Just 2 short weeks into 2015 the metals are experiencing major losses, mostly because of the continuing fall in the price of oil. Copper and steel were the biggest victims but aluminum, stainless and the other metals took a hit, too.
Copper’s 5-Year Low
Copper fell from $6,100/metric ton last Friday to $5,400/mt on Wednesday, an 11% drop in only 3 trading days. Copper recovered a little yesterday, but it’s still mired in a 5-year low. Why the big drop? No other commodity metals fell as quickly and precipitously as copper, and we don’t hear that much about Floridian thieves accidentally electrocuting themselves stealing aluminum or hot-rolled coil. Why copper?
Well, right now copper is as available as a Kardashian between husbands. There’s a surplus out there and, according Morningstar, it’s going to be there for some time. The low prices are dragging down the stock of miners like Freeport-McMoran Copper & Gold (NYSE:FCX), too, and mine closures could be the next shoe to drop.
The silver lining to this cloud of copper sadness? Dr. Copper got his PhD revoked, so it means nothing for the economy as a whole or even that much for the construction market. It just means that copper is in surplus. Dr. Copper is now more like Mr. Pibb.
Back to the ’80s! Not So Tubular!
Remember six months ago when oil country tubular goods (OCTG) were all the rage? U.S. Steel, Vallourec (PARIS:VLLP) and Timkensteel (NYSE:TMST) were all setting up new facilities to make the steel tubes for oil and gas drilling? Well, that was before oil prices fell below $50 a barrel. Tubular is also a funny word that was used as a synonym for cool and rad back in the ‘8s and ’90s? You don’t know about rad? It was short for radical! Youngsters.
Having OCTG and tubular around made the MetalMiner Week-In-Reviewer feel young and reminded him of good times with the Teenage Mutant Ninja Turtles before Michael Bay and Megan Fox strip-mined the source material the same way they did with Transformers. They turned happy childhood memories into really big explosions.
But I digress. Anyway, OCTG is no longer the hot and cool new market sector. It’s going away. U.S. Steel has already shut down 2 plants. While the low price war between OPEC – particularly Saudi Arabia – and Canada is forcing oil prices lower and lower, most consumers are celebrating as gas dips below $2 a gallon. If you’re a shale oil producer, though? Yeah, it’s not a good time. Totally not tubular.
by Jeff Yoders