Commodities Roundup: Russia-Ukraine natural gas deal; auto sales down; U.S.-Iran tensions’ raise oil prices

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:

Russia, Ukraine reach deal on natural gas transmission

Earlier this week, MetalMiner’s Stuart Burns touched on a new agreement between Russia and Ukraine covering natural gas transmission.

“In the short term, a new five-year gas transit agreement between Russia and Ukraine, agreed just 12 days before the current agreement is to expire, is good news for Europe, Russia and Ukraine — a rare example of pragmatism and compromise in today’s winner-takes-all approach to diplomacy,” Burns wrote.

He broke down the compromise of the deal further.

“As part of the deal, Russia will gradually reduce its use of Ukrainian pipeline infrastructure over the next five years as it expands its access to the European natural gas market through the Nord Stream 2 and TurkStream pipelines,” he continued.

“Ukraine, meanwhile, will use the next five years to continue its efforts to reduce its dependence on natural gas that comes directly from Russia by ramping up domestic gas production and searching for alternative routes for imports.”

Indian steel in 2020

MetalMiner’s Sohrab Darabshaw took a look at the Indian steel sector’s prospects for 2020 after facing numerous challenges in 2019.

“A majority of steel producers and analysts are positive Q4 of the fiscal will show a rebound,” Darabshaw wrote. “What gives them hope is the Indian government’s announcement to put fresh investment into the country’s infrastructure.

“A few days ago, the government unveiled the multimillion-dollar National Infrastructure Pipeline, with projects spread across 18 states over the next five years.”

Steel capacity utilization at 82%

The U.S. steel sector’s capacity utilization rate through the first four days of the year reached 82.0%.

The sector produced 1.9 million tons during the period, marking a 2.0% increase from the same period in 2018.

U.S. auto sales down in 2019

In the automotive sector, General Motors touted a strong 2019 in the U.S. market, with deliveries up 12.7% year over year.

However, as a result of the 40-day United Auto Workers strike, GM’s fourth-quarter deliveries fell 25% year over year.

According to J.D. Power and LMC Automotive, new-vehicle retail sales in 2019 were forecast to fall 1.7% compared with the previous year.

Construction spending surges in November

U.S. construction spending jumped 4.1% in November on a year-over-year basis, according to recent data from the U.S. Census Bureau.

Meanwhile, the Architecture Billings Index showed growth for the second consecutive month after spending most of 2019 in flat or negative territory. The ABI posted a reading of 51.9 for November, with readings greater than 50 reflecting billings growth.

Aluminum prices make gains

MetalMiner’s Belinda Fuller noted aluminum prices made gains over this past month, with the LME aluminum price rising above $1,830/mt early this month.

Meanwhile, SHFE aluminum prices continued to move sideways, hovering below CNY 14,500/mt.

U.S.-Iran tensions and oil prices

Unsurprisingly, oil prices spiked on the heels of the U.S. and Iran’s recent exchange of hostilities, which included a U.S. strike killing a top Iranian general, Qassem Soleimani, and Iran’s retaliatory missile launches against military bases housing U.S. personnel in Iraq.

Oil prices picked up once again Wednesday after President Donald Trump declared Iran was “standing down.”

“The more immediate reaction we are seeing in the oil price is due to the fear of oil production facilities being hit and impediments to the movement of crude oil out of the region, particularly through the Strait of Hormuz,” Burns wrote this week.

“But strategic analyst firm Stratfor suggests in a recent Worldview report that while volatility is to be expected, Iran is much more likely to target U.S. military targets than to risk diplomatic fallout from supporters like Russia and China by hitting crude or liquefied natural gas (LNG) traffic through the Strait of Hormuz or the Bab el-Mandeb waterways. Nor is it likely to repeat strikes against Saudi Arabia or neighboring oil facilities, as it did against the Abqaiq and Khurais facilities, where it could hide behind the claim they were carried out by Houthi rebels.”

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