Commodities Roundup: Chinese Steel Prices Drop, Copper Price Rises, USGS Releases Annual Mining Survey

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, our team at MetalMiner scours the landscape for what matters. This week:

Chinese Steel Prices Ease

As Stuart Burns, MetalMiner’s editor-at-large, reported earlier this week, Chinese steel prices have eased up as winter demand has cooled.

“On the one hand, Beijing is constraining polluting industries like steel and coke production,” Burns writes. “Those same policy decisions, however, are hitting industries that consume finished products, such as construction (at least in the industrial northeast, where environmental pollution action has been most active).”

Prices likely would have fallen even more, Burns argues, were it not for government-mandated capacity closures. In December, China’s average daily steel output dropped 1.9%.

Dr. Copper in the House

Meanwhile, copper rose this week. Copper is inversely correlated with the U.S. dollar, meaning when the dollar’s strength wanes, copper prices rise.

London Metal Exchange copper prices steadily declined in January, to a Jan. 23 price of $6,904.50 from $7,202 per ton on Jan. 4. The price has regained upward momentum, however, rising to $7,100 as of Jan. 31.

During that span from Jan. 23-31, the U.S. dollar index fell to 89.15 from 90.12, according to MarketWatch data, hitting its lowest level in more than three years.

A Bullish Beginning

The bullish sentiment of 2017 continued throughout January 2018, reports MetalMiner’s Irene Martinez Canorea.

“This month, bullish sentiment in the industrial metals complex has extended to all base metals, as well as steel,” she wrote. “Commodities remain bullish, while the U.S. dollar continues to look more bearish.”

In the process, the divergence from the historical trend of negative correlation between commodities and the dollar, seen in the first half of last year, is gone.

“Commodities (tracked via the CRB index) and the U.S. dollar have historically correlated negatively,” she added. ”This means that when one increases, the other decreases. The opposite also applies. Despite this correlation, the first six months of 2017 showed a divergence in this trading relationship. Both traded down, the CRB and the U.S. dollar.”

USGS Releases Annual Mining Report

In its annual report, the U.S. Geological Survey said the U.S. mining industry produced $75.2 billion in minerals in 2017.

While the U.S. is 100% dependent on foreign sources for 21 minerals — up from 11 as of 1984, according to the report — there is good news for other sectors. For example, in 2016 and 2017, gold mines have opened operations in Nevada and South Carolina.

U.S. metal mine production in 2017 hit an estimated $26.3 billion, up 12% from 2016. Despite higher prices for metals, domestic production was actually lower than the previous year, the report stated.

For example, for the aluminum sector — which is anxiously awaiting the results of the Trump administration’s Section 232 investigation of aluminum imports — 2017 proved to be another down production year. Primary aluminum production fell for the fifth straight year, according to the USGS report, dropping 12% to reach its lowest level since 1951. Meanwhile, aluminum imports increased by 16%.