Commodities Roundup: European steel consumption weak; France objects to China firm’s British Steel bid; strong dollar and coronavirus pressure commodities

commodities gold coffee coal agriculture Adobe Stock

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:

European steel consumption

Amid slowing growth around Europe, the European Steel Association (EUROFER) sounded the alarm over declining steel consumption.

According to EUROFER, European apparent steel consumption fell 3.1% year over year in Q3 2019 (an improvement from the 6.7% decline in Q2 2019).

“2019 was another challenging year for the steel sector, with declines in steel consumption and import levels which — while down compared to 2018 — were still very high compared to historical levels,” EUROFER Director General Axel Eggert said. “While some growth is expected to return to steel markets in 2020, even these modest estimations could be upended if events take an unexpected turn.”

British Steel saga continues

As China’s Jingye Group continues with its takeover attempt of the insolvent British Steel, the U.K.’s second-largest steelmaker, new objections from France threaten its completion.

Last year, Jingye offered to buy British Steel for £50 million, in addition to a promise to invest £1.2 billion over 10 years. British Steel was forced into liquidation in May 2019, and its continued operation is coming at a price tag of approximately £1 million per day for British taxpayers.

The deal, however, is in jeopardy as a result of French objections regarding the potential fate of the British Steel plant in Hayange.

“Hayange is one of the few profitable parts of British Steel but takes its raw material from the Scunthorpe plant to make rails for France’s SNCF state-owned railway network,” MetalMiner’s Stuart Burns explained.

“Hayange relies on imports of unfinished steel produced at Scunthorpe’s blast furnaces, which are then formed into rail sections of up to 350 feet long at the French site. The site has long-term contracts with the country’s rail sector, a separate Telegraph article reports.

“The French are reliant on Hayange and are reluctant to see it taken over by a relatively unknown Chinese entity, saying Jingye had provided little evidence for the £1.2 billion worth of investment promised and ‘the only financing they’ve provided any evidence for is £50m, the purchase price.’ ”

U.S. steel production jumps 1.9%

According to recent data from the American Iron and Steel Institute (AISI), U.S. raw steel production increased 1.9% year over year during the week ending Feb. 1.

In the year to date (that is, through Feb. 1), production totaled 8.77 million net tons at a capacity utilization rate of 82.3%, which marked a 2.4% increase in production from the same period in 2019.

Falling commodity prices

MetalMiner’s Stuart Burns also weighed in on the general state of falling commodity prices, citing the impacts of a stronger U.S. dollar and the coronavirus outbreak in China.

“So much depends on China’s ability to contain this virus that it is all but impossible to say if the commodity price falls we have seen so far are the end of the story or just the beginning,” Burns wrote.

“No one, certainly not the Chinese authorities who are making herculean efforts to contain and treat patients, can do more than speculate how the next few months will go.”

While many have compared the current coronavirus outbreak to the SARS outbreak of 2003, the parallel is not exact.

“Many observers have drawn comparisons to severe acute respiratory syndrome — more commonly referred to by its acronym, SARS — in 2003, but China’s economy is much larger now and more closely integrated into global supply chains, making the impact much more significant,” Burns wrote.

“In addition, SARS hit at a time when stock markets were bottoming out following the dot-com bubble. (The virus) 2019-nCoV has hit at the end of a 10-year and fading bull market in which some investors have been looking for the peak — the potential for a correction is much higher now.”

U.S. auto sales dip in 2019

U.S. auto sales fell across the board in 2019.

Ford reported its sales fell 1.3% in 2019, while Fiat Chrysler’s dipped 1%.

Due to the United Auto Workers strike in Q4, resulting in the loss of four weeks of vehicle production, General Motors reported wholesales declined by 190,000 units in 2019 on a year-over-year basis.

Meanwhile, Nissan announced it will move to a quarterly reporting schedule (joining General Motors, Ford and Fiat Chrysler).

U.S. construction spending drops 0.2%

U.S. spending on construction fell 0.2% in December compared with the previous month, coming in at a seasonally adjusted annual rate of $1,327.7 billion. However, the December total marked a 5.0% year-over-year increase.

Architecture billings continued to bounce back after sluggish performance earlier in the year. The December Architecture Billings Index (ABI) checked in at 52.5 (anything greater than 50 indicates billings growth).

Share on Procurious

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.