Commodities Roundup: Housing starts, steel prices and Greenland’s melting ice

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.

MetalMiner, a sister site of ours, scours the landscape for what matters. This week:

Housing starts surge in August

Privately owned housing starts jumped in August, according to the U.S. Census Bureau and Department of Housing and Urban Development.

Housing starts rose 12.3% compared with July and 6.6% on a year-over-year basis.

Steel companies post downcast third-quarter guidance

Amid falling steel prices, many steel companies issued underwhelming third-quarter guidance.

U.S. steel prices surged last year in the months following the Trump administration’s imposition of tariffs on imported steel (and aluminum); however, steel prices began a steady decline in mid-2018.

Nucor, Steel Dynamics and U.S. Steel all referenced falling steel prices in their third-quarter guidance.

“The impact of falling steel prices through the second quarter, combined with the impact of a larger-than-expected drop in scrap prices on market sentiment, is expected to negatively impact Flat-rolled earnings in the second half of the year,” U.S. Steel said.

“As a result, our current assessment of the Flat-rolled segment suggests two blast furnaces will remain idled through at least the end of the year.”

Building a green brand

MetalMiner’s Stuart Burns delved into the concept of greener practices serving as a brand-burnishing tool for aluminum companies.

Among those firms is Russian aluminum giant Rusal, which powers all of its smelting capacity via hydroelectric power.

While popular consciousness of the issue of climate change may not have been as ubiquitous 20 or 30 years ago as it is today, reducing carbon footprints can be a major boost to a company’s image in today’s business climate.

“Now, the producer’s carbon footprint is a very significant contributor to its brand strength — either a huge asset, if it is near zero, or a huge negative if the firm has a significant negative carbon footprint,” Burns wrote.

“Rusal has made efforts in recent years to close its few aging coal-powered generating facilities and invested in its hydro plants, both for energy security and because it had the vision to see that a total reliance on near zero-emission hydropower was a potential major brand strength.”

Global copper production down

According to a recent International Copper Study Group report, global copper mine production for the year through August fell 1.4% on a year-over-year basis.

Refined copper production was also down 1%.

LME copper prices had been sliding since March but have experienced a modest recovery in September, picking up just over 1%, according to MetalMiner IndX data.

U.S. steel capacity utilization rate drops to 80.6%

For the second straight week, the U.S. steel industry’s capacity utilization rate lost one-tenth of a percentage point.

The rate for the year through Sept. 21 fell to 80.6% (after falling from 80.8% to 80.7% the previous week).

However, steel production for the year through Sept. 21 is up 3.6% compared with the same period in 2018.

Rare earths in Greenland

Circling back to climate change, the melting of the sheet of ice covering Greenland has many considering the possibility of new resources being opened up on the island.

“A recent report by the Brookings Institution explores both the opportunities and challenges in exploiting an area rich in iron ore, lead, zinc, diamonds, uranium, oil and, crucially, rare earth minerals,” Burns wrote.

While it remains difficult to quantify Greenland’s mineral resources, many countries and companies around the world will be eager to mine any resources that become exploitable — particularly rare earths, given China’s overwhelming dominance of the rare earths mining and processing sectors.

U.S.-China steel price spread

MetalMiner’s Belinda Fuller checked in on the spread between U.S. and Chinese steel prices, particularly given the recent devaluation of the yuan.

“The price spread between U.S. and Chinese steel increased during the months following the March 2018 implementation of tariffs on steel imports into the U.S.,” Fuller explained.

“After peaking around June 2018, the price spread between U.S. and Chinese steel commodity prices then shrank again by July 2019 — to its lowest level since December 2017 — largely due to falling U.S. prices.”

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