by Jeff Yoders on DECEMBER 31, 2015
2015 Was a year of low commodity prices across the board and metals were no exception with our MetalMiner IndX hitting all-time lows and then beating them with new all-time lows.
The major trends that drove the winter — and spring, summer and fall — of low prices and producer discontent were nothing new: the slowing Chinese economy and its subsequent lack of construction demand, a race to the bottom between OPEC and US shale oil drillers eroding the price of crude and global economic sluggishness outside of the US. The domestic economy, while showing positive growth (2% in the third quarter), wasn’t exactly operating full-bore, either, as inventories remained high and inflation cut into buying power.
So, without dwelling too much on the past, we offer MetalMiner’s Year-in-Review, a look at the issues, news and trends that affected metal prices.
3D Printing: Now in Manufacturing
Additive manufacturing continued to transform aviation and other sectors. We saw the largest 3D-printed part ever made for commercial us by Airbus and Autodesk for use in the new A380. The interior partition is made up of 122 components and reduces the weight of the partition by 30%.
In other materials science news this year:
Tin could possibly be used as a catalyst to enable clean carbon capture for electrical power generation.
A flexible aluminum-ion battery could one day replace the lithium-ion battery.
The Year in Dumping
It was a big year for dumping, dumpling. China continued to be the main nemesis of the US when it comes to illegally subsidizing and exporting steel, aluminum and several other metal products. China was also the culprit of choice for India, Russia, the European Union and, well, most of the world.
In steel, the dumping problem was so bad that the very existence of the UK Steel Industry came into sharp question this year. It would be wrong, though, to focus all of our attention on cheap, subsidized imports of steel. Aluminum has felt the pinch from dumped imports, inaccurate warehouse counts and every trick of market distortion, too.
Why does steel get all of the love? I'm being dumped, too!
Why does steel get all of the love? I’m being dumped, too! And you can make aluminum-ion batteries out of me (see above).
Just how into dumping is aluminum? The International Aluminum Institute threw up its hands in February and stopped reporting global inventory because, mainly Asian, market reports were so inaccurate.
On top of the Aluminum Association, the major trade association of North American producers, met with Chinese officials and the US trade representative this year to ask for new export tariffs on Chinese semi-finished products, known as semis to producers, that it alleges are being melted down and used, essentially, as ingot by manufacturers.
How Low Can Oil Go?
We may not have found out yet. This year, Saudi Arabia opened up the pumps and tried to push out shale oil and other high-tech US drillers. This, in turn, brought down prices of anything that is either transported or produced using a lot of gasoline or diesel fuel.
Falling price of oil
This falling oil price illustration may be the most-overused graphic this year.
The Saudis never budged in their race to push out the smaller, US-based oil companies. Even when the rest of the Organization of Petroleum Exporting Countries figuratively said, “c’mon, guys, can we blink?”
The Saudis and their allies justified their high production by saying they would not curtail it… unless Russia does, too. Getting in on that action, Congress lifted the US oil export ban and let those lean and mean shale drillers have access to oil-hungry countries such as Japan. Game on, boys. Did I mention that Iran is about to get into the oil export business, too?
Ex-Cha-Cha-Changes!
The major metals trading exchanges, regulators and trade organizations tried to cope with a dynamic and changing global market like the rest of us this year.
US dollar vs China yuan
Yuan: Hey dollar, we’re both SDR currencies, now. I’m just like you!
Dollar: No you’re not.
Yuan: Am, too.
Dollar: No you’re not. What even is a renminbi?
Yuan: That’s cold, man.
The London Metal Exchange launched new rebar, aluminum premiums and steel scrap contracts. The scrap and rebar ones were simple product contracts but the aluminum premiums one was a clamored-for hedging tool that came about because of the uproar over the cost of premiums, especially the Midwest premium, the last two years.
Of course, just as it was introduced, premiums — even the Midwest premium —took a huge dive and almost nobody was willing to wager money on them increasing anytime soon. Classic.
The International Monetary Fund welcomed the yuan/renminbi to its exclusive club of SDR currencies as an acknowledgement of its use in international transactions, including metals trading. A bigger battle looms in 2016 over whether China should automatically receive “market economy” status with the World Trade Organization. See the dumping section above for the pro/con argument.
That’s the less-than-1,000-word recap of 2015. It was a great year for metal buyers but, always remember, it could be even better in 2016, so avoid all of those falling price knives. I got a paper cut from a price knife while I was writing this, as the aluminum in the soft drink can I’m holding was purchased too early. Happy New Year!
Source: MetalMiner
