Copper prices drop in February
Consumer prices in China dropped 0.8% year over year in January, marking the country’s steepest decline in CPI since September 2009.
Why it matters: Copper prices dropped in response to the economic news out of China. On Monday, February 12, copper opened at $3.71, up $0.03 from Friday’s close. The downward trend is a pivot from the end of January, when news that China was adjusting interest rates lifted copper prices toward $3.93.
Big picture: The year-to-date copper average is $3.81. The annual copper average in 2023 was $3.86.
Looking ahead: The copper supply outlook has tightened after the closure of Panama’s Cobre Panama mine, causing copper smelters in China to lower first-quarter rates for copper processing treatment and refining charges.
Some analysts predict copper prices could increase by 75% to reach record highs over the next two years as supply disruptions continue and demand increases due to green energy transition projects.
U.S. aluminum smelter closes
Magnitude 7 Metals, the second-largest aluminum smelter in the U.S., shut down operations on January 28. The Marston, Missouri, smelter produces around 30% of the total aluminum produced in the U.S. A letter from plant management said Magnitude 7 is looking for potential investors to restart operations in the future.
Why it matters: So far, no changes to the market have been announced, but the plant’s closure will likely tighten aluminum supply.
Big picture: Aluminum opened at $1.19 on February 12. The year-to-date aluminum average for 2024 is $1.19. In 2023, the average price of aluminum was $1.26.
Facility maintenance is still tightening steel supply
Steel suppliers started the year with a price increase in January. Some supply is still out of the market as furnaces remain in maintenance mode, increasing demand.
Why it matters: Vendors report raw material is in good supply, but challenges with flatbed logistics and plant maintenance schedules stay in play.
What else we’re watching: A couple factors have the potential to disrupt the steel market.
Cleveland-Cliffs Inc., a U.S. steelmaker, argued in a regulatory filing that its cash-and-stock offer to acquire U.S. Steel was worth $1.4 billion more than the winning bid from Japan’s Nippon Steel.
- Nippon offered $55 per share, while Cleveland-Cliffs’ final offer was $54 per share. Cleveland-Cliffs said synergies between the two projects would add $6.50 per share to U.S. Steel shareholders.
- The Nippon-U.S. Steel deal has drawn concern from some members of congress about its effect on supply chains, national security and U.S. steelworkers.
Car makers like Volkswagen, Toyota, General Motors and Tesla are making more cars in China, but it puts them at risk of using forced labor as part of their supply chains in China, according to a report by Human Rights Watch.
PVC prices continue to decline overall
Overall, the PVC market continues to decline as demand softens and vendors and distributors maintain healthy inventory levels.
News roundup
The Federal Reserve (Fed) decided to hold interest rates at its January 31 policy meeting. In a statement issued after the meeting, the Fed said it will need to gain greater confidence that inflation is moving toward the goal of 2% before cutting interest rates. Other central banks are making similar decisions.
Conflict in the Middle East has not yet disrupted oil prices, but we continue to watch the situation closely. Some factors that could affect oil and other commodity prices include:
- The reach and duration of the conflict. As the Israel-Hamas war has continued, the U.S. has become more involved, launching airstrikes against Houthi militant targets and Tehran-backed groups in Yemen, Iraq and Syria in retaliation for attacks on cargo ships and U.S. troops in Jordan.
- Houthi attacks on cargo ships in the Red Sea heading toward the Suez Canal. Some major shipping groups have rerouted ships to travel around the southern tip of Africa, which uses more fuel and takes more time.