Commodities Roundup: Zinc, Rising Architecture Billings, Higher Oil Prices

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:

The New Zinc

MetalMiner’s Stuart Burns delved into the future of zinc, and how it could transform from its more humble, traditional status into a metal of technology.

As The New York Times reported, Dr. Patrick Soon-Shiong’s NantEnergy, developers and manufacturers of zinc air storage batteries, could see zinc demand rising in the coming years.

“No one is suggesting zinc air batteries will take over in retail appliances, electric cars or drones,” Burns wrote. “For these kinds of applications, weight is a critical factor and the power density of zinc air batteries is not the same as lithium-ion.

“However, for static grid or off-grid storage, weight is inconsequential. Cost is the overriding factor, and low-cost grid storage is currently the biggest drag on national or regional grids embracing more solar and wind power.”

China Changes Winter Capacity Cut Approach

As winter approaches and another round of winter capacity cuts is on the way in China, Beijing has changed its approach.

Rather than hard caps on capacity — part of the country’s efforts to combat rampant pollution — Beijing has opted for emissions targets to be decided by local authorities.

“China will not renew significant cuts on steel production and coal use aimed at improving air quality this winter,” the Financial Times reports, suggesting the reason is slowing economic growth in the face of the U.S.-China trade war, Burns writes.

The decision isn’t great news for steel mills outside of China.

“Without the imposed discipline of winter closures, steel mills may be encouraged to keep high run rates as demand softens,” Burns added. “With a weaker currency, export prices could be sufficiently competitive to drag down global price levels; that would be good for consumers, but it’s not what mills outside of China will be wanting in 2019.”

Automakers Struggle in September Sales

September proved to be a down month for a number of major automakers in the U.S. market last month.

As noted in this month’s Automotive Monthly Metals Index (MMI) report, General Motors reported a Q3 year-over-year sales decline of 11%. Ford also was down, falling 11.2%.

Fiat Chrysler was up 15%, while Honda and Nissan were down 7% and 12.2%, respectively.

U.S. Construction Spending Picks Up

August construction spending jumped 6.5% compared with August 2017 spending.

Over the first eight months of the year, spending increased 5.3% compared to the same time frame in 2017.

Meanwhile, at 54.8, the Architecture Billings Index (ABI) reached its second-highest value this year (values greater than 50 indicate architecture billings growth).

Oil Prices on the Ascent

Many predict a continued rise of the oil price this year, particularly given political instability in Venezuela and the specter of sanctions looming over Iranian oil supplies.

Having recently hit $85/barrel, the Brent crude price is now at approximately triple its early 2016 level, Burns notes.

Burns wrote about the impact impending supply-led shock on the global oil market, as some are predicting a price of $100/barrel: “Venezuelan production has collapsed, Iran’s will be drastically reduced by the end of the year due to the reimposition of sanctions. OPEC has chosen not to open the spigots, and questions have even been asked as to whether Saudi Arabia, traditionally the world’s swing producer, has the capacity to do so even if it wished,” he wrote. “Prices seem set to continue rising. Talk of $100 per barrel by the start of next year do not look overblown.”

Upon recent pressure from President Donald Trump, Saudi Arabia has increased oil production to near-record levels, at 10.7 million barrels per day, according to a Bloomberg report.