Commodities Roundup: Aluminum tariff flaws; U.S. steel shipments down; Oil price recovery on shaky ground

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:

ArcelorMittal reports Q1 loss

Steelmaker ArcelorMittal reported a Q1 net loss of $1.1 billion.

“There are still too many uncertainties to accurately predict what the rest of the year holds,” Chairman and CEO Lakshmi Mittal said. “However, it seems likely that over the course of this month countries will start to announce details of their ‘exit’ strategies. Whilst these are likely to be an easing, not an immediate ending of lockdown, construction and manufacturing are expected to be among the first sectors to be permitted to restart operations, and indeed we are seeing signs of customers restarting production.”

Flaws in U.S.’s aluminum tariff approach

In 2018, U.S. President Donald Trump shook up the global metals market by slapping import tariffs on steel and aluminum in an effort to support the domestic industries.

As MetalMiner’s Stuart Burns noted in an analysis of U.S. aluminum imports, the plan is seeing ups and downs.

“Following the imposition of Section 232 tariffs in 2018, U.S. primary aluminum production rose from 741,000 metric tons in 2017 to 1.13 million metric tons last year,” he wrote. “But now smelters are being idled and output is falling again.

“Alcoa will curtail 230,000 tons of operating capacity at its Washington state smelter, while the future of other smelters has to be in doubt as prices remain uncompetitively low and imports continue to flood in.”

Copper prices show signs of recovery

Like other metals, the price of copper took a hit earlier this year amid dropping demand stemming from the COVID-19 pandemic.

However, after hitting its 2020 low on March 23 ($4,617/mt), the LME copper price gained nearly 10% in April and reached an eight-week high earlier this week.

U.S. steel shipments down in March

The American Iron and Steel Institute (AISI) reported U.S. steel shipments fell 6.3% in March compared with March 2019 shipments.

March shipments totaled 7.8 million tons, which marked a 0.4% increase compared with February shipments.

Steel capacity utilization hits 53.7%

Impacted by a decline in demand during the global pandemic, especially from the automotive sector, U.S. steel mills operated at a capacity utilization rate of 53.7% for the week ending May 9.

Production during the week totaled 1.2 million net tons, a 36% year-over-year decline.

However, the weekly production totaled marked a 5.2% increase from production the previous week.

With parts suppliers restarting production this week and major automakers targeting a May 18 restart date, the steel sector will likely get a demand boost. However, it remains to be seen when steelmakers will be able to restart idled production to meet that demand bump.

Oil prices slow to recover 

Although oil prices quickly bounced back after plunging into negative territory — U.S. WTI fell to nearly -$38 per barrel last month — the commodity is not likely to bounce back in earnest for some time.

“Unemployment has skyrocketed and despite government hopes it will be short term, the reality is levels will remain elevated, depressing growth and demand,” Burns explained.

“Oilprice.com states in a recent post that the U.S. Labor Department reported total nonfarm payroll employment fell by 20.5 million in April, causing the unemployment rate to hit 14.7%. This is the highest rate of unemployment and the largest monthly increase since January 1948.

“Meanwhile, the International Labor Organization reported that some 1.6 billion workers in the informal economy, representing nearly half of the global labor force, are in immediate danger of losing their livelihoods due to the COVID pandemic.”

Demand recovery boosts stainless 

While it remains to be seen if conditions will remain on an upward trajectory vis-à-vis the COVID-19 pandemic in China, the country has begun a cautious crawl toward normalcy.

As a result, slowly rising demand has boosted stainless steel prices in the country.

Reuters reported SHFE stainless steel recently jumped to a nine-month high.

Rising nickel prices have also given stainless a boost; after falling down near $11,000/mt in late March, LME nickel has bounced back over $12,100/mt.

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