Commodities Roundup: Steel mills idle; South Africa lockdown delays stainless surcharges; container traffic plunges

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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:

Chemaf suspends copper-cobalt operations 

As noted in MetalMiner’s Renewables Monthly Metals Index (MMI) report earlier this month, Chemaf, the Congo subsidiary of Shalina Resources, announced it would suspend operations at its Usoke copper-cobalt processing facility.

The plant has an annual capacity of 31,500 tons of copper cathodes and 2,500 tons of cobalt.

Steel mills idle production amid falling demand

In an effort to support prices amid falling demand, U.S. steel mills in recent weeks have announced idling of production.

U.S. Steel late last month announced it would idle the No. 4 blast furnace at its Gary Works in Indiana.

ArcelorMittal also announced the idling of a blast furnace at its Burns Harbor facility in Indiana.

In ArcelorMittal’s recent annual report, it forecast U.S. apparent steel consumption will grow between 0-1% this year, in spite of the coronavirus outbreak’s depressive impact on demand.

South Africa lockdown impacts ferrochrome, stainless steel

South Africa, a major producer of ferrochrome — an important material in the production of stainless steel — imposed an initial 21-day lockdown in response to the coronavirus outbreak, a lockdown which has recently been extended through the end of April.

As a result, producers of ferrochrome have declared force majeure, which has in turn impacted the fixing of stainless steel surcharges (as ferrochrome represents the biggest piece in determining the surcharges).

“While chrome forms by far the larger part of the stainless surcharge, falling nickel prices also undermine price support, particularly for the higher nickel-bearing grades,” MetalMiner’s Lisa Reisman explained.

“As for China, stainless production is recovering but is still well below 2019 levels; a full recovery there is likely to take several quarters.”

Coronavirus outbreak hits container traffic 

MetalMiner’s Stuart Burns weighed in on another indicator of the coronavirus slowdown: plunging container traffic.

“World Cargo News reports that container traffic through the Port of Los Angeles during March was down significantly in the wake of the pandemic,” Burns wrote. “Los Angeles moved 449,568 TEU in March 2020, a 30.9% decrease compared to last year.

“For the first quarter of 2020, volumes have decreased by 18.5% compared to 2019,” the port said. “It was the lowest amount of monthly cargo moving through the port since February 2009.”

Depending on how long the health crisis continues, it could have significant long-term ramifications for shipping firms and their customers.

“Some shipping lines were already in a difficult position, heavily laden with debt and facing a slowdown in trade due to the U.S.-China trade war,” Burns explained. “The greater impact of the virus’ damage to global supply chains could see bankruptcy in the months ahead and a smaller container shipping industry emerges from what is left.

“That would not be good news for consumers, as less capacity and less competition mean rates would rise.”

Pandemic impacts India’s iron ore sector 

MetalMiner contributor Sohrab Darabshaw analyzed the pandemic’s impact on India’s iron ore sector amid forecasts of significant drops in its iron ore exports this year.

“A new report by data analytics company GlobalData has forecast India’s iron ore exports will decline by around 25% to 23.3 million metric tons in 2020 due to the coronavirus outbreak, the closure of ports, shortage of workers and transport restrictions,” Darabshaw wrote.

“This report follows the one by Fitch Solutions a few days ago that revised India’s mineral production growth forecasts downward, adding that despite mining operations being operational during the lockdown, other restrictions were hampering output.”

E.U. imposes anti-dumping duties on stainless steel 

After a lengthy period of deliberation, the E.U. opted to slap anti-dumping duties on stainless steel imports from China, Taiwan and Indonesia.

“But unlike America’s blanket 25% levy on steel products, the E.U.’s response to the threat is more nuanced,” Burns explained.

“In addition to Tsingshan, its rival Shanxi Taigang Stainless Steel Co Ltd and three affiliates were hit with the highest rate of 18.9%, while other mainland China firms saw rates of 14.5% and 17.4%. The Taiwan duties were lower, ranging from 6% to 7.5% and collectively are hoped to ‘restore fair-trading conditions’ and allow domestic producers to recover, the E.U. announcement states.”

U.S. industrial production suffers largest drop since 1946

Unsurprisingly, as shelter-in-place orders went into effect around the U.S. in March, industrial production levels plummeted.

In fact, according to the Federal Reserve, industrial production fell 5.4% in March, marking its biggest drop since 1946.

Manufacturing output, meanwhile, fell 6.3% in the month, paced by production suspensions in the automotive sector.

Oil price deal and the way forward 

The spat between Saudi Arabia and Russia over oil output cuts has apparently reached a conclusion, as oil-producing countries reached a deal to cut output by about 9.7 million barrels per day over the next two months.

Previous talks had fizzled, leading Saudi Arabia to decide to flood the market with oil, thus engendering the recent price swoon (which was exacerbated by the coronavirus pandemic and the ensuing plunge in demand).

“Before the coronavirus crisis, global demand was in the region of 100 million barrels of oil a day, The New York Times states, but demand is down about 35%, suggesting excess production is still in the region of an unprecedented 20 million barrels,” Burns explained.

“Analysts have cast doubts on even the 9.7 million barrels per day figure, saying it is based on high baseline estimates used to calculate cuts, estimating the real figure will be more like 7 million barrels per day before falls in North and South American production are factored in.

“Global storage is rapidly filling up as consuming and producing countries fill up their reserves at what are historically low prices; estimates are storage will be full within a couple of months, if not just a few weeks.”

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