Copper, brass lead times out

Service centers are reporting extending lead times for all copper and brass products on the back of strong demand from the automotive and housing sectors, which could encourage some buyers to turn to imports

Lead time for certain light-gauge material are out as long as 18 weeks from 12 weeks previously.

The long lead times could encourage original equipment manufactures (OEMs) and service centers to turn to copper product imports to meet their customer orders.

Stainless prices up

Stainless steel prices rose slightly alongside March surcharges, although many buyers are holding off in anticipation of lower tags in April, market participants said.

The price increases were largely in line with higher March surcharges from the major products, market participants said.

Business has improved slightly since the start of the year, but still hasn't reached its pre-November levels, market sources told AMM.

It seems to be improving a little bit as compared to the 4th quater of 2012, but that was an absolutely dismal period," a third distributor said. "The general market is soft. There are still some buyers that are very uncertain about what the year will hold fo them, and they're adjusting their purchases accordingly."

His overall assessment was gloomy. "I think it will be a tough year," he added. "I don't see anything on the horizon to suggest it will get better."

LIGHT GAUGE COPPER LEAD TIMES REMAIN AT THREE MONTHS

Lead times for light gauge copper products remain at three months.

For light gauge flat rolled, orders are placed for June. That's way out, the first service center source said. A fourth service center source confirmed this trend, adding that he expects lead times for light gauge material to stay out on the back of continued strong demand from automotive, ammunition and electrical distribution end marks.

One of the major mills has moved their lead times out by two weeks, and we expect other domestic mills to do the same, the fourth service center source said, pegging lead times for these products at nine weeks at least.

Most copper mills are hesitant to add staff to meet this increased demand, the source added. Mills are often reluctant to add a bunch of personnel, because then we enter into summer months, when there are shutdowns – auto manufacturers' maintenance always happens in the first two weeks of July. By the time the mills get everyone trained and up and running, they'll have to fire them. So they'll work through it the very best way they can, which is pushing out lead times, the fourth service center said.

SEC Approves JPMorgan Copper ETF

The U.S. Securities and Exchange Commission (SEC) has given JPMorgan Chase & Co. the go ahead to list and trade shares in physical copper exchange traded fund (ETF) in a move that will come as a blow to a group of key copper consumers.

The commission agrees with JPMorgan that copper held by the ETF trust will remain available to consumers and other participants in the copper market. They also stated that there are very substantial copper inventories outside the LME and Comex that are deliverable on a short term basis.

Copper consumers have said the new ETFs would create price volatility that would make their copper business uncompetitive internationally.

"We are very disappointed in the ruling which we continue to believe will result in the removal of substantial amounts of copper available for immediate delivery and as we demonstrated repeatedly to the commission staff, could have a devastating impact on U.S consumers in terms of price volatility and availability of supply" said Robert Bernstein, a partner at New York law firm Eaton & Van Winkle LLP, which represents the consumers.

MIDWEST ALUMINUM SPOT MARKET SLOWS

Spot P1020 business has given way to discussions between producers, traders and aluminum consumers focusing on next year’s aluminum supply contracts.

Few deals were closed as a result, which kept Midwest aluminum sport premiums firmly between 11 and 11.50 cents per pounds.

I expected more spot activity because the aluminum price came back down, but I didn’t see it a trader said.

It is likely a case of seasonality, with aluminum producers and consumers looking to end the year with lean inventories, the second trader said. It just means people don’t need to buy and they’re not looking at the price to make a decision. When demand is there and they need to restock, they’ll do it. But no one wants metal at the year end.

Aluminum remains locked in financing deals or long queues, keeping supply off the market. That trend appears unlikely to change next year. “I am still finding the supply side is tight. If you have LME metal, you are sitting pretty. But if you don’t, it is going to be a tough year. Talking with the producers, they’re not doing any favors, a third trader added. Everything seems to be pointing to tight aluminum supply next year.

Stainless Consumption on Rise: SSINA

Stainless consumption and imports both rose sharply in April compared with the same period a year ago, according to figures from the Specialty Steel Industry of North America (SSINA).

