Metals Market Update

Metals Market Update – Month/Quarter/Year Ending 31 December, 2012 (See downloadable spreadsheet with all data at bottom of page)

Metals prices closed 2012 with mixed performance compared to November, end of the third quarter, and year-ago levels.  The lack of strong direction reflects ongoing questions buffeting world-wide economies, government policy, and overall demand expectations.

With new year data, though, there are some indicators of improving demand:

December saw Chinese manufacturing log its largest expansion in 19 months.

  • UK manufacturing - though still quite weak (with a November decline) showed its best performance in 15 months according to December PMI data (though the Eurozone overall continued to lag).  See
  • US homebuilding continued to expand in December, and automotive demand is expected to reach 15.5 million units in 2013.
  • The Institute for Supply Management’s manufacturing index jumped to 50.7 (growing), up from a three year low in November.
  • US job growth expanded – including strong manufacturing additions of 25,000 jobs – 1/6thof all US jobs created in December.

Given those indicators, stable/jumbled metals pricing may simply be the calm before a tide of rising prices.  That said, pressure against price hikes will be supported by relatively low immediate demand and reasonable inventory levels (growing significantly vs. year ago for some metals).  2012 US raw steel production logged only a 2.6% gain vs. 2011, and mills were operating at a tepid 72.5% of capacity for November and December 2012, compared to 75% for the same period in 2011.

That said, base metal pricing is decidedly lower than two years ago, off nearly 20% on average compared to December 2010/January 2011 pricing.  So… take comfort for now, but prepare for increases should demand improve.

Data for year-end 2012, comparing quarterly and year-ago LME pricing and inventory levels (spreadsheet below):

Aluminum closed December down 1% compared to end of 3rdquarter averages, but up 3% year over year.  2 year change:  DOWN 17%.  LME inventories were 5% higher than year ago levels – not likely a substantial enough difference to affect pricing.

  • Copper lost 2.5% compared to end of Q3 averages, but remained a 4% gainer for the year.  2 year change:  DOWN 19%.   LME inventories show a decline of 14% vs. year ago levels, which risks magnifying the price effect of any unexpected demand surges.
  • Lead gained strength in the 4thquarter, ending up 6.7% over September averages.  One of the year’s strongest gainers with a 17% increase.  Two year change:  DOWN 10%.  LME inventories are down 10% compared to year ago levels.
  • Molybdenum closed the 4thquarter with a 5% gain, which was not enough to offset a nearly 11% loss for the year.  Two year change:  DOWN 30%.  LME inventories are down nearly 50% compared to year ago levels.
  • Nickel was nearly even with end of third quarter levels, down just 0.7%.  Off 6.5% for the year.  Two year change:  DOWN 31%.  LME inventories suggest nickel is well supplied compared to a year ago, up 57%.

Next Update:  For week ending Friday, 11 January, 2013.