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Sudbury strike, Indonesia lockdown jolt nickel prices

  • Spanish Market: Metals
  • 09/07/21

Supply concerns are pushing up prices across the global nickel complex, as strike action at Vale's Sudbury mine in Ontario dents regional pellet availability and drives up competition for briquettes, while simmering concerns about Indonesia's latest Covid-19 lockdown push the LME three-month (3M) contract to its highest level since 25 February.

Industrial action began at Sudbury on 1 June and market participants are concerned that it could drag on as negotiations stumble, particularly as strikes elsewhere in the regional metal industry have sometimes lasted for months.

Sudbury is one of the world's few producers of nickel pellets and the temporary loss of its output is pushing more consumers to switch to battery-grade briquettes. Nickel stocks in LME warehouses, which are dominated by briquettes, stood at 229,980t yesterday, down from 231,498t a week earlier and their lowest level since April 2020. US briquette premiums rose to 35-37¢/lb yesterday, up from 25-27¢/lb a week earlier.

As briquette supply tightens, some end-users might consider switching to other nickel products, such as cathodes, for which prices are already rising as concerns build. US premiums for full truckload melting grade 4x4inch cathodes were assessed at 35-40¢/lb yesterday, up from 30-35¢/lb a week earlier. Premiums for full truckload plating grade 1x1inch cathodes were assessed at 60-65¢/lb, up from 50-60¢/lb.

Indonesia's Covid-19 surge triggers price hikes

The LME 3M nickel contract had a choppy start to July (see chart), lurching between just under $18,100/t and just over $18,500/t amid various signals from the US Federal Reserve, concerns about Chinese economic growth and exchange rate movements. But today the contract jumped decisively higher, to $18,684/t from $18,190/t yesterday, as Indonesia's latest lockdown restrictions fuelled fresh supply concerns.

It remains to be seen how the pandemic's latest surge actually affects physical volumes, with one broker noting that Indonesia's nickel mining sites are so remote that there has only been a limited impact during previous similar scares.

But the impact on prices has been building through the week, contributing to a rise in China's domestic nickel pig iron (NPI) prices yesterday — up to Yn1,210-1,240/mtu ex-works from Yn1,200-1,220/mtu ex-works a week earlier — and leading to a surge in open interest on the Shanghai exchange over the past 24 hours.

Overall, Indonesia's mined nickel production slipped to 760,000t in 2020 from 853,000t in 2019 amid Covid-19 disruptions, according to industry data. But volumes are still up significantly compared with 345,000t in 2017 and multiple new project developments are expected to push up the country's output significantly in the medium-term, such as PT Huayou Nickel Cobalt, PT QMB New Energy and Morowali Huayue Nickel and Cobalt.

The global demand outlook is strong — particularly from the battery industry — but Indonesia's anticipated ramp-ups, combined with other production hikes planned by suppliers such as Russia's Nornickel, are fuelling expectations that the global nickel market will tip further into oversupply from 2022, potentially weighing on prices.

As of June, investment bank Macquarie estimates a global nickel surplus of 7,000t in 2021, as compared with a 19,000t deficit in 2019. The bank expects this surplus to rise to 193,000t in 2023 and then narrow to 71,000t in 2025.

"We still foresee surpluses through to 2025 but now see some discipline from Chinese investors in bringing on new capacity since there will be excess supply of NPI/ferro-nickel over the next few years," Macquarie said, adding that "while risks to nickel's near-term price are to the downside, a strong post-virus global economic recovery story, combined with large-scale Chinese NPI closures in 2021, could see current prices hold for longer than medium-term fundamentals justify".

China nickel sulphate hits $4,000/t

Looking across to China, restocking activity from the battery and stainless steel industries continues to push prices higher across the nickel suite. The nickel sulphate market has been rising particularly sharply, with Argus' cif China nickel sulphate assessment hitting the $4,000/t threshold earlier this week, up from around $3,450/t cif China on 1 June (see chart).

Import demand is particularly strong because of domestic supply tightness, underpinned by a shortage of mixed hydroxide precipitate (MHP) — an intermediate product needed for nickel sulphate production. Market participants have been hoping the MHP shortage will ease a bit after Lygend began operations at its nickel-cobalt project on Indonesia's Obi island in late May. The first 5,500t of MHP were due to arrive in China in late June. It remains to be seen if Indonesia's latest Covid-19 surge will have any impact on the Obi project's operation and exports.