Stainless consumption was up 12.3% from April of last year. While stainless imports grew 22.5% in the same time frame.

Stainless plate posted the most notable increase with consumption rising 44.4%. And Stainless plate imports grew a massive 56.2%.

Stainless sheet and strip consumption was up 9.1% then in April of last year. While import stainless sheet and strip increased 18.7%.

Imports of electrical and alloy tool steel were also higher, up 35.7% year on year and up 36% respectively.

US NICKEL PREMIUMS TUMBLE TO 9 YEAR LOW IN WEAK MART

Nickel premiums continue to decline, with melting grade numbers hitting a nine year low as spot activity weakened.

Melting grade premiums fell to between 20 and 23 cents per pound, the lowest level seen since mid 2003.

Premiums have been under pressure this year as suppliers are said to be holding adequate material and there have been no supply disruptions at large mines.

Producers seem to be flexible in increasing contract volumes to their customers.

Even the historically low nickel prices haven’t attracted more customers.

Three month nickel ended the official session on the LME at $16,405 per ton Friday. Prior to May 29th, the contract hadn’t traded below $16,500 per ton since late 2009.

NORTH AMERICA ALUMINUM DEMAND UP

Demand for aluminum in the United States and Canada rose by 7.5% in the first quarter compared with the same period last year, according to preliminary data from the Aluminum Association.

Shipments of aluminum by domestic aluminum producers and aluminum imports were estimated at 5.8 million pounds. Demand for semi-fabricated aluminum (mill) products increased 7.9% to 3.8 million pounds in the same comparison.

The growth in demand for aluminum is indicative of the trend towards light-weighting in the automotive and electrical sectors. While most other markets are holding steady or starting to look up.

Electrical wire and cable used in building applications and electrical transmission increased 28.8% in the first quarter of 2012.

ALUMINUM ORDERS DOWN 2.7% IN NOVEMBER

Aluminum orders in North America fell 2.7% in November from the previous month due to continued de-stocking ahead of the year's end as well as uncertainty about aluminum prices.

Orders remain in a choppy, sub-par uptrend. This marks the second month of declining orders; however they remain up strongly from 2010.

The overall monthly decline in shipments was lead by aluminum foil, which saw orders fall 6.9% in November from October. Partially offsetting the decline in aluminum foil shipments was aluminum sheet and aluminum plate which saw shipments rise 2.2% and extruded shapes which had a 1.3% rise.

Aluminum orders are important for companies with downstream manufacturing businesses.

ALUMINUM SPOT PREMIUMS REACH RECORD HIGHS

A severe shortage of available aluminum has pushed spot premiums to record highs in the U.S. marketplace.

Midwest spot premiums have gone up to between 7.5 and 8.5 cents per pound, with one trader even reporting transactions as high as 9.5 cents per pound. Business is no problem; people will pay to get the metal.

A shortage of free metal units is largely behind the racing premiums. The flow of metal does not seem to be there. When you need something spot it is hard to come by. There are a lot of customers that are short. According to metal sources, smelters continue to ship aluminum directly into LME-bonded warehouses in Detroit in exchange of incentives of as much as $145 per tonne, keeping new units from reaching the consumers directly.

The incentives have allowed LME warehouses in Detroit to acquire a critical mass of material with Detroit inventories now totaling 1,083,375 tonnes or almost a quarter of global LME aluminum inventory.

Also behind the shortage of material in the U.S. market is the strength of neighboring regions. Mexico and Latin America which have been running short due to production delays in Venezuela and roaring demand continue to buy material very aggressively.

There is not a lot of metal coming in here. Other parts of the world are more effective for swing units, so North America is being starved.

GOLDMAN TEMPERS ROSY COPPER CALL

Goldman Sachs Group Inc. has pared back the bullish copper forecast it issued last year, saying the tightness originally expected to develop in the second half of 2011 is unlikely to materialize for another year.

