Commodities Roundup: Aluminum going green; iron ore falls; European, Indian steel sectors face challenges

commodities

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. housing starts jump

According to recent data from the Census Bureau and the Department of Housing and Urban Development, U.S. housing starts in February reached a seasonally adjusted annual rate of 1.60 million, which marked a 1.5% decline from January but a 39.2% increase compared with February 2019.

Housing completions, meanwhile, fell 0.2% from January and 1.2% from February 2019.

Aluminum mills going green

Even as the coronavirus outbreak continues to dominate the world’s attention, MetalMiner’s Stuart Burns delved into aluminum mills’ efforts toward improving their environmental bona fides.

Among the aluminum producers looking to make their processes greener is China’s Hongqiao Group.

“A Reuters report this week covers China Hongqiao Group’s move from Shandong to southwest China’s Yunnan province to take advantage of cleaner hydropower,” Burns wrote.

“The report states Hongqiao is looking to move some 2 million tons of annual aluminum production while at the same time increasing the use of scrap recycling (in preference to alumina as a raw material).

“This will entail the construction of new production lines for melting, alloying and casting of scrap to alloy; however, no plans were announced to close any alumina production.”

As Burns notes, however, the efforts undertaken by many companies are not necessarily driven by environmentalist motivations.

“Producers’ migration to power supply sources with better environmental credentials is largely driven by customer demand, not altruistic motives,” he continued.

“Tech firms like Apple and automotive firms like BMW are actively looking to burnish their own image by marketing their products as having a low-carbon footprint, or, via offsets, as zero carbon.

“Yes, I know — offsets are smoke and mirrors, not genuine zero carbon, but this is marketing, not science.”

RMF report evaluates practices of large mining companies

A report released this year by the Responsible Mining Foundation aimed to assess the practices of the world’s biggest miners, including names like Rio Tinto, Glencore and Anglo American, among others.

In all, the study surveyed the practices of 38 companies operating more than 780 mine sites.

MetalMiner contributor Kyra Senese summarized some of the key points from the report.

“A few companies have developed new or stronger management standards,” the study said. “Yet many companies show little sign of movement and much needs to be done to translate corporate commitments and standards into successful business practices.”

Senese highlighted an area of concern raised in the report, that being that most companies “remain unable to demonstrate any ability to track or publicly report how effectively they oversee EESG issues.”

“Even fewer companies show evidence of reviewing their performance and taking responsive actions where necessary,” the report states.

Iron ore prices drop

As Burns noted earlier this week, iron ore prices had been showing some level of relative resilience recently.

“Supply disruptions and what looks like an overly optimistic assessment of likely stimulus measures have supported iron ore and coking coal, despite the collapse of just about all other commodity prices,” he wrote.

“Benchmark iron ore had remained above $90 per ton all quarter, falling just 1.1% from 2019 closing prices, Reuters reported. The Singapore Exchange’s Australian coking coal futures ended at $161.84 per ton on Wednesday, up 19% from the end of last year.”

That changed this week.

Iron ore on the Dalian Commodity Exchange fell 6%, “stricter measures to contain the coronavirus pandemic in Europe and the U.S. persuaded investors the Chinese economy could be in for a prolonged period of slow growth.”

Indian steel sector faces challenges

MetalMiner contributor Sohrab Darabshaw surveyed the state of the Indian steel sector amid a bevy of challenges, from the coronavirus to new export incentives by Beijing.

“The Economic Times reported Beijing was hiking export incentives on the primary infrastructure alloy by a third to help cushion the impact of demand destruction at home and overseas,” Darabshaw wrote.

“The move by China to increase export rebates on cold-rolled steel, stainless steel strip and others from the present 10% to 13% for a large number of steel products may prompt some Indian steelmakers to seek higher border tariffs if imports, too, were to surge now.

“The Indian Steel Association said the impact on pricing will now depend on the inventory pile-up in China.”

Copper mine production drops in 2019

According to the International Copper Study Group, global copper mine production fell 0.7% in 2019.

In the U.S., however, copper mine production increased 6% to 1.3 million tons in 2019, 68% of which came from Arizona.

European steel sector in dire straits

Like the aforementioned Indian steel sector, steelmakers in Europe are also feeling pressure from a number of fronts.

“Companies such as Thyssenkrupp and Tata Steel have taken action because of falling orders, a lack of available personnel or as a safety precaution against infections, while market leader ArcelorMittal, the world’s largest steel producer, has reduced output at most of its plants on the continent,” Burns wrote.

“Steel producers cite a number of reasons, chief among them being worker safety, but collapsing sales are probably as much of a dynamic.”

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