Commodities Roundup: Copper production rises; nickel at critical moment; U.S. energy production exceeded consumption last year

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:

January copper mine production rises 

The International Copper Study Group (ICSG) reported January copper mine production rose 0.5% on a year-over-year basis.

In terms of supply and demand, the global copper market was balanced during the first month of the year, according to the ICSG.

Global refined copper production increased 3% in January.

Nickel ups and downs

MetalMiner’s Stuart Burns took a look at the nickel market, which has swung from a surplus to supply fears.

“Reuters reported that just a few weeks ago market surpluses were expected,” Burns wrote. “In a recent poll of analysts, the median nickel market balance forecast for this year was a surplus of 89,000 tons, while Russian producer Norilsk Nickel last week came out with an even heftier surplus estimate of 149,000 tons.

“Yet demand destruction is matched only by supply disruption, with the Philippines’ forcing the closure of major mines in the southern province of Surigao del Norte — home of the country’s biggest exporter, Nickel Asia — following the outbreak of COVID-19 cases in the area.”

As such, the nickel market is on a knife's edge, as market watchers look to which side it will ultimately fall.

“LME nickel prices have lifted from a low of below $11,000 per ton in March to over $12,000, but seem to have plateaued for now as the market tries to assess which will be more severe — supply tightness or weak demand,” Burns added.

Global steel output falls 6% in March

The coronavirus pandemic has exerted significant pressure on a number of sectors, including steel, as global steel output fell 6% in March on a year-over-year basis.

That decline came after a 3.3% increase in February.

China’s production totaled 79 million tons, down 1.7% year-over-year.

China’s growth dilemma 

Burns also weighed in on China and its efforts to claw out of the first-quarter economic doldrums.

“The 2008 stimulus blockbuster spawned many problems, such as overheating the economy, capital inflation, financial market distortions, inefficient expansion of production capacity and soaring housing prices,” he explained. “As a result, China has become one of the world’s most indebted economies in less than a decade, with debts hidden away on the books of local governments and state-run companies.

“Beijing is highly unlikely to repeat that mistake again and arguably has more world-class infrastructure than it needs or will ever get a viable return from.

“So, what is it likely to do, and will its actions result in a boost to metal prices and global GDP as many hope?”

Unlike the 2008 financial crisis, China’s bounce-back is not likely to be as swift this time around.

“Metal prices will, therefore, be lifted by sentiment, on the expectation rising GDP will boost metals demand,” he added. “Copper, in particular, is sensitive to such dynamics, but a firming of prices is far from the doubling we saw post-2008.

“In the absence of a China bull story, this time around metal prices are likely to remain much more subdued — and for longer.”

U.S. energy production exceeds consumption in 2019

According to the Energy Information Administration (EIA), U.S. energy production exceeded consumption in 2019 for the first time since 1957.

U.S. energy production last year grew 5.7% while consumption fell by 0.9%.

Tata Steel seeks U.K. government support

As Burns noted earlier this week, Tata Steel is reportedly seeking $630 million in support from the British government to help see it through the COVID-19 pandemic, which has disrupted the European steel market.

“After throwing money at so many causes, some more deserving than others, the government will not want to see large-scale, permanent closures of the steel sector just as lockdown rules are being relaxed and manufacturing is being encouraged to restart,” Burns wrote.

“The jobs at risk are a fraction of some retailers, airlines or large parts of the leisure industry equally on the brink. But this is not just about jobs — it is how the industry survives the rest of this year that counts.

“Steel will be needed as manufacturing recovers. However, already overburdened with debt, there is a limit to what the industry can borrow commercially to get through the next six months.”

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