LME 3M nickel prices choppy but treading higher $/t

Nickel sulphate cif China hits $4,000/t $/t

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05/11/24

Boeing workers approve contract, end strike: Update

Boeing workers approve contract, end strike: Update

Includes additional contract details in 3rd and 4th grafs, and background on Boeing. Houston, 5 November (Argus) — Union-backed machinists approved a new labor contract with aircraft manufacturer Boeing, ending a seven-week work stoppage that halted production of major jet programs and disrupted aerospace supply chains. More than 32,000 factory workers represented by the International Association of Machinists and Aerospace Workers (IAMAW) voted by 59pc to ratify the deal, the local union said late Monday. Employees secured a general wage increase (GWI) of 38pc spread out over the contract's four-year life, a one-time $12,000 ratification bonus and greater 401(k) contributions, among other retirement and health care benefits. The pay raise — a sticking point in prior rounds of negotiations — improved upon Boeing's first two offers of 25pc and 35pc but fell short of the 40pc sought by workers. Still, the union touted that the GWI in the new contract amounts to 43.65pc when compounded. Boeing chief executive Kelly Ortberg acknowledged the past few months "have been difficult" in expressing his appreciation that both sides were able to come to terms. Workers began their strike on 13 September, effectively shutting down Boeing's final assembly lines in Renton and Everett, Washington, where the company produces its flagship 737 MAX aircraft, along with its 767 and 777 programs. That stoppage further exacerbated issues within Boeing's operations that have been under heightened scrutiny since January, when a midair panel blowout led to a mandated production cap on the 737 MAX. Additionally, parts shortages and other supply chain challenges have constrained output of the company's main widebody program, the 787 Dreamliner, this year. The strike itself compelled Boeing to initiate cost-cutting measures with the production halt weighing on its finances . The company on 11 October announced it would lay off 10pc of its total workforce, while confirming on 23 October that it had stopped shipments from certain suppliers to conserve cash. The latest estimate from Anderson Economic Group, which does not account for last week, puts Boeing's losses at $5.5bn and its suppliers' losses at $2.3bn because of the work stoppage. All workers must return to their positions by 12 November but can return as early as Wednesday, the union said. Still, Boeing cautioned that it would take time for operations to stabilize, saying it would have to retrain and recertify employees who did not "get enough time on an airplane" before they went on strike. The company also will have to contend with a supply chain that it "turned off in many cases" because of the work stoppage. By Alex Nicoll Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Boeing workers approve contract, end strike


05/11/24
05/11/24

Boeing workers approve contract, end strike

Houston, 5 November (Argus) — Union-backed machinists approved a new labor contract with aircraft manufacturer Boeing, ending a seven-week strike that halted production of major jet programs and disrupted aerospace supply chains. More than 32,000 factory workers represented by the International Association of Machinists and Aerospace Workers voted by 59pc to ratify the deal, the local union said late Monday. Employees secured a general wage increase of 38pc spread out over four years and a $12,000 ratification bonus, along with other retirement and health care benefits. All workers must return to their positions by 12 November but can return as early as Wednesday, the union said. By Alex Nicoll Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US railroad-labor contract talks heat up


04/11/24
04/11/24

US railroad-labor contract talks heat up

Washington, 4 November (Argus) — Negotiations to amend US rail labor contracts are becoming increasingly complicated as railroads split on negotiating tactics, potentially stalling operations at some carriers. The multiple negotiating pathways are reigniting fears of 2022, when some unions agreed to new contracts and others were on the verge of striking before President Joe Biden ordered them back to work . Shippers feared freight delays if strikes occurred. This round, two railroads are independently negotiating with unions. Most of the Class I railroads have traditionally used the National Carriers' Conference Committee to jointly negotiate contracts with the nation's largest labor unions. Eastern railroad CSX has already reached agreements with labor unions representing 17 job categories, which combined represent nearly 60pc of its unionized workforce. "This is the right approach for CSX," chief executive Joe Hinrichs said last month. Getting the national agreements on wages and benefits done will then let CSX work with employees on efficiency, safety and other issues, he said. Western carrier Union Pacific is taking a similar path. "We look forward to negotiating a deal that improves operating efficiency, helps provide the service we sold to our customers" and enables the railroad to thrive, it said. Some talks may be tough. The Brotherhood of Locomotive Engineers and Trainmen (BLET) and Union Pacific are in court over their most recent agreement. But BLET is meeting with Union Pacific chief executive Jim Vena next week, and with CSX officials the following week. Traditional group negotiation is also proceeding. BNSF, Norfolk Southern and the US arm of Canadian National last week initiated talks under the National Carriers' Conference Committee to amend existing contracts with 12 unions. Under the Railway Labor Act, rail labor contracts do not expire, a regulation designed to keep freight moving. But if railroads and unions again go months without reaching agreements, freight movements will again be at risk. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US light vehicle sales hit 6-month high in Oct


