Commodities Roundup: Precious Metals, Currency Consternation and Steel Production

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.

MetalMiner, a sister site of ours, scours the landscape for what matters. This week:

The Dollar and Precious Metals

MetalMiner’s Belinda Fuller earlier this week looked into the U.S. dollar and its impact on precious metals prices.

“MetalMiner recently caught up with Americas Silver Corporation President and CEO Darren Blasutti regarding underlying gold and silver price trends,” she wrote.

“Blasutti explained the transition away from oil supports gold’s bullishness. Once that happens, the rationale for holding U.S. dollars weakens greatly, while currency diversification, including precious metal purchases, will continue to make sense.

“Whereas industrial metals have shown more price volatility during certain periods, gold prices have stayed relatively more stable, according to Blasutti, therefore making it more attractive for mining companies.”

As such, a weakening dollar would boost gold prices, possibly boosting silver along with it.

“Given projections for the reduction of oil use in the long-term as stricter emissions standards come into effect, demand for the dollar could decline into the future,” Fuller added.

“As demand for the dollar weakens, we can expect gold prices to rise. Once gold reaches higher prices, silver may finally follow suit, with the gold-to-silver ratio finally dropping back from current highs that strongly favor gold mine production.”

Currency War

Speaking of currency, MetalMiner’s Stuart Burns delved into the political implications of the slumping euro, particular with respect to U.S.-E.U. relations.

“Quantitative easing (QE) has depressed the euro for the last five years,” Burns wrote. “The trade-weighted index fell 14% a year after Mario Draghi, president of the European Central Bank, signaled bond buying was coming in 2014. That has been a powerful stimulus, such that Germany is now running a current account surplus of 8.5% of GDP, and Europe as a whole is running a surplus of $300 billion-$400 billion per annum.

“Since QE stopped last year and hastened by a slowing China, growth in Europe has slumped; the ECB is desperate to get it going again.”

Global Steel Production Rises 5.4% in May

According to the World Steel Association, global crude steel production in May jumped 5.4% on a year-over-year basis.

After hitting a record monthly production total in April, China hit another record in May with 89.1 million tons, up 10% from May 2018.

Iron Ore Prices Continue to Rise

The surge in prices of steelmaking material iron ore has put the squeeze on steelmakers around the world, including in China.

“Iron ore inventories at Chinese ports have dwindled away to the lowest level in more than two years,” Burns explained. “The current price is approaching U.S. $120/metric ton, still well short of the record U.S. $191/ton in early 2011 or the $160/ton reached in the last big rally seven years ago. However, the current price is still rising inexorably and resulting in mill margins becoming so pressured that some producers have slipped into the red.

“Chinese steel futures are reacting to the tight market with rebar prices hitting a near eight-year high and hot-rolled coil climbing to an all-time peak, Reuters reported. Steel demand from downstream sectors in China is reported to be very strong, yet finished steel prices are not rising fast enough to spare steel mills from becoming squeezed in the tight raw material supply market.”

Global Aluminum Production

Meanwhile, global aluminum production in May held flat from May 2018 levels, according to the International Aluminum Institute.

May 2019 production reached 5.43 million metric tons.

U.S. Steel Imports Drop 12%

U.S. imports of steel through the first five months of the year fell 12% compared with the first five months of 2018, according to the American Iron and Steel Institute.

May imports declined 38.2% compared with the previous month.

MetalMiner Trade Center is Live

Whether it’s Section 232/301 tariffs, USMCA or the ongoing U.S.-China trade talks, trade news is dominating the headlines.

With that in mind, MetalMiner has launched a Trade Resource Center, a one-stop shop for trade news, analysis and data. The trade portal features MetalMiner news, podcasts and white papers, in addition to links to useful sources of trade data.

Visit the new Trade Resource Center at trade.metalminer.com or under the “Research” tab on the MetalMiner home page, www.agmetalminer.com.