METALS COMMENTARY — Steel slowdown reveals volatility in marketplace

The jockeying between metal suppliers and consumers is adding volatility to the marketplace.

Suppliers and distributors of steel, for example, are having to reduce stocks in response to a decline in plant production levels to five or six days a week from a previous duration of seven days. So far, the steel and stainless steel declines have had only a speculative effect on exchange prices, causing them to plummet rapidly only to bounce right back. The drop in production has, to date, been moderate, and the effect on raw materials demand also minimal, as exchange stocks continue to spiral downwards.

The recent, slight slowdown in steel mill output and inventory drawdowns appears to be stabilizing. U.S. ferrous plate and structural f.o.b. scrap prices, as of mid-November, were relatively stable at $140-145 ST (compared with $151 on Oct. 31). Stainless 304 edged down, and remains around $1,040-$1,060 ($1,100-$1,125), while 316 is ranging between $1,300 and $1,400 ($1,425-$1,450 in late October).

The following average prices and inventories of the London Metal Exchange refer to November to date, with last month’s corresponding figues shown in parentheses (unless stated otherwise):

Firm demand at the producer level, coupled with tight inventories, elevated nickel to US$3.884 (US$3.658) per lb., as inventories fell to 47,976 tonnes (51,372 tonnes at the end of October).

Producer sold-out positions, together with strong trader positions (supported by brisk consumer demand) raised cobalt free-market quotes for Western A Grade to US$30.25 per lb. (US$29.25 per lb. on Oct. 31).

Good battery sales continue to support lead at US31.2 cents (US29 cents) per lb., with stocks having fallen to 181,925 (193,525) tonnes.

Reflecting steady demand, zinc rose to US46.7 cents (US44.4 cents) per lb., as stocks slipped to 699,450 (710,250) tonnes.

The price of copper weakened, and then recovered to US$1.347 (US$1.276) per lb., as the combination of inventories on the LME and Commodity Exchange of New York rose to 212,676 (198,990) tonnes.

Spot molybdenum oxide remains firm at $4 ($3.80) per lb., as oxide markets remain balanced. Moly scrap is selling for $3.75 per lb., while ferro-moly hovers around $7.50 ($7) per lb. in tight supply.

All is quiet in the precious metals sector, with gold having moved up to US$384.66 (US$383.19) per oz., and silver having eased to US$5.35 ($5.37) per oz.

Platinum, meanwhile, slid to US$412.89 (US$412.94) per oz., while palladium fell to US$135.02 (US$137.09) per oz. Rhodium, which slumped to $330 per oz. in early October, recovered to US$390 in early November. The price then fell again, to $325 per oz.

— Jack Dupuis is an agent, broker and consultant specializing in the marketing of metals.