Spot copper on the LME crossed the $10,000 per tonne mark in early February and hit a record high of close to $10,148 on February 14th and has averaged around $9,622 per tonne so far this year.

"Recent events pose downside risks to demand, potentially deferring our critically low inventory scenario. As a result the risk/reward in this position has diminished", Goldman analysts said.

LME copper stocks have grown some 14% since the start of the year, while those on Comex have risen some 30%.

The physical supply situation has been further supplemented by continued political unrest in the Middle East and North Africa.

"We believe the growth conditions for those inventory draws have changed and our critically low inventory scenario may get pushed further out, creating downside risk to our late 2011 forecasts and some downside relative to current near record high forwards" the Goldman analysts added.

COPPER HITS RECORD HIGH, EXCEEDS $9,000/T ON LME

Copper hit a record price on the London Metal Exchange Tuesday after topping $9,000 per tonne for the first time ever in the pre-market session.

A combination of factors, including the Euro strength, short coverings and protracted speculation about exchange traded funds sparked the rally, traders said.

Three month copper closed at $8,986 per tonne in the LME's second ring compared with an opening price of $8,790 per tonne.

The red metal hit a high of $9,044 per tonne, with the low at $8,717 per tonne. Copper stocks in LME listed warehouses fell 1,000 tonnes to 351,375 tonnes.

I think it is technical covering; gold and silver made new highs overnight and the strength of the Euro, said a Category II trader.

Market participants should expect a wave of profit taking and future margins increases, a second Category II trader said in a note. "Buying the dip just entered a whole new uncharted level of risk" he said.

NO NEAR-TERM SLIDE IN ALUMINUM STOCKS

It will be 18 months to 2 years before there is a substantial decline in the LME aluminum inventories, according to Novelis, Inc. president and chief operating officer Phil Martens, purely because people are not going to dump material on the market.

Speculation that the recent narrow backwardation on the light metals cash-to-three month spread would lead to hundreds of thousand of tones of metal being released from the financing deals after months of contango trading was overdone, Martens said. People talked about the backwardation but the effect was very minimal. It is almost not relevant.

The financing deals have removed a hefty tonnage of aluminum from the market helping boost US and European premiums and leaving consumers struggling to secure supply.

Phil Martens does not believe there will be a substantial move in aluminum prices next year, despite strong demand forecasts and the launch of a possible exchange-traded fund (EFT) in the first quarter. But he feels physical demand for aluminum products will be strong in 2011.

ALUMINUM REELING FROM SQUEEZE ON SUPPLY, PRICES

"Banker grab" hits with backwardation.

Aluminum locked up in long term financing deals could be released as a result of a backwardation that has emerged in the August-September forward prices on the LME, market sources told AMM.

The emergence of higher prices for August compared with September is a dramatic reversal of the healthy contango that has existed for the past 2 years and prompted the long term financing deals that tied up millions of tons of aluminum in warehouses. The financing deals only make sense when the costs of financing and rent are covered by the healthy contango.

Some banks with long positions are said to be unwilling to lend which is fueling the backwardation and leaving shorts with few options other than to release metal.

Most of the nearly 4.4 million tons of aluminum in LME warehouses and as much in off exchange deals is rumored to be tied up in long term financing deals. Aluminum is locked up and it's not available in a contango, but it will be available in backwardation the market source says.

The idea is you get more value than what is costs you, said a physical trader, describing the tactic as a "banker grab". Only banks with financial firepower would be able to create this kind of squeeze.

The backwardation may evaporate by the third Wednesday prompt dates, but there is nothing to stop another squeeze in the future market participants said.

ALCOA PUSHES NEW ALUMINA PRICING

Alcoa Inc is changing the way it prices alumina as its long term contracts come up for renewal, according to Chairman CEO Klaus Kleinfield.

Alcoa's long term supply contacts had priced alumina as a percentage of exchange traded aluminum, but as the contracts come up for renewal the company is pushing customers toward higher non LME linked prices.

Alcoa changed their pricing to reflect market conditions as well as underlying costs, and this had yielded a higher price percentage of LME.

