewgaws for cash or checks at wine-and-cheese ‘gold parties’ … Think Tupperware parties, but instead of buying plastic, guests bring gold (coins, watches, necklaces, teeth) to be assayed (tested) for carat content and weighed. Depending on the ounce-cost of gold that day, guests can walk away with hundreds or even thousands of dollars. The party host pays them with cash or a check, then ships the gold to a refinery, where it is melted down and recycled.”

NBC Nightly News also covered this new phenomenon on a recent broadcast, listing the site My Gold Party as an excellent place to mine for more information about these social gatherings.

With current debate about whether or not to sell gold stocks this month, this could be a good time to try your hand at a gold get-together. The price of gold is constantly changing — it can even change several times per day — but it’s still considered the “safe haven” commodity. Even if you would rather sell scrap metal on your own time, a gold party could always be an excuse to see old friends, have some fun, and laugh at those bold gold bangles of yesteryear.

–Amy Edwards

I’m allergic to sesame seeds, so when I order a burger in a restaurant, I’m always in the hunt for a good bun substitute. So I thought it might be interesting to take a look at the current state of product substitutions in various metals markets. About a year ago, when nickel was trading at over $50,000/ton, it was almost a no-brainer to consider moving to other grades of stainless, as one example. What with the price of 304 stainless moving from the mid $6000/ton range to $5000/ton today, substitution to 200 series alloys looks a little less interesting, according to this article in Metal Center News. [Read more →]

My local paper, the Chicago Tribune, had a great article yesterday on the state of the near booming (my words, not theirs) steel industry. There were several statistics in the article worth mentioning and of course, commenting on. Specifically, the US steel industry is operating at 90% capacity, which does not come as any big surprise since many of the non-profitable operations were closed over the past couple of decades. But prices as you all know are increasing and some are increasing by up to 50%, since the beginning of the year. [Read more →]

In spite of statements from China in Bloomberg, stating that $2400/ton is the support level for lead and that China is cutting back exports to support the world price, the metal has continued to fulfill its image and has sunk like the proverbial lead balloon. The reality is China, which produces a third of the world’s lead, would lose money if it exported at current levels. Dealers are hoping the cessation of Chinese exports may support the price but so far there have been no signs that this is the case.

Following five years of shortages earlier in the decade and massive investment in new mines, the metal moved into surplus and stocks have now reached an 18 month high precipitating the fall in prices to close at $2195/ton on Friday. The sentiment remains overwhelmingingly negative and prices could fall further.

–Stuart Burns

Just when consumers thought one of the main drivers of current material cost – sea freight rates – would be coming down as new shipping capacity came on stream, it looks as if the credit crunch has done for them what it has for the housing market, according to a Bloomberg report.

Small to medium sized shipyards and those new to the market are finding it increasingly difficult to find loans. Previously, owners could expect to pay 1% over Libor for 12-15 yrs and be able to borrow up to 85% of the value. Now rates are higher than the 1% premium, the terms are reduced to 10 years and borrowings to no more than 65% of the value. Consequently, only the larger lines and owners with deep pockets can afford to keep their orders firm. Shipbuilding grade steel has increased by 47% since the start of the year and the viability of some of the Chinese shipyards not yet built but who had taken orders for new vessels is in doubt. Brokers estimate between 10 and 30% of the 2561 new vessels on order will not be built. No surprises then that freight rates have already begun to increase again as the availability of space has decreased. Rates were expected to decline by 56% over the next three years but instead are at a five month high as far fewer vessels have been delivered. [Read more →]

According to Martin Feldstein, an economics professor at Harvard, “The recent government report that US gross domestic product increased 0.5 percent in the first quarter was very misleading,” which he shared in this Financial Times article. The writer continues to say that the increase is not due to actual economic activity in the months of January through March, but rather to the rise from the average level in the fourth quarter of 2007 to the average level in the first quarter of 2008. But the doom doesn’t stop there. Feldstein points to falling real incomes, plummeting consumer confidence, and declining household wealth that will only continue to fuel reduced consumer spending and a falling GDP. He continues by pointing to the number of individuals with negative equity mortgages which will create a downward spiral in house prices and wealth. The result will be, according to Feldstein, “a deeper and longer recession than any seen in the past several decades”.

Yikes. He’s a doom and gloom guy. But who am I to argue with these predictions? I’ll tell you one thing, though; some industries are booming (and I mean really booming). Let’s hope that the oil and gas, metals and mining, machinery, conglomerates and our old friends tobacco can keep this economy afloat. Not sure about you, but I don’t like ugly.

–Lisa Reisman