Commodities Roundup: Preparing for steel price spikes; COVID-19’s impact on supply chains; low coal prices and renewables’ future

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:

Rising steel prices?

In anticipation of a potential rise in steel prices, the MetalMiner team recently released a two-page guide for steel buyers looking to mitigate price spikes.

“The most successful strategies will take the peaks off the price spikes,” said Don Hauser, Vice President of Business Solutions for MetalMiner and a former steel buyer for John Deere. “It’s not as important to get the best price as it is to make sure you never get the worst price.”

COVID-19 impact on supply chains

MetalMiner recently spoke with Anton Posner, CEO of Mercury Resources, about the supply chain impacts of COVID-19 in North America.

To date, there hasn’t been a significant impact in North America, said Posner, whose firm offers logistical expertise for the shipment of dry goods, especially for the metals sector.

“If you sat in our organization and we didn’t tell you that there was a pandemic going on, and you were just managing the flow of rail cars, rail freight throughout the continent and barges on the river system and stevedoring operations, you would never know that there was a problem,” Posner told MetalMiner.

However, he added that could change if large outbreaks occur at ports and among stevedoring crews.

Supply chain concerns in India, Pakistan

Despite initial reports of relatively modest COVID-19 totals, it appears figures in India and Pakistan are likely much higher than has been reported, MetalMiner’s Stuart Burns explained.

“It has been a source of puzzlement to the international community that India and Pakistan had appeared to have gotten off relatively lightly compared to China, Europe and North America. Poor healthcare, densely populated cities, communal living and existing lung disease were expected to make the countries particularly susceptible,” Burns wrote.

“Instead, official death tolls have been surprisingly low.

“By May 22, India had reported only 3,435 deaths and Pakistan only 1,017, compared with nearly 100,000 in America.”

However, actual numbers are likely much higher, raising questions about the strength of supply chains relying on India or Pakistan.

“Many businesses are now coming out of forced lockdown; migrant workers and laborers will be drifting back from their villages to work in the cities,” he added. “Hotspots are a significant feature, but insufficient testing makes the identification of outbreaks unreliable unless a really large surge forces a reappraisal.

“Under such circumstances, the potential for a manufacturing site, city or even whole region to see a spike and be closed down again is a significant risk and one consumers with supply chains relying on product from the subcontinent would do well to keep under close review.”

Renewables in the short-term vs. long-term

Amid a drop in demand for commodities across the board, prices for less-environmentally friendly but traditional sources of energy, like coal, have plummeted.

As such, renewable forms of energy are, for the moment, less attractive to some energy users.

In the long-term, however, the future for renewables is bright.

“Looking further ahead into the next decade, a separate Financial Times post reports on a consortium of six of Denmark’s biggest companies teaming up to launch one of the world’s largest green hydrogen projects,” Burns wrote. “The project aims to create emission-free fuels suitable for ships, trucks, aircraft and heavy industry such as steel and cement. Those industries are notoriously heavy power consumers and, in recognition of that, are recipients of all kinds of carbon credits to allow them to pollute but continue to operate.

“Container shipping group AP Moller-Maersk, airline SAS, logistics group DSV Panalpina, ferry line DFDS, Copenhagen Airports and the world’s largest wind farm developer Orsted are aiming to open their first hydrogen facility powered by offshore wind by 2023 and reach full capacity by 2030 as they try to help Denmark achieve carbon neutrality by 2050.”

Lead, zinc post surpluses in Q1

According to the International Lead and Zinc Study Group, the global markets for lead and zinc were in surplus during Q1 2020.

Zinc supply exceeded demand by 239,000 tons, according to the ILZSG, while lead was in surplus by 19,000 tons.

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