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Commodities Roundup: Base Metals Trend Sideways (For Now), Section 232 Aluminum and World Steel Output in 2017

01/26/2018 By

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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:

Base Metals Trend Sideways

Last year saw base metals prices skyrocket. Metals like copper and aluminum soared, including in December.

Therefore, it’s not surprising to see some metals track back or flatten out in early 2018, as profit taking occurs or, as our Irene Martinez Canorea puts it, metals take time to digest previous gains.

With that said, it’s still a bullish run for base metals — the rally isn’t over just yet.

“Despite the possibility that the base metals rally could actually have started to peak, the evidence of the bulls still seems to outweigh the case for the bears,” Martinez Canorea writes. “No current indicators signal the end of this bullishness for base metals.”

Take “Dr. Copper,” for example. LME copper sat at $6,924/ton on Wednesday after hitting $7,215 on Dec. 28. Previously, the metal had hit a then-2017-high of $7,023 before leveling out and eventually falling to $6,530 on Dec. 7. From that point, in the span of three weeks LME copper rose 10.5% to the aforementioned $7,215. In short, it’s a story of gains, “digestion” and more gains.

In the case of copper, whether more upward price movement will happen remains to be seen, but developments like copper mine labor negotiations in Chile could put a squeeze on supply and, thus, send prices up.

Global Crude Steel Output Rises 5.3% in 2017

The World Steel Association’s annual report covering the last calendar year shows global crude steel output jumped 5.3% compared to 2016.

Unsurprisingly, China led the way in output,and even saw its percentage of global output increase slightly despite Beijing-led efforts to curtail capacity on environmental grounds.

China produced 831.7 million tons in 2017, up 5.7% from 2016, upping its percentage of the global share to 49.2% from 49.0%.

Meanwhile, the U.S. produced 116.0 million tons, up 4.0% from 2016.

Section 232 Aluminum Report Moves to Trump

U.S. Secretary of Commerce Wilbur Ross sent his Section 232 report on aluminum imports to the president for his consideration last Friday, the Department of Commerce announced Monday.

The move comes one week after Ross sent President Trump his report on steel imports. The actions came ahead of the statutory 270-day deadline, as the two probes were launched in April 2017.

Section 232 of the Trade Expansion Act of 1962 gives the president authority to take action if imports of a product are determined to impact the country’s national security. According to the law, the president has 90 days to decide on how to respond to the secretary of commerce’s recommendations as of receipt of the report.

Brent Crude Oil Prices Hit Highest Point Since 2014

Prices for Brent crude passed $71 per barrel Thursday for the first time since 2014.

The reasons? According to Reuters, it comes down to a struggling U.S. dollar, tighter global supply and a decline in U.S. crude inventories.

After opening the year above 92.0, the dollar index has steadily lost ground, dropping to 88.76 as of Thursday afternoon, according to MarketWatch data.

Output reduction efforts introduced by OPEC and Russia last year, not to mention political instability in Venezuela, have put a dent in supply.