MARKET DYNAMICS

• As a step to Q4 2024, the global economic outlook indicates moderate growth, bolstered by easing inflationary pressures and resilient manufacturing activity.  Global manufacturing production has been resilient.  Output has increased for six consecutive months, particularly in the consumer and intermediate goods sectors.  However, goods production has declined for the second time in three months.
• Among the 30 nations with June PMI data, 18 reported increased output, with Asia performing exceptionally well.  India, Vietnam, and Thailand showed strong growth, while China and Japan experienced moderate expansions.
• China's subdued economic performance and the absence of concrete fiscal policy changes following its Third Plenum contributed to a cautious narrative in the base metals space.  This situation will likely persist until more evident signs of economic stimulation exist.
• US stock markets closed significantly lower amid further concerns of an economic recession triggered by weak employment data.  Manufacturing activity showed a more severe contraction in early August.  In July, the US economy added only 114,000 non-farm jobs, compared to June's downwardly revised figure of 179,000.  The unemployment rate rose from 4.1% to 4.3%, reaching a historical high since Oct.2021.  As a result, market expectations for the first Fed interest rate cut in September have increased and are priced in with a 90% probability.
• Europe provides a foundation for continued economic stability.  The ECB's recent interest rate cut from 4% to 3.75% and potential further cuts in September are expected to support borrowing and investment, contributing to economic growth.  While challenges persist, particularly in business investment and geopolitical uncertainties, the trajectory points toward a sustained recovery.  This moderate growth and resilient manufacturing sectors suggest a stable yet cautious path forward for the global economy.

TECHNOLOGY OVERVIEW

INERT ANODE TECHNOLOGY

• Traditional carbon anodes in aluminum smelting release significant amounts of greenhouse gases. Inert anodes, made of materials that don't react during electrolysis, offer a potential solution for eliminating these emissions, making the process considerably more environmentally friendly.  

ADVANCED RECYCLING TECHNOLOGIES

• Sorting and separation technologies are becoming more sophisticated, allowing better aluminum scrap recovery and purification.  
• Novel recycling processes, like mechanical and pyrolysis, are being developed to recycle complex aluminum alloys and composites, increasing the overall recycling rate and reducing reliance on primary production.

DIGITALIZATION AND AUTOMATION

• Industry 4.0 technologies, such as IoT sensors, data analytics, and machine learning, are being deployed throughout the aluminum supply chain to optimize processes, improve efficiency, and reduce waste.  
• Robotic automation is used in various stages, from smelting and casting to machining and finishing, increasing productivity and improving safety.  

BLOCKCHAIN TECHNOLOGY

• Blockchain is being explored to enhance transparency and traceability in the aluminum supply chain. This can ensure the authenticity and sustainability of aluminum products, providing greater visibility into their origin and production methods.  

LIGHTWEIGHT AND ALLOY DEVELOPMENT

• New aluminum alloys with improved strength, formability, and corrosion resistance are being developed, expanding applications and enabling the production of lighter and more durable products.
• Lightweighting techniques, such as advanced extrusion and casting processes, optimize material usage and reduce the weight of aluminum components, benefiting industries like automotive and aerospace.

RECENT DEVELOPMENTS

Date	Aluminium Supplier	End User (Company 2)	Development Type	Description	Deal Value
August 2024	Hindalco Industries (India)	-	Expansion	Hindalco Industries, which is part of the Aditya Birla Group, is planning a significant expansion with investments totaling $10 billion.	$10 Billion
July 2024	Vedanta aluminium (India)	-	Expansion	Vedanta aluminum, India’s top aluminum producer, has expanded its fleet of electric lithium-ion forklifts to 66 units, making it the biggest user of these forklifts in India. The company added 22 more electric forklifts at its smelter in Jharsuguda, Odisha, to further its sustainable operations.	-
May 2024	Hydro aluminium (US)	-	Expansion	aluminum and renewable energy company Hydro has decided to invest USD 85 million in a new casting line to strengthen its aluminum recycling plant in Henderson, Kentucky. The new line will become operational in 2026 and supply the US automotive market with high-quality automotive components.	$85 Million

Source: Press releases & company websites

DEMAND/SUPPLY OVERVIEW

 DEMAND COMMENTARY

• The outlook for aluminum demand is positive, with sustained growth expected in the coming years.  The combination of solid sector demand, sustainability advantages, and technological advancements positions aluminum as a critical material for many industries.

