Commodities Roundup: Palladium soars; steel slides; auto tariffs loom over U.S.-E.U. trade talks

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:

Copper Prices Make Slight Gains

MetalMiner’s Belinda Fuller delved into recent copper price trends, noting prices made some gains in October but didn’t quite make it back to the $6,000/mt level.

SHFE copper prices, meanwhile, trended sideways last month. As is always the case, Chinese demand is critical because it is the world’s top copper consumer.

“Additionally, growth in China looks set to slow further — down to 5.8% in 2020, according to the most recent IMF estimate,” Fuller wrote.

“China’s Official NBS Manufacturing PMI fell to 49.3 in October, compared to 49.8 in September, marking a sixth consecutive month of contraction.”

Nickel Prices Move Sideways After Fall

Meanwhile, nickel prices have steadied into a mostly sideways trend after having dropped around 10% over the last two months, Fuller wrote.

“Trading volumes tapered off during recent weeks, indicating sideways movement could continue,” Fuller wrote.

“Prices still remain high compared to the longer-term average; therefore, prices could also continue to drift lower, although some analysts expect prices to remain high.

“In fact, over the long term, prices keep rising, with price bottoms progressively rising since 2016.”

Palladium Soars to Record High

Palladium’s star continues to shine, as the metal recently reached a record high.

As of Nov. 1, the palladium price soared to $1,780/mt, jumping 8.7% on a month-over-month basis.

How long can palladium continue to ride this hot streak? That remains to be seen.

“Gold, silver and palladium prices are expected to ease further in the run-up to the year-end, while other PGMs will be swayed more by car production and dollar strength,” MetalMiner’s Stuart Burns explained. “Much will depend on a successful outcome to the encouraging progress on trade talks, which could see investors take a more bullish attitude on risk to industrial metals and weaken demand for safe-haven investment metals.”

Steel Prices Continue to Slide

After appearing to have potentially reached bottom in August, U.S. steel prices have continued to show weakness.

“Plate prices dropped by another 14% since late August’s high price of $799/st, down to $684/st, with prices near those for CRC. While plate prices are closer in line with historical pricing norms, plate prices tend to fall below CRC prices, despite being equal at this time,” Fuller wrote. “HRC prices also looked particularly weak recently, dropping 18% to $483/st from the late August price of $590/st.

“While CRC and HDG also dropped below July values to reach new 2019 lows, recent declines were milder (but still significant). CRC and HDG prices dropped 10% and 11%, respectively, over the past couple of months, since reaching higher prices in early September/late August.”

U.S. steel capacity utilization checked in at 80.3% for the year through Nov. 9, according to a recent report by the American Iron and Steel Institute.

Cobalt on the Rise

Cobalt prices had dropped from $95,000 per ton in March 2018 to as low as $25,000 per ton earlier this year.

Lately, however, cobalt has bounced back, primarily on the back of Glencore’s announced closure of the Mutanda mine in the Democratic Republic of the Congo; the mine accounts for approximately one-fifth of global supply.

Recently, cobalt has made gains, clawing its way back up to around $35,000 per ton.

Weakening Steel, Aluminum Demand in Europe

Looking at the European aluminum and steel demand picture, Burns analyzed the current situation in the Netherlands, focusing on the debate over elevated nitrogen emissions in the country.

“Although 61% of emissions are coming from agriculture, a sizable portion also comes from the construction industry — a big consumer of aluminum and steel products,” Burns explained.

“The impact is particularly damaging, as the country has been enjoying a boom in infrastructure and housing investment of late.

“As a result of a fiasco over how permits are assessed, a review is underway and, in the meantime, new permits have been withheld, leading to delays and project uncertainty.

“Aluminum extruders estimate the European market is down at least 20% from last year as a result. With steel prices also waning, participants across the supply chain are reducing inventories, adding further to the fall in demand being experienced by producers.”

U.S.-E.U. Trade Talks Show Encouraging Signs

Trade talks between the U.S. and China, the world’s top two economies, have commanded a large share of attention devoted to trade-related news — understandably so.

However, the U.S. is also engaged in trade conversations with the European Union, one over which the specter of U.S. auto tariffs looms.

After having delayed a decision earlier this year, Trump was expected to again delay a decision on whether to use Section 232 to levy tariffs on imported automobiles. According to media reports, the Trump administration was expected to delay the decision again, with the self-imposed deadline falling Thursday, Nov. 14, with no definitive word.

Although it’s not yet clear if the Trump administration will deploy Section 232 once again, one thing is clear: The U.S. wants increased investment in the U.S. from E.U.-based automakers.

“The administration is in discussions with the E.U. and its carmakers about increasing their investment and employment in the U.S.,” Burns wrote. “The more cars that foreign carmakers manufacture in the U.S., the less they will ship in from abroad, benefiting the balance of payments and creating employment stateside.”

U.S. automakers are supportive of the removal of tariffs in both directions, Burns noted.

“Even U.S. carmakers are in favor of removing all tariffs, as they see a reduction in overseas import tariffs as an opportunity worth the increased domestic competition that foreign carmakers setting up in the U.S. may pose,” he continued.

“The only losers, should the deal be agreed, could be said to be foreign carmakers who will lose domestic exports, an impact that Germany is expected to feel the significance of more than any other country. Germany runs the second-largest trade surplus after China, with autos making up a sizable portion of that mercantilist trade structure.”

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