Over the past few weeks, industrial metals have been showing some strength. However, there is one thing that stinks in this rally: The most-liquid and the most-used industrial metals are not leading this market rally.
Minor metals such as zinc and tin are performing the best while aluminum, copper and nickel are lagging badly in this base metals rally.
Aluminum
3-month London Metal Exchange aluminum price. Source: Fastmarkets.com
Aluminum has yet to find upside momentum. One of the major challenges for the global aluminum industry has been the rise in Chinese aluminum exports but recent trade numbers are encouraging for global aluminum. In February, China’s aluminum exports declined more than 33% year-over-year, the lowest in two years. However, the news didn’t help lift prices. Indeed, it only served to bring the metal down below $1,500 per metric ton.
Copper
3-month London Metal Exchange copper price. Source: Fastmarkets.com
Copper prices have made some progress but they are still well below last year’s levels of $6,500 per mt. Trade data also showed some glimmers of optimism for copper producers as China’s February copper imports surged 50% y-o-y. However, at the same time, Shanghai Futures Exchange inventory levels hit new records. This seems to suggest that Chinese copper imports are rising but they aren’t backed by end-user demand. Despite recent price gains, copper is struggling to rise above $5,000 per mt.
Nickel
Nickel prices are not joining the broad metal price rally. Nickel is still trading below $9,000 an mt and down for the quarter.
3-month London Metal Exchange nickel price. Source: Fastmarkets.com
On March 4, the U.S. Commerce Department launched an anti-dumping and countervailing duty investigation into Chinese imports of stainless steel sheet and strip, for possible illegal subsidies and selling prices at below cost to illegally gained market share.
With the threat of anti-dumping lawsuits looming, the volume of imported stainless sheet and strip had already been diminishing, pushing out domestic lead times. However, low international prices will likely add downside pressure if stainless domestic prices rise, especially since China is the only named party.
What This Means For Metal Buyers
We would like to see these metals leading the broad rally but they are not. While these metals haven’t shown any strength, the broad rally in industrial metals, itself, is prone to fall short.