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Commodities Roundup: eBikes, Iron Ore Tightness and the Section 232 Auto Probe

02/22/2019 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, we scour the landscape for what matters. This week:

GM’s New eBikes

General Motors this month announced that its new line of electronic bikes were available for preorder.

The bike brand, dubbed ARĪV after a crowdsourcing campaign launched in November, will first be rolled out in Germany, Belgium and the Netherlands.

According to a GM release, the bikes’ battery can be charged in about 3.5 hours and the bikes can be used for about 40 miles on a single charge.

Iron Ore Supplies Remain Tight

On the heels of last month’s fatal dam breach at Vale SA’s Corrego do Feijao iron ore mine in Brazil, iron ore prices have been trending upward.

However, as MetalMiner’s Stuart Burns noted, despite the relatively small production loss stemming from the disaster last month, iron ore supply remains tight after years of plentiful supply.

In short, markets are worried about the ramifications the fatal dam breach could have for other operations around the world.

“Brazilian authorities have seized Vale assets, and there could be ripple effects elsewhere,” Burns wrote.

“There are some 18,000 tailings dams around the world; one would expect, and hope, that authorities are taking another look at those in their own backyard following repeated failings in Brazil.”

LME’s Cobalt Contract

For anyone who tracks the dizzying ups and downs of the cobalt market, the question of supply chain ethics pervades any and all discussions of the coveted material used in cellphones, laptops and other high-tech applications.

In that vein, Burns delved into the LME’s cobalt contract, speaking with LME Chief Executive Matthew Chamberlain.

“Chamberlain explained that the LME treads a balancing act between the interests of consumers, the needs of producers and avoiding litigation from a host of interests in the wider market,” Burns wrote. “The LME is a physically delivered market, meaning buyers have no control over which brands they receive if they take delivery of metal from the exchange, warrant holders will inevitably deliver their least desirable brands — for cobalt, that is those brands with the least scrupulously audited provenance.

“When there are serious worries about the supply chains of a brand, it begins to impact the price. However, for the reasons outlined above, that discount taints all brands on a market like the LME.”

Section 232, Round 2

The phrase “Section 232” is likely by now branded on the minds of metals market watchers, particularly those with a stake in steel and aluminum.

In 2018, the Trump administration used Section 232 of the Trade Expansion Act of 1962 to impose tariffs of 25% and 10% on steel and aluminum, respectively, deeming high imports of the metals injurious to national security.

A similar process is also pending regarding imports of automobiles and automotive parts.

Once a Section 232 probe is launched, the secretary of Commerce has 270 days by which to provide the president with a report featuring recommendations. Secretary of Commerce Wilbur Ross submitted his report Sunday, Feb. 17, just hours before the deadline.

However, the report was not made public, much to the chagrin of industry groups.

“It is critical that our industry have the opportunity to review the recommendations and advise the White House on how proposed tariffs, if they are recommended, will put jobs at risk, impact consumers and trigger a reduction in U.S. investments that could set us back decades,” the Motor and Equipment Manufacturers Association said in a statement this week. “Secrecy around the report only increases the uncertainty and concern across the industry created by the threat of tariffs. MEMA calls for the immediate and full release of the report.”

India’s Aluminum Producers Battle Imports

Much like India’s steel producers, its aluminum producers are also feeling the heat in the face of rising imports.

“Primary and secondary producers have started grumbling about cheaper imports eating into their aluminum business,” MetalMiner’s Sohrab Darabshaw explained.

“The ongoing trade war between the U.S. and China has seen the dumping of aluminum finished products in India, not only from China but also from nations with whom India has a free-trade agreement, including Vietnam, Malaysia and Japan.”

As Darabshaw notes, India hopes to nearly triple its annual aluminum output by 2030, up from the current 3.4 million tons per year.