Commodities Roundup: Steel prices; commodities bear market; U.S.-China trade deal keeps tariffs for next phase

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:

Steel prices make gains

As MetalMiner’s Belinda Fuller noted this week, U.S. steel prices made gains in the first half of December.

“Key forms of steel increased across the board in the first half of December 2019,” Fuller wrote. “Plate prices increased the most, with prices spiking a couple of times during the month.

“However, HRC, CRC and HDG increases lost some steam later in December.

“Still, CRC and plate prices managed to match values hit during Q3 2019, while HRC and HDG prices did not reach quite as high as they did during Q3.”

Lynas needs rare earths license in Malaysia

Lynas Corporation, the world’s largest rare earths firm outside of China, last year received a six-month extension of its license to operate its processing facility in Malaysia.

However, Malaysian regulators did not grant the company an extension of its lanthanide processing limit for calendar year 2019.

“The regulator has provided Lynas with a list of additional reports and management plans that the regulator now requires in order to reconsider the application,” Lynas said. “The processing limit resets on 1 January each year, and Lynas intends to reapply for an increase for CY20.

“As noted in our Quarterly Report released on 21 October 2019, production during the second 6 months of CY19 has been managed at reduced rates pending the regulator’s decision on the processing limit increase. As a consequence of the regulator’s decision, total NdPr production for CY19 will be similar to total NdPr production for CY18.”

The commodities bear market

MetalMiner’s Stuart Burns weighed in on commodities trends and where they might go from here.

“While stock prices are currently at all-time highs, commodity prices are as cheap today as they pretty much have been for decades — not historic lows, but relatively speaking commodities have not enjoyed the same boost from cheap money and asset-boosting policies like quantitative easing that stock prices have seen,” Burns explained.

How long can this commodities bear market continue? It would not be surprising to see a turnaround at some point in the relatively near future, Burns wrote.

“Dollar weakness alone could create support for prices this year,” Burns wrote. “There are plenty of reasons — from deficit spending to political risk or the popping of a corporate debt bubble — for the dollar to weaken.

“If that happens, commodities could rise.

“The U.S. stock market would be likely to fall, since corporate margins are tight, the Financial Times suggests, saying there is not much room to buffer against rising energy and input prices. If the dollar weakens, all costs from overseas supply chains rise too.

“It doesn’t even have to be a dramatic fall in the dollar: a perceived significant weakness could be enough.”

Companies named in lawsuit alleging cobalt mine child labor

Several major U.S. companies were recently named in a lawsuit alleging complicity for the use of child labor in cobalt mines in the Democratic Republic of the Congo.

According to a CBS News report, companies named in the lawsuit filed in the U.S. District Court in Washington, D.C., were Apple, Google parent company Alphabet, Microsoft, Dell and Tesla.

A majority of the world’s cobalt supply is mined in the DRC. Several NGOs have highlighted poor conditions at mines in the country, including the use of child labor at less-closely regulated artisanal mines.

Precious metals on the rise

Burns also documented the superior performance of precious metals relative to base metals of late.

“The base metals have at best been lackluster,” Burns wrote. “Aluminum has been range-bound for much of the last nine months, as has most of the base metals complex.

“Copper has perked up since about November on the back of expectations of a thaw in U.S.-China trade relations. Nickel got interesting toward the back end of August when the market reacted to news of an Indonesian export ban but has since sunk back.

“Only the precious metals have risen and sustained their rises during the period — albeit for differing reasons.”

U.S., China sign ‘phase one’ trade deal

Despite much fanfare at the White House on Wednesday for the signing of a preliminary trade deal between the U.S. and China, reactions to the deal were predictably mixed.

Overall, however, the deal sees to an at least temporary pause in the trade tensions that have surged between the world’s two largest economies over the last two years.

“Today we take a momentous step, one that has never been taken before with China, toward a future of fair and reciprocal trade as we sign phase one of the historic trade deal between the United States and China,” U.S. President Donald Trump said Wednesday.

In the deal, China commits to purchasing over $200 billion in U.S. goods and services over the next two years. The U.S. will hold off on a planned additional $160 billion in tariffs and will cut tariffs on a previously imposed $120 billion in tariffs from 15% to 7.5%.

However, the existing 25% tariff on $250 billion in Chinese goods will remain in place, meaning the majority of existing tariffs on Chinese goods remain in effect.

Trump indicated the tariffs could be removed pending further negotiations.

“We’re leaving tariffs on … but I will agree to take those tariffs if we are able to do phase two,” Trump said.