Commodities Roundup: Coronavirus pressures metals prices; oil price crashes; Tesla’s cobalt substitution

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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:

Nickel prices slide

MetalMiner’s Belinda Fuller noted that nickel prices continued to slide last month in reaction to coronavirus-related production delays.

LME nickel prices fell below $13,000/mt, while SHFE nickel prices also declined on falling demand.

“However, with three sequentially lower bottoms indicating short-term weakness likely remains, it will be interesting to see if SHFE nickel prices — as well as LME nickel prices — can maintain a longer-term uptrend during the upcoming weeks,” Fuller explained.

Aluminum prices reach three-year low

Elsewhere, Fuller noted LME aluminum prices recently touched a three-year low.

SHFE aluminum, meanwhile, which had traded sideways throughout 2019, dipped last month.

“Like LME aluminum, SHFE aluminum dropped to a three-year low as price weakness resulted from the coronavirus demand hit,” Fuller wrote.

“As aluminum demand stalled out in China, production generally continued, as noted in a recent article by MetalMiner’s Stuart Burns. As a result, the global market looked particularly oversupplied during February 2020.

“Traders reacted to reports of stock build-up at exchange warehouses and traded on that information.”

Gold prices surge

Gold prices surged above $1,700/ounce earlier this week, supported by those rushing to the safe-haven asset amid the coronavirus outbreak.

However, the price retreated throughout the week, falling to around $1,635/ounce as of mid-Thursday.

LME copper steady, SHFE copper drops

As for copper, the LME copper price held steady last month, Fuller noted.

“Markets generally moved down March 9 as Saudi Arabia’s oil price surprise shook markets globally,” she wrote. “Copper looked most impacted of all industrial metals, but the price still managed to hang onto the $5,500/mt level.”

However, SHFE copper took significant losses and could be in for more losses ahead.

“The price is now trading at a critical long-term point,” Fuller added. “From a technical perspective, a drop from here could look more like a price free fall.

“The International Copper Study Group (ICSG) previously forecast growth for 2020 at 1.7%. This growth rate may be hard to reach now, with some analysts tentatively expecting a permanent copper demand reduction for Q1 2020 roughly in the range of 15-20%.”

Oil price crashes amid tensions between Saudi Arabia, Russia

While much of the headlines are currently focused on the impact of the coronavirus outbreak, the most recent oil price crash is attributable to politics, Burns analyzed this week.

Amid a disagreement between oil producers Russia and Saudi Arabia over output cuts, Saudi Arabia has opted to open the spigots and sell at a heavily discounted rate.

“Following Russia’s reported refusal to accept the Saudis’ take-it-or-leave-it demand to further reduce output in an effort to bolster prices, the Financial Times reports the Saudis decided — possibly in an act intended to punish the Russians, possibly simply to put all higher-cost producers out of business — to raise output to the kingdom’s maximum, estimated to be near 12 million barrels a day, thus swamping the market with excess supply,” Burns wrote.

“At the same time, Saudi Aramco announced unprecedented price discounts for April deliveries. In a market that sees price rises and discounts in the range of cents or tens of cents, Saudi Arabia is set to announce that it will sell its crude into northern Europe, a key market for Russian deliveries, the Financial Times notes, at discounts to its March reference price of more than $8 a barrel.”

Tesla aims to lower cost with lithium-iron-phosphate batteries

As explained by MetalMiner’s Stuart Burns, electric vehicle maker Tesla is in talks to buy batteries that do not contain cobalt from China’s Contemporary Amperex Technology Co Ltd (CATL).

“The statement went on to say as a result of using CATL’s lithium-iron-phosphate (LFP) batteries, Tesla would be able to substantially lower the cost of those cars using the alternative battery technology, as cobalt is the most expensive component in traditional nickel-cobalt-aluminum (NCA) and nickel-manganese-cobalt (NMC) batteries,” Burns wrote.

“The statement, however, did not say what the impact of the alternative batteries would be on range.”

Lynas gets 3-year license renewal in Malaysia

Malaysian authorities granted Australia’s Lynas Corp. a three-year license extension to continue its rare earths processing operations in the country. In August, the government granted Lynas a shorter, six-month extension.

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