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Commodities Roundup, coronavirus edition: Shares vs. commodities; China’s aluminum production; Detroit automakers go idle

03/20/2020 By


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:

Shares versus commodities

MetalMiner’s Stuart Burns compared the difference in the coronavirus outbreak’s more sizable impact on share prices compared with the still notable but not as significant impact on commodities.

“Compared to falls in share prices in excess of 20% — sufficient to qualify as bear territory — metals within the wider commodity sector have at most fallen some 10% so far and some, such as iron ore and copper, are showing considerable resilience, staying within single digits,” Burns wrote.

“Even at the height of China’s lockdown, metal prices drifted lower but have hardly fallen out of bed, considering China is either consumer of or/and producer — sometimes both — of half the world’s production of all the base metals.”

China’s aluminum production rolls on

Despite the challenges posed by the outbreak of COVID-19, China’s aluminum production hasn’t showed signs of waning.

“China’s aluminum production rose by 2.4% year over year in the first two months of 2020, Reuters advised, as smelting capacity commissioned late last year took supply higher, with output averaging 97,500 metric tons a day over January and February combined,” Burns wrote.

“However, that average was down from around 98,000 tons a day in December, but it was still the third-highest daily rate on record.”

Precious metals lose their luster

Even traditional safe-haven assets like gold took heavy losses as investors looked to raise cash, Burns explained this week.

“Gold, in particular, has been the victim of its own success, rising strongly this quarter on the back of growing investor anxiety about the wider economy,” he wrote.

“Longer-held positions were showing a healthy profit. So, when investors faced demands for margin calls on falling equities, the first place they turned to was to take profits on precious metals and cover the margin calls.”

Moody’s has coronavirus risk heat map

Moody’s Investors Service recently released a coronavirus heat map, outlining relative risk exposure of various industry sectors.

For example, metals and mining fell into the “moderate” exposure category.

“Sectors reliant on trade and the free movement of people are most exposed, such as passenger airlines, shipping, and lodging & leisure, which includes cruise lines and restaurants,” said Benjamin Nelson, a Moody’s vice president and co-author of the report.

High-exposure sectors included automotive manufacturers, automotive suppliers, global shipping and passenger airlines.

India’s aluminum sector eyes green advances

MetalMiner’s Sohrab Darabshaw outlined activity in the Indian aluminum sector, including the potential for the manufacture of the country’s first aluminum-bodied train coaches.

“For starters, news has just broken that the Indian Railways, one of the world’s largest rail networks, is looking to manufacture India’s first aluminum body train coaches,” he wrote.

“The Railway Board has approved the manufacturing of 500 aluminum body coaches in India.

“The report notes the coaches were expected to be manufactured in the year 2021-2022 after Transfer of Technology (ToT) from South Korean firm Dawonsys, for which a contract has been awarded.”

Detroit automakers announce production suspensions

After holding talks with the United Auto Workers (UAW) union, General Motors, Ford and Fiat Chrysler have each announced plans to temporarily suspend their North American production to combat the spread of COVID-19.

Ford also announced the suspension of its production in continental Europe, effective yesterday, March 19.