Commodities Roundup: EU revisits steel quotas; GM worker strike; oil prices rise after attack in Saudi

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:

Europe may cut steel quota increase

In response to rising imports as a result of the U.S.’s imposition of Section 232 tariffs on steel, the E.U. earlier this year instituted steel safeguards to protect the European steel industry.

However, the safeguard measures included gradual 5% increases in import quota levels — much to the chagrin of European steelmakers.

As a result, the EU has proposed bringing the import quota increase down to 3%.

“The measures set quotas for 26 grades of steel, including stainless, and were set at the average level of imports in 2015-17, plus 5%,” MetalMiner’s Stuart Burns wrote. “They allowed for a further 5% hike due in July and the same again in July 2020.

“Following complaints that Europe’s steel market is too weak to absorb the planned increase in quotas, the European Commission has proposed that this year’s hike should be 3% effective from Oct. 1.”

Nickel prices surge

MetalMiner’s Belinda Fuller, in her Stainless MMI report this month, noted that nickel prices have surged of late.

LME nickel prices jumped 28.5% last month, while prices in India and China were up by 24.1% and 25.9%, respectively.

“Opinions appear mixed as to whether prices will drop back down anytime soon, with some analysts foreseeing further price increases,” Fuller explained.

“Indonesia produced around 26% of global mine supply last year, according to the International Nickel Study Group.

“It is possible (that) ramped-up production of nickel pig iron in Indonesia will stave off further price increases from supply shortages.”

Copper prices down

Meanwhile, copper prices fell last month amid a weaker global demand outlook.

“Demand concerns continue to weigh on copper prices,” Fuller wrote. “Meanwhile, trade issues also continue to impact the metal’s price volatility.

“Demand in China, the world’s largest copper consumer, still looks weak as the government continues to implement measures to bolster the economy.

“The China Association of Automobile Manufacturers (CAM) released poor automotive sales numbers for August. Like copper, the automotive industry may serve as a good barometer of consumer demand, given its overall weight in total consumer spending.”

GM workers on strike

Earlier this week, the United Automobile Workers union announced a nationwide strike at General Motors, the first such work stoppage at the Big 3 automaker since 2007.

The strike includes 46,000 workers at 31 GM plants.

“While we are fighting for better wages, affordable quality health care and job security, GM refuses to put hard-working Americans ahead of their record profits of $35 billion in North America over the last three years,” UAW Vice President Terry Dittes said in a prepared statement. “We are united in our efforts to get an agreement our members and their families deserve.”

Oil price rises after attacks on Saudi facilities

Drone and cruise missile strikes on Saudi oil installations this week unsurprisingly led to a rise in oil prices, Burns explained.

“The strike said to have been made by some 20 drones and a dozen cruise missiles on the world’s largest oil installation — a separation plant at Abqaiq, southwest of Dharan in Saudi Arabia — came after a smaller but similar strike on the main East-West pipeline in May and another on the Shaybeh field just last month,” he wrote.

It remains to be seen how much further prices could rise, particularly as the U.S. and Saudi Arabia accuse Iran of being behind the attacks.

“Brent crude oil prices rose by almost $12/barrel to near $72/barrel when the market opened on Monday, then closed at $69.02/barrel, a 14.6% jump, the Financial Times reported,” Burns wrote. “Trading volume across New York and London smashed daily records, with the equivalent of more than 5 billion barrels changing hands. The price is currently around $68.15/barrel, suggesting that, for now at least, the markets are relatively sanguine about an immediate escalation.

“If there are no further strikes and neither Saudi Arabia nor the U.S. escalates the situation with retaliatory military action, the oil market can cope with the loss of 5% of global supply as a result of the damage caused to the Abqaiq and Khurais processing facilities.”

GM strike and steel prices

Circling back to GM, MetalMiner Executive Editor Lisa Reisman ran some numbers on the possible impact of the strike on steel prices.

The verdict?

“Given that the U.S. market consumes about 110 million tons annually, and GM’s share represents about 8% of domestic steel production, it would take a 39-day strike to lower demand by 1 million tons, or 1%,” Reisman wrote.

“Does that mean the GM strike could cause steel prices to plummet or fall further?

“Not likely.”

U.S. steel production rises

U.S. steel production continues to remain elevated over 2018 levels.

Production for the year through Sept. 14 totaled 68.96 million tons, the American Iron and Steel Institute (AISI) reported, up 3.8% on a year-over-year basis.