04/11/24
04/11/24

US light vehicle sales hit 6-month high in Oct

Houston, 4 November (Argus) — Domestic sales of light vehicles climbed in October, rising to a seasonally adjusted rate of 16mn on the back of greater truck purchases. Sales of light vehicles — trucks and cars — increased from a seasonally adjusted annual rate of 15.8mn in September, the Bureau of Economic Analysis reported today. Last month's rate was the highest since 16.1mn in April and greater than the 15.3mn unit rate in October 2023. US consumers, boosted by solid hiring and salary gains, stepped up purchases as borrowing costs have started to come down in the wake of the Federal Reserve's half point cut in its target rate in September, the first cut since Covid-19 struck in early 2020. With inflation nearing the central bank's 2pc target, the Fed has signaled another 200 basis points of rate cuts are likely into 2026. Sales of light truck sales increased by 1.6pc to just under a 13mn unit rate in October, while sales of cars rose by 2.2pc to a 3.1mn unit rate in the same timeframe. Domestic auto production rose to a seasonally adjusted rate of 123,900 in September from 121,500 in August. That compared with 143,400 in September 2023. Auto assemblies are reported with a one-month lag to sales. By Alex Nicoll Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Mexico GDP outlook dims in October survey


04/11/24
04/11/24

Mexico GDP outlook dims in October survey

Mexico City, 4 November (Argus) — Private-sector analysts have again lowered their projections for Mexico's gross domestic product (GDP) growth this year, with minimal changes in inflation expectations, the central bank said. For a seventh consecutive month, median GDP growth forecasts for 2024 have dropped in the central bank's monthly survey of private sector analysts. In the latest survey conducted in late October, analysts revised the full-year 2024 growth estimate to 1.4pc, down from 1.46pc the previous month. The 2025 forecast also dipped slightly, to 1.17pc from 1.2pc. The latest revisions are relatively minor compared to the slides recorded in preceding surveys, suggesting negativity in the outlook for Mexico's economy may be moderating. This aligns with the national statistics agency Inegi's preliminary report of 1.5pc annualized GDP growth in the third quarter, surpassing the 1.3pc consensus forecast by Mexican bank Banorte. Inflation projections for the end of 2024 inched down to an annualized 4.44pc from 4.45pc, while 2025 estimate held unchanged at 3.8pc. September saw a second consecutive month of declining inflation, with the CPI falling to 4.58pc in September from 4.99pc in August. The survey maintained the year-end forecast for the central bank's target interest rate at 10pc, down from the current 10.5pc. This implies analysts expect two 25-basis-point cuts to the target rate, most likely at the next meetings on 14 November and 19 December. The 2025 target rate forecast held steady at 8pc, with analysts anticipating continued rate reductions into next year. The outlook for the peso remains subdued, following political shifts in June's elections that reduced opposition to the ruling Morena party. The median year-end exchange rate forecast weakened to Ps19.8 to the US dollar from Ps19.66/$1 in the previous survey. The peso was trading weaker at Ps20.4/$1 on Monday, reflecting temporary uncertainty tied to the US election. Analysts remain wary of Mexico's political environment, especially after Morena and its allies pushed through controversial constitutional reforms in recent months. In the survey, 55pc of analysts cited governance issues as the primary obstacle to growth, with 19pc pointing to political uncertainty, 16pc to security concerns and 13pc to deficiencies in the rule of law. By James Young Mexican central bank monthly survey Column header left October September Headline inflation (%) 2024 4.45 4.44 2025 3.80 3.80 GDP growth (%) 2024 1.40 1.46 2025 1.17 1.20 MXN/USD exchange rate* 2024 19.80 19.66 2025 20.00 19.81 Banxico reference rate (%) 2024 10.00 10.00 2025 8.00 8.00 Survey results are median estimates of private sector analysts surveyed by Banco de Mexico from 17-30 October. *Exchange rates are forecast for the end of respective year. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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