Commodities Roundup: Auto Sales, Construction Spending and China’s Rare Earth Output

Toyota supply chain Rainer Plendl/Adobe Stock

For the buyers and category managers out there, especially those of you deep in the weeds of buying and managing commodities, here’s a quick rundown of news and thoughts from particular commodity markets.

From price movements to policy decisions, we scour the landscape for what matters. This week:

U.S. Automakers Report October Sales

Earlier this month, automakers reported their October sales, to varying results.

General Motors, which reports on a quarterly basis, announced its third-quarter North American sales fell 9.8% compared with Q3 2017. However, GM reported its average transaction price in the U.S. rose to $36,000, marking an increase of $800 year over year.

Similarly, Ford reported an increase in average transaction price, up to $36,800 for October.

Fiat Chrysler, meanwhile, saw its October sales rise 16% year over year.

U.S. Construction Spending Flat

Construction spending in the U.S. flattened in September, according to recent U.S. Census Bureau data.

However, September spending was up 7.2% from September 2017. In addition, spending through the first nine months of the year rose 5.5% compared with the first nine months of 2017.

A number of construction sector metals saw price decreases, including U.S. shredded scrap steel, which dropped 2.3% month over month.

China’s Rare Earths Output

Rare earths like neodymium and compound oxides are valued by high-tech sectors for a variety of uses, most commonly associated with electric vehicles, cellphones and laptops.

However, a challenge for manufacturers around the world comes in the form of China’s overwhelming dominance of the rare-earths sector, as China accounts for more than 90% of global rare-earths output.

As such, supply-side policy decisions from Beijing are crucial.

Reuters recently reported data suggesting China was cutting back on output in an effort to boost prices; however, in a recent statement China’s Ministry of Industry and Information Technology denied the report.

Cobalt Supply Chain Under the Microscope

Similar to our recent post on the global gold supply chain, cobalt is also under the microscope.

A majority of the world’s cobalt is mined in the Democratic Republic of the Congo (DRC), which has struggled with violence and political instability in recent decades.

The cobalt supply chain has been under scrutiny, with reports from NGOs like Amnesty International calling out some of the biggest companies in the world for their lack of action to assure they are ethically sourcing cobalt.

In addition, a recent report by the Enough Project also delved into human rights issues regarding cobalt mining in the country, which include unsafe labor conditions and the use of child labor.

Copper Price Retraces

The LME copper price fell in October, dropping below the $6,000/mt level.

As MetalMiner’s Irene Martinez Canorea noted this week, the global copper market has run a deficit this year.

Tariff Waiver Controversy

It’s no secret that the U.S. Department of Commerce’s tariff exclusion request process has come in for significant criticism throughout the second half of this year.

U.S. companies have sought exclusions from the Trump administration’s tariffs on steel and aluminum, making the case that a particular form of steel or aluminum is not made domestically in the quantity or quality necessary for their manufacturing purposes.

MetalMiner’s Stuart Burns recapped the controversy enveloping the process.

Domestic Steel Price Momentum Slows

As Martinez Canorea also noted this week, domestic steel price momentum slowed again in October.

“Domestic steel prices have showed slowing momentum since June 2018,” she wrote. “Domestic steel prices increased sharply at the beginning of the year, driven by a bullish market in commodities and industrial metals and the Section 232 tariffs.

“Buying organizations may want to remember that domestic steel prices have remained at more than seven-year highs this year.”

However, she also notes that according to historical steel price cyclicality, buyers may see price increases from November to January.

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