Commodities Roundup: Coronavirus outbreak weighs on metals prices; copper buyers call force majeure; U.S. steel prices flatten

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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:

U.S. steel prices flatten

On the heels of some upward price momentum for U.S. steel prices, prices appeared to flatten out this past month, MetalMiner’s Belinda Fuller noted.

“Some stronger signs of improvement in U.S. manufacturing activity, plus reports of increased activity in the housing market, may continue to provide sideways support to U.S. steel prices in the short term,” Fuller wrote.

“As noted in the MetalMiner Monthly Outlook (free trial available) released this week for February 2020, the ISM PMI increased to 50.9 for its January activity reading — a 3.1-point increase compared to December — and back in expansionary territory with a value over 50.”

Copper buyers call force majeure

As the coronavirus outbreak in China intensifies, metals markets have been impacted.

MetalMiner’s Stuart Burns noted some metals buyers have invoked force majeure in relation to planned copper purchases, citing the situation on the ground in China as the government imposes measures to control the outbreak — measures that have disrupted typical commercial flows.

“Copper buyers are reported to be using the clause to delay shipment of copper imports from Chile and Somalia,” Burns wrote. “So far, the delays are mostly coming in at two weeks; depending on how the epidemic develops, wholesale cancellations could follow.

“The risk of cancellations increases as the price falls — it shouldn’t, but the temptation to cancel and then rebuy in some days or weeks at a significantly lower price may be too hard to resist.”

PwC: Metals deals down in 2019

According to a recent PwC report on M&A activity in the metals and mining sectors, deal volume fell 10% in 2019 compared with the previous year, while the value of deals also declined.

Last year saw two “megadeals,” or deals with a reported value greater than $5 billion.

However, M&A activity picked up in Q4 2019 compared with the previous quarter.

Allegations in the nickel market

Burns also weighed in on the nickel market and allegations of potential unscrupulous activity therein.

“A recent Telegraph article takes a more balanced approach to review goings-on at the London Metal Exchange (LME) amid accusations that have been leveled against some major market players that they were instrumental, or at least complicit, in the manipulation of the nickel market last year,” Burns wrote.

“The price spiked dramatically on Indonesia’s announcement that it would bring forward its planned ban on the export of nickel ore.

“As a result, many consumers and not a few traders caught on the wrong side of deals lost out heavily.”

Palladium price continues to rise

Palladium’s star continues to rise, as does its premium over fellow platinum-group metal (PGM) platinum.

The palladium-platinum spread jumped to $1,232/ounce earlier this month, supported in part by power outages in South Africa (a major producer of both palladium and platinum).

The U.S. palladium bar price jumped to $2,190/ounce at the start of February, up 16.1% month over month.

Nickel price down amid coronavirus outbreak

Like other metals, nickel prices also reacted to the coronavirus situation in China.

Nickel prices dipped below $13,000/mt in late January, Fuller reported.

“Subsequently, within a week or so, the price increased to the $13,000/mt price level, indicating future upside price risk cannot be ruled out entirely,” Fuller continued.

“However, until stronger demand emerges from key consuming sectors — which looks like it will most likely be delayed until Q2 — prices could move sideways from here and continue to trade around the $13,000/mt price level.”

Copper prices fall

Similarly, copper prices also dipped in response to the coronavirus outbreak.

“LME copper prices rallied as January progressed then dropped precipitously later in the month due to demand uncertainty stemming from the coronavirus outbreak in China,” Fuller explained.

“Markets reacted strongly to the news of the potential for a pandemic originating from Wuhan, the capital city of the Hubei province, which serves as a major production center. The province is still mostly on lockdown as of press time.

“As a key beacon of the industrial metals complex, copper prices reacted to the developments in China.”

Aluminum demand uncertainty weighs on prices

Aluminum prices have also declined of late, reaching a new short-term low in late January, Fuller reported.

“Prior to the coronavirus black swan event originating in Wuhan, China, price gains looked somewhat capped at around $1,840/mt, but they at least moved sideways around the $1,800/mt price level,” Fuller wrote.

“If prices trend sideways from here — now closer to $1,700/mt — more production curtailments could be expected.”

Glencore signs cobalt supply deal with Samsung

Miner Glencore announced it had signed a five-year cobalt supply deal with Samsung.

According to a Glencore release, the miner will supply up to 21,000 tons of cobalt contained in cobalt hydroxide from 2020 to 2024.

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