SUPPLY ANALYSIS

• Supply-side, some aluminum smelters in Sichuan Province have restarted operations following facility upgrades.  Sichuan is a significant player in China's aluminum industry, and these restarts could impact the overall supply dynamics.
• Yunnan province has also seen restarts finish, suggesting its idle capacity is operational.  With the flood season comes ample hydroelectric power, a cost-effective energy source for smelting aluminum.  This adds to the potential increase in China's total aluminum operating capacity.
• On the demand side, the spot market for aluminum in Europe and the US is currently subdued.  Sellers and traders hold on to materials and are reluctant to sell at the current low London Metal Exchange (LME) prices. Buyers are stepping back from the spot market due to reduced demand for their products during summer.  This seasonality effect is contributing to the quiet market conditions.
• In China, downstream semi-fabricators face weak demand, including those producing sheets and plates.  Few new orders are being placed, indicating a sluggish market tone.

PRICING SITUATION

• The fundamental disturbance of the electrolytic aluminum market in the year's second half is limited.  And the main driving logic may still be the macro-driven capital preference.  In the "gold nine silver ten" consumption season, aluminum prices are expected to increase again.  Still, the supply side of the continued high operation may limit the upside of aluminum prices.
• China's increasing alumina production and quiet summer season consumption limited the price.
• Currently, consumption remains subdued, and the destocking process in China has been slower than expected, leading to a generally weak trend in aluminum prices.  However, improving the local conversion rate of aluminum water and policy guidance and the growth of demand in areas such as new energy vehicles and photovoltaics may support aluminum prices.

MARKET DYNAMICS

• China's Caixin Manufacturing PMI for July was 49.8, indicating a contraction in new orders. In July, the prosperity of China's manufacturing sector slowed for the first time in nine months, with a contraction in new orders, a decline in the purchasing volume index, and a significant slowdown in output growth.
• In the Asian market, China's interest in imports remained subdued due to high offer prices and limited spot availability in July. In contrast, exports of refined copper reached a high record. Southeast Asia also experienced minimal spot liquidity, compounded by ongoing port congestion.
• In the United States, the market maintained a slow pace, typical for the season, with little movement and stable premiums. European markets were similarly quiet, affected by the summer lull, with stable premiums in Germany, Italy, and Rotterdam. Overall, the market was characterized by low demand, limited trading, and stable-to-slightly decreased premiums in crucial regions.
• The decline in the official cash price of copper on the London Metal Exchange in July was primarily due to bearish economic expectations about China. The absence of significant economic measures during the Third Plenum reinforced this bearish sentiment towards base metals such as copper.

TECHNOLOGY OVERVIEW

BIOLEACHING AND BIO-OXIDATION

• These technologies utilize naturally occurring bacteria to extract copper from low-grade ores or concentrates, reducing the need for energy-intensive smelting and refining processes. This approach has the potential to improve resource recovery and decrease environmental impact.  

SOLVENT EXTRACTION AND ELECTROWINNING (SX-EW)

• This hydrometallurgical process is gaining popularity as an alternative to traditional smelting, particularly for processing oxide ores and secondary copper sources. SX-EW offers lower energy consumption, reduced emissions, and increased flexibility in handling feed materials.

ADVANCED SMELTING TECHNOLOGIES

• While traditional smelting remains a crucial process in copper production, advancements in furnace design, process control, and gas capture technologies improve efficiency and reduce environmental emissions.

IMPROVED SORTING AND SEPARATION TECHNOLOGIES

• Advances in sensor-based sorting and automated separation techniques enable better recovery and purification of copper from complex scrap streams, increasing the efficiency and economic viability of recycling.

URBAN MINING

• The concept of "urban mining" involves recovering valuable metals, including copper, from electronic waste and other end-of-life products. This approach reduces reliance on virgin ore mining and helps to conserve resources.

