Commodities Roundup: Tesla’s battery shift hurts cobalt, nickel; coronavirus strains supply chains; zinc market posts 2019 deficit

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:

Tesla moves to make prices more competitive

In a compromise, electric vehicle maker Tesla is sacrificing range in favor of offering a more competitive price for its Model 3 cars in China, MetalMiner’s Stuart Burns explained earlier this week.

As Burns noted, Tesla plans to buy lithium-iron phosphate batteries from China’s CATL, which represent an alternative from the more expensive cobalt- and nickel-using batteries.

“In January, Tesla cut the cost for a standard-range battery model to 323,800 renminbi ($46,271) from 355,800 renminbi,” Burns wrote. “Other EV producers, such as China’s BYD, are also adopting the less efficient but cheaper LFP batteries in a new model due out later this year.

“Chinese nickel and cobalt producers’ share prices plunged on the Tesla news. Both China Molybdenum and Huayou Cobalt, China’s two largest cobalt miners, fell more than 8% in what the Financial Times suggests is bearish news for cobalt producers, for whom automotive electrification is a big part of their value proposition.”

Coronavirus puts stress on supply chains

Burns also weighed in on the coronavirus outbreak and its impact on global supply chains, particularly in contrast to the impact of SARS in 2003.

“Not only does China play a much larger role, but it also plays a more complex one,” he wrote, referencing an Economist article.

“The country has transitioned from being a simple assembler of components made elsewhere to relying on a complex internal supply chain of those components, making regions far from the outbreak of the epidemic highly vulnerable to supply disruption within China.

“Some industries that have taken this lean approach the furthest are arguably at greatest risk.

“The electronics industry is one such example, the article notes. A quarter of the world’s fiber-optic cables and devices come from Hubei province — home to Wuhan, where the outbreak started and which remains in lockdown.”

U.S. industrial production falls in January

According to the Federal Reserve, U.S. industrial production slipped 0.3% in January, citing a decline in utilities output and slowed production of civilian aircraft.

Manufacturing production fell 0.1%, while mining production increased 1.2%.

Zinc market posts 189,000-ton deficit in 2019

According to a recent report from the International Lead and Zinc Study Group (ILZSG), the global zinc market in 2019 was in deficit by 189,000 tons.

Despite the deficit, zinc prices fell on the LME and SHFE by 12.9% and 13.6%, respectively, last year.

Meanwhile, the lead market posted a surplus of 8,000 tons.

Copper market posts 385,000-ton deficit

As for copper, the International Copper Study Group (ICSG) reported the global copper market was in deficit by 385,000 tons through the first 11 months of 2019.

Copper mine production fell 0.6% during the period, while apparent refined usage fell 0.5%.

Aluminum and the coronavirus

Having previously covered the coronavirus outbreak’s impact on the steel and copper markets, Burns on Thursday looked at the health crisis in relation to aluminum supply chains.

China is the No. 1 producer and consumer of aluminum. Despite lagging demand last year, the Chinese aluminum sector continued to add new capacity, Burns noted.

In the short term, the retail end of the supply chain has felt the effects of the country’s coronavirus clampdown.

“Passenger car sales slumped by 92% in the first half of February, according to Reuters (citing the China Passenger Car Association), but movement restrictions are already being lifted across China, outside of Hubei province (the epicenter of the outbreak),” Burns wrote.

“MetalMiner’s own survey of downstream manufacturers suggests downstream semi-finished product manufacturers are largely back to work, with workers at state enterprises close to 90% fully staffed and private enterprises at around 70%.”

USTR hails agreements aimed at enforcing China trade deal

Earlier this year, the U.S. and China signed a “phase one” trade deal that, among other provisions, called for China to ramp up its purchases of U.S. agricultural goods, manufactured goods, energy goods and services by no less than $200 billion above the 2017 total.

This week, the United States Trade Representative announced a series of agreements aimed at enforcing agricultural provisions of the deal, including lifting a ban on imports of U.S. poultry and poultry products and updating the approved list of U.S. seafood species that can be exported to China.

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.