Metals Bulletin is reporting that the Kobe Steel Ltd [TYO:5406] scandal isn’t affecting metals prices. As the company’s share price has dropped almost 35%, metals seemingly dodged a bullet. As Metals Bulletin notes:
‘The investigation into the falsification of aluminium and copper product
specifications by Kobe Steel has not led to any recalls yet nor did it prompt
any order cancellations, with Japanese customers left with few alternative
options in a tight market…’
Aluminium Price Stable
Aluminium has remained steady at US$2,123 per tonne, marginally lower by 0.4%. While copper continue to rally higher, though still lower than its September highs. Currently trading at US$6,683 per tonne, up 0.6% in overnight trade.
While all seems fine for now, there could still be some fallout. Japanese traders believe the full impact is hard to quantify. And with an ongoing investigation, the market isn’t out of the woods yet.
One trader notes:
‘It’s going to be difficult for Kobe Steel’s customers to shift to another
rolling mill in the next few months. But in the long run, it could happen.’
Which means customers could be looking for a new supplier long-term. How that will affect the aluminium price in Japan is unknown at the moment. We’ll just have to see what the wash-up is over the coming weeks.
Other metals also made slight ground in a relatively flat commodities market:
Gold Price — US$ 1,294 an ounce: +0.65%
Iron Ore Price — $60.09 a tonne: +0.6%
Chinese Alumina — US$553.5 a tonne: +4.3%
Gold price still strong as US dollar dips
Minutes from the US Federal Reserve saw the US dollar slide slightly. Mainly due to dovish comments, such as:
‘Many participants thought that another increase in the target range later
this year was likely to be warranted if the medium-term outlook remained
Apparently, that tone wasn’t aggressive enough for the market. Which led to a slight rally for gold.
Another concern is the ongoing tensions between the US and North Korea. Especially as news circulates of a possible new missile test from the rogue state.
RBC Capital Markets strategist Christopher Louney, says the outlook for gold isn’t great either. With all signs still pointing to a Fed rate rise gold prices could pair back. Especially as the metal has struggled to break through the $1,300 an ounce barrier.
Iron Ore Price Stems Bleeding
Chinese traders are back after their golden week celebrations and the iron ore price is certainly thankful for it. Though lower and higher grades didn’t share in the fortune, continuing to fall in prices.
But Business Insider Australia indicates that Chinese futures may provide a sign of hope. They note:
‘After plumbing fresh multi-month lows on Thursday, rebar futures rocketed higher in the latter part of the session on news that authorities in Tangshan, a major steel producing city in the northern province of Hebei, ordered steel mills operating in the city to reduce output a month ahead of schedule in order to improve air quality…’
Chinese alumina supply concerns
Finally, a quick look at China’s domestic alumina market. Supply concerns are putting upward pressure on the domestic price for the metal. Which is a key ingredient in aluminium production.
It’s punishing aluminium smelters whose profit margins are growing slimmer. With the rising costs of raw materials, it could mean aluminium prices could be heading higher.
The news comes as Macquarie bank analyst’s voice their approval for aluminium prices over the next two years. And the bank believes demand won’t be an issue, meaning that supply will be the key factor.
Just something to think about.
Also, something you should be really thinking about is the Aussie dollar. It’s treading water at the moment, but Markets & Money editor, Vern Gowdie believes it’s about to sink. For all the details, read Vern’s report, in full, right here.
Junior Analyst, Markets & Money