Commodities Roundup: China to Offload Excess Aluminum, LNG Price Holds Steady Despite New Supply

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:

China Looks to Offload Excess Aluminum

Excess metal capacity in China has been a topic of intense discussion around the world, especially in recent years, as producers in the U.S. and the E.U. point to the depressing effect on prices caused by the glut of Chinese metal in the global marketplace.

With an increase in import restrictions, however  — and the Trump administration’s pending Section 232 aluminum probe, which could result in further restrictions in the form of tariffs, quotas or a tariff-quota hybrid approach — the Chinese government is looking to find buyers for excess aluminum.

MetalMiner’s Stuart Burns covered the subject earlier this week.

“Over the last year we have seen LME aluminum inventory fall while SHFE has been on a relentless rise,” he wrote. “Not surprisingly, the SHFE aluminum price has fallen to a discount from the LME when VAT is stripped from the price. Exporters of semi-finished products are able to partially or largely reclaim the VAT element of their costs, much as exporters are in the rest of the world.”

Burns also touched on another topic of intense global discussion: circumvention.

“Stories are rife, although prosecutions few, of companies exporting primary products, yet claiming they are semi-finished in an effort to avoid export tariffs,” he wrote. “Of course, export containers undergo spot checks by Chinese customs, so much of this primary metal masquerading as semis comes out in the form of barely altered basic products. Cast slabs rolled just enough to call them plates or round cast billets hot extruded to call them bars.”

LME Nickel, Stainless Steel Surcharges Rise

In her monthly Stainless Steel Monthly Metals Index (MMI) report, Irene Martinez Canorea overviewed the uptick in LME nickel prices and stainless steel surcharges.

“Nickel prices increased sharply during January. However, prices decreased slightly in early February,” she wrote. “As reported previously by MetalMiner, nickel price volatility has increased over the past few months.”

Sure enough, the LME nickel price picked back up this week after that aforementioned decline, closing at $13,625 per ton on Feb. 14.

As for stainless surcharges, “Following the recovery in stainless steel momentum, domestic stainless steel surcharges increased this month,” Martinez Canorea writes. “Surcharges remain above last year’s lows (under $0.4/pound); they remain in an uptrend, even if their pace has slowed.”

The stainless steel market as a whole, she adds, is still bullish.

“Stainless steel momentum appears in recovery, similar to all the other forms of steel,” she writes. “As both steel and nickel remain in a bull market, buying organizations may want to follow the market closely for opportunities to buy on the dips.”

Liquefied Natural Gas Prices Hold Despite New Supply

“With major new projects coming onstream in Australia and the rising output from the U.S. shale producers, the global liquefied natural gas (LNG) market was widely predicted to enter a period of oversupply between 2015–2020, with total supplies growing almost 50%,” Burns wrote earlier this week.

Despite the increase in supply, however, the expected drop in price for liquefied natural gas (LNG), according to basic supply-and-demand dynamics, hasn’t materialized.

“Rather than fall, LNG prices have remained robustly firm despite the predicted flood of new supply entering the market. The reason? The other side of the supply-demand equation has been outdoing itself,” Burns wrote.

That growing demand probably isn’t just a blip on the radar, either, in light of the global shift to cleaner forms of energy.

“The LNG market is evolving and maturing as the fuel replaces less environmentally friendly alternatives like coal and competes head on with nuclear on price,” Burns concluded. “The strength of LNG demand is coming at a time of unprecedented rollout of renewable energy generation, which suggests LNG will have a long-term future as part of the energy mix in the next decade, despite the uptake of wind and solar.”

Copper Picks Up This Week

Like nickel, LME copper has also rebounded after prices fell to start the month.

After closing at $6,754.50 per ton last Friday, LME copper has steadily risen this week, closing at $6,961 on Wednesday.

The metal continued its ascent on Thursday. Reuters reported the LME copper price is on track for its biggest weekly rise since November 2016. London copper closed Thursday at $7,182 per ton.

As per copper’s usual negative correlation with the U.S. dollar, the metal picked up this week in tandem with the dollar’s tumble. The U.S. dollar index fell from 90.17 in the early hours Monday to 88.61 as of 4:50 EST Thursday, according to MarketWatch data.