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Commodities Roundup: Platinum and Palladium, Market Volatility Takes its Toll and China Shoots to Beat Steel Capacity Cut Timeline

02/09/2018 By

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, our MetalMiner editors scour the landscape for what matters. This week:

Platinum Takes a Bite into Gap with Palladium

Historically, platinum has traded at a premium to palladium. This past fall, however, that trend reversed, as palladium raced past its platinum-group metal (PGM) peer.

But no longer. After several months of following from behind, platinum has come roaring back. As of Feb. 1, platinum was trading at $1,000/ounce, up 6.2% month-over-month, while the U.S. palladium bar price dropped 5.8% to $1,023/ounce.

Palladium’s price has dropped three weeks in a row, meaning the metal’s run of dominance over platinum may be over.

Market Madness

The Dow Jones Industrial Average plunged on Monday, posting a historic intraday drop. The Dow did bounce back, but promptly plummeted again, marking a particularly volatile week amid a large-scale equities selloff.

The CBOE’s volatility index (VIX) closed at 33.46 on Thursday, up 20.7% from the previous closing, signaling greater market volatility.

What do the equities selloff and the tempestuous swings of the market at large have to do with commodities? Stuart Burns explored the relationship between the two earlier this week on the heels of the first market tremor on Monday.

“Meanwhile, commodities in general will experience complex dynamics,” Burns writes. “A stronger dollar will undermine prices and contributed in part to falls in the price of crude and gold last week, but robust global demand and rising global GDP will be supportive of metals prices, particularly for supply-constrained markets like lead and nickel.

“In fact, so tight is the lead market that treatment and refining charges in China are said to have fallen to zero this month as smelters fight to secure supplies.”

China Eyes Ambitious Timetable for Capacity Cut Goals

Excess steel capacity in China has been a topic of much conversation among global trading powers for years, and if China’s recent announcement is actualized, it may provide some relief to steelmakers worldwide.

As Reuters reported earlier this week, the country announced plans to hit its previously announced capacity cut target this year, two years earlier than the previous goal.

Steel producers in the U.S., E.U. and elsewhere have argued for some time that China is flooding the global marketplace with excess, government-subsidized steel, resulting in depressed prices. If China’s recent announcement comes to fruition, that would, on the surface, be a win for those steelmakers around the world.

Copper Cools After Hot Finish to 2017

All markets overheat eventually — copper is no different.

The metal affectionately dubbed “Dr. Copper” surged to close 2017, but has since come down in price, trading flat or down this year. Nonetheless, copper prices still held above the $7,000 per ton mark as of Feb. 1.

That was, of course, before overall market volatility had its hand at roiling commodities.

Copper dipped below $7,000 per ton as of Feb. 7, when it hit $6,880 after an almost 3% drop on Wednesday alone.