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Commodities Roundup: Shale Gas Expansion Slows, Europe Drops Solar Panel Duties

09/14/2018 By

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:

Shale Gas Momentum Losing Steam

MetalMiner’s Stuart Burns earlier this week delved into the shale gas sector and its slowing expansion, notably in the Permian Basin.

“From a low two years ago, the tight oil industry’s rebound has been impressive,” he wrote. “Much of it is coming from the Permian Basin, with national production up by 1.5 million barrels a day in the 12 months to July.

“But questions are being asked as to whether or not the Permian may be reaching a plateau.”

As Burns notes, the Permian Basin’s ability to continue to produce long term is in question; however, that does not necessarily mean the sector overall is tapped out.

“What it probably does say is the stellar growth of recent years is unlikely to continue and may be slower from the middle of this year onwards,” he said. “With the dramatic rise in steel prices following the U.S.’s imposition of a 25% import tariff on steel products, it was to be expected drillers would find both exploratory work and infrastructure investment slowing.”

Europe Drops Solar Panel Duties

The European Union dropped its duties on solar panels from China, which dated back to 2013.

The duties expired at midnight Sept. 3.

“After considering the needs of both producers and those using or importing solar panels the Commission decided it was in the best interests of the EU as a whole to let the measures lapse,” the European Commission said in a statement. “This decision also takes into account the EU’s new renewable energy targets.”

U.S. Midwest Aluminum Premiums Fall

For the second straight month, the U.S. Midwest aluminum premium dropped, MetalMiner’s Irene Martinez Canorea wrote in her Aluminum Monthly Metals Index (MMI) report.

As for aluminum prices, they showed upward momentum in August but have retraced thus far in September.

SHFE aluminum prices followed a similar trend, rising in August and retracing in September.

Sanctions Deadline on the Horizon

Circling back to Rusal, Burns addressed the uncertainty in the aluminum market with respect to the U.S. sanctions on Rusal and, moreover, whether or not those sanctions will be lifted, as has been expected by some throughout the summer.

The sanctions were imposed in April, resulting in skyrocketing aluminum prices. Prices have recovered since, as the U.S. Treasury Department softened its stance, allowing businesses until Oct. 23 to unwind business dealings with the Russian aluminum giant.

Throughout, there has been an expectation that said sanctions would eventually be lifted; however, with just over five weeks until the Oct. 23 deadline, there is no clear indication as to whether the sanctions will be rescinded.

That uncertainty has had real implications in the marketplace, as some buyers reportedly avoided Rusal supplies during a crucial buying event held in Berlin this week.

“The aluminum market has so far been relaxed about the fallout from Rusal being placed under sanctions at the beginning of April once a stay of execution was granted later in the month,” Burns wrote. “The expectation has been the sanctions would be lifted in October.

“But over the last week or two, doubts are being raised and the fear factor is dissuading buyers from taking the risk.”

Platinum, Gold Take Hits

As MetalMiner’s Taras Berezowsky noted in his Global Precious MMI report, U.S. platinum and gold prices dipped this past month.

“The former dropped below $800/ounce for bars, hitting $777/ounce to start the month,” he wrote. “That ensured one of the largest chasms in the platinum-palladium price spread of late, as the U.S. palladium bar price surged back up to $979/ounce after two straight months of steady declines.

“The gold price, meanwhile, also dropped to begin September, down to another historic low. Its bullion price in the U.S. slid under $1,200/ounce for the first time since January 2017, clocking in at $1,191/ounce.”

Copper Continues Slide

As has been noted previously, the last couple of months have seen the copper price slide.

“Copper pricing has been sliding, driven by concerns about a Chinese economic slowdown,” Martinez Canorea explained. “However, fundamentals indicate the metal will remain in a deficit. Stock levels have decreased on the major exchanges.

“Supply issues have eased in most Chilean mines. Workers at the Chilean Escondida mine signed a new labor agreement after the government mediated the conflict. However, workers at the Caserones mine remains on strike.”

In addition, production at the Chilean state-owned Codelco mine increased 2% over the first six months of the year compared with the same period in 2017.

Steel Price Momentum Slowing

U.S. steel prices have reached more than seven-year highs this year, but that momentum appears to be slowing.

“All forms of steel decreased in August,” Martinez Canorea wrote. “HRC, CRC and HDG showed weaker momentum. Meanwhile, plate prices held stronger in August. Plate prices had the support of low metal availability. However, plate prices lost momentum at the end of August and prices decreased. So far in September, prices for all steel forms declined.

“The recent slowdown in steel prices may come down to historical steel price cyclicality. Domestic steel prices have remained in a sharp uptrend since January 2018. Prices have started to come off slightly but remain higher than last year’s average.”