Over the past decade, the LME price and cost inputs of alumina did not move in tandem. Alcoa believes it is time for the industry to develop a new price methodology going forward.

An alumina pricing index is still in development, but Alcoa reiterated this week that it will support such a pricing mechanism once it comes to fruition. They are moving toward indexed pricing as they are going into 2011.

The fear of some customers is that the information given to such an index unless it's truly transparent is always lagged for not even accurate. Customer's really unwilling to switch may be able to hold out paying a percentage of LME a bit longer but not at the 14% and lower rates that have been offered in the past contract years. Prices are going up one way or another. The 12% are not there anymore and they haven't been for years.

NICKEL LEADS BASE METAL PRICES HIGHER

Supply concerns and a weaker dollar breathed second life into the base metals rally over the past week, although sources say prices are unlikely to maintain current levels on fundamentals alone. Nickel was the standout during the week as continued tightness in the market drove up prices not seen since June, 2008.

Base metals ended Friday in positive territory, with nickel for 3 month delivery on the LME gaining 9.7% from a week earlier, three-month aluminum rose 6.9%, and copper was up 5.7% and tin and zinc each gained 4.9%. Lead contracts lagged the complex posting a meager 1.3% weekly gain.

The metals sector also saw some positive news from the Organization for Economic Cooperation and Development (OECD), which released its composite leading indicators for January, noting improvement in economic activity in the G7 countries and recovery in India and Brazil. "Economic activity is projected to continue to expand in China and Russia" the OECD said.

Some analysts are seeing more upside in their long term outlook for metals. "People are starting to discount the double-dip recession and the OECD came out with an improved report on their leading indicators for the entire world, so the biggest problem right now is the valuations" said Justin Lennon, analyst at Mitsui Bussan Commodities in New York. And who likes to pay full value? Who likes to pay retain prices in a recession?

STAINLESS REVIVAL TRICKLES DOWN TO RAW MATERIALS

The unexpected revival of stainless steel production in the first quarter is having a dramatic effect on the raw material supply chain, with nickel moving into a deficit and ferrochrome and molybdenum prices up more than 30% since the beginning of the year. The recovery of the stainless sector has been quite surprising especially considering that December 2009 was a poor month as mills cut production in an attempt to be lean and mean coming in to 2010.

A lot of the specialty alloys are doing well, but the real catalyst to the increase in physical premiums has been this about face by stainless at the beginning of the year, a US based nickel trader told AMM. "These guys were completely spooked last year and refused to carry any raw material inventories into 2010. When there order books improved, they had to buy spot nickel and many of the mills faced the stark realization that it just wasn't available anymore at least not at a cheap price".

In addition to improved demand, North American nickel supply has been dramatically impacted by the 8 month strike at Vale Inco Ltd's operations in Canada, which has kept about 10% of global supply off the market. All of this adds up to a global nickel deficit in 2010. It is a similar story in the ferrochrome market where prices are up 43% since the beginning of the year.

IN the molybdenum market, spot ferromolybdenum prices have increased to around $20/lb from $15/lb at the beginning of the year. While molybdic oxide prices have risen to $18/lb from $11.50.lb. Risks to raw material prices remain firmly to the upside for the next several months. Expectations of rising raw material prices are feeding the higher steel prices, causing a restocking cycle by buyers of stainless and carbon steel, this could stimulate further strong rises for raw materials and steel prices in the coming months.

Copper Prices Leap As Mart Eyes Quake Impact

Copper prices surged Monday as traders tried to gauge the extent of disruption to output from Saturday's earthquake in Chile, the world's top copper producer. Three month copper erased last week's losses, rocketing 3.7% higher to end second ring trade on the LME at $7.360 per tonne on Monday vs. Friday's close at $7,096 per tonne. In New York May delivery copper settled at $3.35/lb up 2% from $3.284/lb on Friday, after earlier hitting highs of $3.487/lb.