RECENT DEVELOPMENTS

Date	Copper Supplier	End User (Company 2)	Development Type	Description	Deal Value
August 2024	BHP (Australia)	-	Expansion	A new incentive regime for mining in Argentina is attracting major players such as BHP, who are starting to eye the South American country as the world's next frontier for copper, more than half a dozen mining industry officials told Reuters. BHP's investment last month marked the company's first foray into mining in Argentina in two decades.	-
July 2024	Glencore (Switzerland)	Cyprium Metals (Australia)	Partnership	Cyprium Metals announced a commercial strategic partnership with global commodities giant Glencore on July 26. In a press release, Cyprium said the deal is geared at accelerating the resumption of production from its Nifty copper complex, located in Western Australia's Pilbara region.	-
June 2024	Freeport-McMoRan (US)	-	Expansion	Freeport-McMoRan Inc. unlocks a large mine’s worth of copper from vast stockpiles of waste rock in an “aggressive” push to boost the supply of the metal as global demand climbs.	-

Source: Press releases & company websites

DEMAND/SUPPLY OVERVIEW 

DEMAND COMMENTARY

• Market consumption is still weak, and purchasing demand is relatively average. It is difficult for processing companies to see a significant increase in new orders, and they mainly need to receive goods during the day when bargain hunting occurs. In August, copper prices fluctuated wildly in the short term, and the cautious wait-and-see sentiment in the downstream continued. Overall, under the background of the off-season. Downstream consumption shows no signs of sustained improvement. 

SUPPLY ANALYSIS

American market

• Copper consumption in the US market has increased, but the growth rate of copper consumption is expected to slow in the second half of the year due to economic pressures.

Asia market

• Refined copper in China is oversupplied. However, overall supply and demand are slightly short, and the degree of shortage depends on the price correction amplitude.

PRICING SITUATION

ASIA MARKET

• As copper prices fall, holders still strongly support the price. In addition, inventory continues to be restocked. Some companies still expect rising prices in the future. Their willingness to ship at low prices is relatively limited, and the overall stabilization range is mainly operating. 

EUROPEAN MARKET

• Copper prices may be supported by an expected increase in copper consumption in emerging sectors in overseas markets (excluding China) in 2024 and an expected shortage in the overseas refined copper market.

US MARKET

• Copper prices declined for a fifth week amid unusual market volatility until August 9. However, a potential softening of the US dollar and improved global liquidity could lead to a recovery by the year-end.

MARKET DYNAMICS

• In the USA, geopolitical tension, election jitters, and adjusting to a new normal undermine economic fundamentals.
• In China, the construction sector remains weak, and increased trade restrictions will limit export opportunities, potentially adding to inventories.  The demand for steel in the manufacturing industry may significantly weaken.  Q3 is the traditional off-season.  Historical data shows that major steel-consuming industries in the hot rolling sector, such as automobiles and home appliances, exhibit notable weakness during the summer.
• In the Eurozone, demand has reached the bottom and is poised to improve from low levels.  The weak trading activity in the steel market can be attributed to a combination of seasonal factors and underlying demand weaknesses.  This situation is further exacerbated by the underwhelming performance of the automotive sector, a significant consumer of steel products.

TECHNOLOGY OVERVIEW

GREEN STEELMAKING

• The steel industry is actively pursuing decarbonization efforts. This includes the development of technologies like hydrogen-based steelmaking (replacing coal with hydrogen), carbon capture and storage, and electric arc furnaces powered by renewable energy sources. These innovations aim to reduce the carbon footprint of steel production significantly.  

ADVANCED HIGH-STRENGTH STEELS (AHSS)

• These steels offer superior strength and durability to traditional steel grades, allowing for lighter, more fuel-efficient vehicles and structures. Continuous research and development are leading to the creation of stronger and more versatile AHSS grades.  

3D PRINTING

• Additive manufacturing, or 3D printing, enables the production of complex and customized steel components, offering greater design flexibility and reducing material waste. This technology is beneficial for prototyping and low-volume production.

RECENT DEVELOPMENTS

Date	Steel Supplier	End User (Company 2)	Development Type	Description	Deal Value
June 2024	SAIL (India)	-	Business Development	Steel Authority of India (SAIL), the public-sector giant, has announced plans to establish a cutting-edge steel plant in Burnpur, West Bengal, with an investment of Rs 36,000 crore. This initiative is poised to be Bengal’s most significant industrial project investment in recent years.	₹360 Billion ($4.3 Billion)
June 2024	JSW Steel (India)	-	Business Development	JSW Steel USA, a subsidiary of JSW Steel, plans to invest $110 million to modernize its steel plate mill in Baytown, Texas.	$110 Million
May 2024	ArcelorMittal (India) (+ Nippon Steel (Japan))	-	Business Development	ArcelorMittal Nippon Steel India, a joint venture between steel giants ArcelorMittal and Nippon Steel will include a new 2 million tonne cold rolling mill and an upstream hot strip mill, targeting the fast-growing automotive sector with specialty steel grades, at its flagship plant in Hazira, Gujarat.	₹600 Billion ($7.15 Billion)
September 2023	POSCO (South Korea)	-	Business Expansion	South Korean steel company POSCO is considering the possibility of opening a steel plant in India. Opening a steel plant in India will allow POSCO to meet the growing demand for the company’s automotive steel.	-

