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Commodities Roundup: Tesla-Panasonic Partnership Cools, Indian Steel Exports to U.S. Fall, Oil Market Primed for Growing Deficit

04/26/2019 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.

We scour the landscape for what matters, from price movements to policy decisions. This week:

Tesla Roadblocks

MetalMiner’s Stuart Burns delved into the challenges at Tesla’s Gigafactory in Reno, as Panasonic announced it would roll back its commitment to help develop the factory.

“But Tesla blames lowered deliveries of the Model 3 on delivery problems to Europe and China, not lack of demand,” Burns wrote.

“The firm further suggests its upcoming launch of its lease option on the Model 3 in North America will substantially increase demand.

“That may be so, but the row back raises questions as accuracy of the original predictions for the Gigafactory and, by extension, for wider battery demand.”

Through the partnership, Panasonic made battery cells for Tesla’s electric vehicle battery packs. The two companies have invested $4.5 billion in the Reno facility.

Indian Steel Exports to U.S. on the Decline

Last year, India surpassed Japan to become the world’s second-largest steel producer.

However, Indian steel exports to the U.S. fell 49% last year, the largest decline of steel export value of any country. Turkey and South Korea saw the value of their steel exports to the U.S. last year fall by 35% and 15%, respectively.

Indian steel remains subject to the U.S. Section 232 tariff imposed last year. In response to the Trump administration’s move, the Indian government proposed retaliatory duties on a variety of U.S. products but has continually delayed imposition of those duties (most recently pushing an April 1 deadline to May 2, Reuters reported).

Tin Prices Cool

The often-volatile price of tin has enjoyed great heights of late, but its run may have come to an end.

As MetalMiner’s Belinda Fuller noted this week, the LME tin price rose around 20% from December 2018 to February 2019.

“A somewhat similar price trend occurred one year prior, when prices rose quickly between December 2017 and January 2018,” Fuller explained. “The price trend formed a temporary flag formation following the price peak, after which prices turned sideways in a bearish triangular pattern before moving downward overall once again for some months. The LME price finished out 2018 by moving sideways.”

However, the tin price could receive support from a number of factors, including the rising cost of tin ore mining. In addition, increased scrutiny given to ethical sourcing of tin could lead to price increases.

LME Launches Consultation Period on Ethical Sourcing Principles

Speaking of tin and ethical sourcing, the LME this week announced the commencement of a consultation period regarding the formulation of ethical sourcing principles for LME-listed brands to follow.

The LME released a position paper on the subject in October 2018, which offered special focus on cobalt and tin.

“For cobalt and tin, chosen standards must be identified by the fourth quarter of 2019, and full compliance with standards will be required by the end of 2020,” the LME said in October. “For all other higher-focus brands, standards must be identified by the fourth quarter of 2020 with compliance by the end of 2021. Non-compliant brands will be eligible for delisting once the relevant deadlines have been passed.”

The consultation is scheduled to end June 30, 2019.

U.S. Imports of Chinese Aluminum Foil Plunge

According to an Aluminum Association white paper released this week — one year after the Department of Commerce issued anti-dumping and countervailing duty orders on aluminum foil imports from China — aluminum foil imports from China fell 64% from 2017 to 2018.

Imports of aluminum foil from China dropped from 272.4 million tons in 2017 to 97.7 million tons in 2018.

Oil Faces Growing Deficit

MetalMiner’s Stuart Burns also delved into the oil price this week, and OPEC producers’ ongoing battle against U.S. shale.

“Saudi Arabia and OPEC are in conflict with the U.S. in wanting higher oil prices and a balanced market, yet the U.S. is making no efforts to restrict its own shale oil output, expecting OPEC to raise or lower its supply to keep prices stable,” Burns explained.

However, supply-side challenges due to conflict in Libya, U.S. pressure on Iran and economic fallout in Venezuela will drive the deficit even higher.

“The oil price has already risen sharply this year,” Burns wrote. “Brent crude climbed 2.6% on Monday to $73.80 a barrel, after hitting a high of $74.31 in early Asia trading following the announcement by a U.S. official. West Texas Intermediate, the U.S. marker, rose as much as 1.2% to a high of $64.74, the highest intraday level in two weeks, the Financial Times reported.”