It was your typical reaction to a catastrophic event. The 8.8 magnitude earthquake, which saw miners across central Chile and neighboring provinces temporarily shut operations and evacuate workers, closed some 1 million tonnes of copper production Saturday. Chile's largest copper mines are located in the northern regions and were unaffected by the quake. But while the quake's impact on Chilean mine output could be limited other market participants warned it might have far reaching consequences for the global copper concentrates market.

One third of global concentrate production would be out of Chile, and while not all of that is going to be disrupted there is potential that smelters in Japan, China and India that have term contracts may be notified that they may receive lower tonnages in the weeks or months to come. Production could also be impacted further due to problems with Chile's power supply. Over the coming days, power may have to be rationed to provide it to the rest of the country. There could also be delayed consequences for more remote copper mines that draw their electricity from diesel operated power plants, which might face fuel shortages because many of the country's oil refineries have been shuttered by the quake

US Aluminum Premiums Climb to 43 Month High

North American spot aluminum premiums continue to race upward, grazing 43 month highs in the new year as reduced supply and increased demand create a feeling of tightness in the domestic market.

Fewer US imports of aluminum products are one factor behind the supply side tightness in the domestic market. Russia a top supplier of aluminum material and Venezuela's state owned producers have been curbing their North American imports in recent quarters. Even as supply continues to dwindle in the North American market, demand for aluminum is growing stronger every day.

Business has picked up over the holidays and hasn't slowed down since. Traders have seen an up-tick in interest in the first week of the year. We've had good demand. Even at the beginning of the year people are kind of restocking and responding to their orders, so it's been decent demand the trader said. "I think the growth level is coming back slowly and we're going to see improved volumes.

Today's tighter supply and stronger demand would normally drive prices on the LME higher, but sources said it is fund money, not fundamentals, currently supporting the price. Three month aluminum closed second ring trade at $2337.50 per tonne Thursday, up 3.5% from $2,259 .00 at the start of the week. The LME is going on a nice run. At these levels, it's questionable whether people can restart and make money or not. If Alcoa Inc restarts in Tennessee, if Ormet fires back up some potlines, that will put a dent in the premium market.

Aluminum mills' upturn in orders signals bottom

North American aluminum mills reported a slight but significant uptick in orders in May from the previous month, suggesting that the market might have reached bottom after nearly two quarters of slackening demand. "We are finally seeing some stabilization, some signs of maybe an increase," one aluminum trader said.

Extruded products led the charge with orders up 5.3% in May over April. Sheet and plate orders were also on the rise in May. Orders for domestic can stock increased 2.6% in May, with U.S. and Canadian aluminum mills reporting a 3% increase in demand from April. "(Aluminum's) doing really well. This has been a sharp, sharp spike and it's consolidating really nicely," one LME ring trader said.

"The U.S. government is spending money on infrastructure projects and that might be beginning to feed through to aluminum demand, but I still think recovery is a bit tenuous at the moment. The best we can say is there's been a bottoming out – we're at the end of a destocking phase," David Wilson, director of metals research at Societe Generale, said.

Aluminum stocks rose a net of 2,375 tonnes, taking total inventories in LME-approved warehouses to 4,277,775 tonnes as of Tuesday morning.

Aleris hits back at the shareholder over financing

Aleris International, Inc., a Beachwood, Ohio-based producer of aluminum sheet and ingot from scrap, squared off against its lone shareholder Wednesday, offering arguments to a bankruptcy court supporting the structure of proposed Chapter 11 financing for the company during its reorganization.

TPG Capital, based in Fort Worth, Texas, is the sole owner of Aleris' stock. If the dispute delays court approval of interim financing arrangements, Aleris might find it harder to emerge from Chapter 11 in good shape.

Aleris has rescheduled a hearing to approve its $1.075-billion debtor-in-possession bankruptcy loan until March 16th. Until the sum is approved, the court has given Aleris permission to draw some funds to keep the company running.

Aluminum Benefiting From Substitution: Evans.

Stainless Centers Keep a Lid on Stocks; Demand is Strong

Copper Scrap Prices Decline as Offshore Sales Lose Steam