Source: Press releases & company websites

DEMAND/SUPPLY OVERVIEW

 DEMAND COMMENTARY

• The demand for long products in the US is softening, influenced by seasonal factors like summer doldrums and increased cautiousness among steel buyers.  This caution is partly due to fears of a potential US recession, exacerbated by a weaker-than-expected jobs report.
• However, steel demand is expected to remain healthy in the coming years. Infrastructure investments, urbanization, and the growing adoption of renewable energy and & vehicles support this demand. The industry's ability to adapt to supply chain challenges, decarbonize its operations, and leverage technological advancements will be crucial in meeting this rising demand and ensuring a sustainable future.

SUPPLY ANALYSIS

• Structural changes in production capacities, such as Tata shutting down its blast furnaces in the UK permanently and Ilva's minimal output due to technical issues.  ThyssenKrupp also announced plans to reduce capacity by 1.5-2 million tons annually.
• German distributors of flat steel are reported to have low stocks from a BDS (Beck & Döring System) data perspective.  However, distributors are cautious about restocking due to the uncertain market conditions.  They may anticipate further price drops or continue to face weak demand, making them hesitant to commit capital to additional inventory that could become unsellable or decrease in value.

PRICING SITUATION

• Chinese mill margins declined in July mainly due to lower steel prices after destocking among many steel mills ahead of revised rebar standards.  The destock ahead of the September 25 deadline.
• Chinese HRC and plate export prices will find a floor soon and adjust higher towards the end of the year.  Key drivers for this recovery include government intervention to reduce production, resolving regulatory issues in the rebar market, and the need for steel mills to restore profitability.
• European HRC prices have slowly trended lower.  End-user demand remains weak.  However, import restrictions and low inventories support the market, although the upside is limited.
• US domestic rebar prices bottomed at $750 a short ton in mid-July.  While there has been a slight uptick in demand, with some funding from the IIJA bipartisan infrastructure bill starting to flow upward, pricing movement is still limited due to a combination of weak demand, excess supply, and overall slow market activity.

ALUMINUM

• Due to heightened macroeconomic concerns and the supply-demand mismatch in the Chinese aluminum market, we believe it will be difficult for aluminum prices to generate upward momentum in the short term.
• Aluminum supply continues to face uncertainty in the medium term.  While the easing tightness has caused aluminum prices to drop, we do not expect domestic aluminum or LME prices to fall below the levels seen in March 2024.

COPPER

• Continually weaker than anticipated Chinese demand, combined with Western recession concerns and LME inventories leaping over 100% over the past seven weeks, has pushed copper base prices to their lowest levels since March, at $3.96 per pound.
• While bearish market sentiment persists, the potential upside could arrive via robust economic stimulus rollouts from China or the US Fed, signaling a quicker pace of interest rate cuts in response to weaker economic conditions.
• Recent macro factors have continued to disrupt the market, and overall, judging from the current situation, the demand side is still weak, with a significant year-on-year decline.
• Supply-side holders are actively supporting prices. Copper prices in Q4 are expected to maintain wide fluctuations. 
• Market dynamics and price forecasts vary by region and material, and overall, the market is likely to gradually find a new equilibrium after a certain degree of adjustment.

STEEL

• In the first half of 2024, the European steel industry faced challenges with declining prices. Steel prices may decrease in the short term and gradually improve.
• The demand for steel in the US market increased in the first half of 2024 but may face economic pressures in the second half, with the demand growth rate expected to slow down.
• In the first half of the year, China's steel market experienced an oversupply, putting downward pressure on prices.  In the second half of the year, the iron ore market is anticipated to continue to show a pattern of solid supply and weak demand, leading to a lower price center.  The trend may initially decline before rising.