Commodities Roundup: Central U.S. sets wind power records; Chinese semi-finished aluminum exports decline; Tesla inks cobalt supply deal

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:

Central U.S. sets wind power generation records

According to the Energy Information Administration (EIA), the central U.S. set wind power generation records this spring.

“Earlier this year, the Southwest Power Pool (SPP), the regional transmission organization that manages the electric grid for much of the central United States, set records for the highest share of electricity demand supplied by wind power in both a single-hour period (72%) and a full day (62%),” the EIA reported.

Concerns over nickel supply

As MetalMiner’s Maria Rosa Gobitz noted this week, many major stainless steel producers reported their first-quarter sales were flat compared with the previous year.

With an expected drop in demand this year, Gobitz offered a hypothesis for why sales had yet to fall.

“It might be due to concerns over a nickel shortage in the near future,” Gobitz wrote.

“After all, Indonesia, the world’s largest nickel producer, banned the export of nickel ore back in January. Even when the Indonesian nickel miners association (APNI) proposed in April that the country lift the ban, the Ministry for Maritime Affairs and Investment rejected the proposal.

“Moreover, SHFE nickel inventory has fallen to just 27,000 tons, while the LME has some 230,000 tons of stock.”

Chinese semi-finished aluminum exports down

MetalMiner’s Stuart Burns took a look at China’s semi-finished aluminum exports, which have continued to fall during the pandemic.

“China’s relatively strong demand appears to be supported not just by a high primary ingot price but by a drop in exports of semi-finished products,” Burns wrote. “Semis exports have long been seen as more of a pressure release valve to dispose of excess product than as a core marketing objective of the Chinese aluminum industry (although its domination in terms of size and number of stands at aluminum exhibitions in recent years may suggest otherwise).

“Whether core business objective or release valve, exports have been steadily dropping for the last couple of years. Rather than reverse this trend as many expected, exports have continued falling during the pandemic. ING bank reports that total exports of unwrought aluminum and semis products declined to 383 kt, marking a third straight month of declines.”

Struggles ahead for the U.K.

Elsewhere, Burns explained why the U.K. may be set to experience a difficult economic road ahead.

“The OECD is quoted by The Guardian newspaper as saying the U.K. will experience the deepest recession of any nation in the developed world this year (although Italy and Spain will not be far behind),” Burns wrote.

“There are a number of factors at play, but key among them according to the OECD is the importance of the service sector to the U.K. economy.

“Trade, tourism, real estate and hospitality together make up a sizable chunk of gross domestic products, and all have been hard-hit by the lockdown.

“Even by the end of 2021, the economy is expected to be 5% below pre-crisis levels.”

Solar power investment in India

MetalMiner contributor Sohrab Darabshaw checked in on India’s burgeoning solar power sector and Adani Green Energy Ltd’s intention to invest approximately U.S. $6 billion to build out 8 GW worth of solar power projects.

“India imports about 90% of its solar equipment today, so this development could serve to lessen that import dependence,” Darabshaw wrote.

“Adani Green Energy Ltd., a part of the diversified Adani Group, is expected to invest about U.S. $6 billion in the project, and create 400,000 direct and indirect jobs, it said in a stock market filing, according to India Climate Dialogue.”

Tesla inks new cobalt supply deal with Glencore

The cobalt market is rife with ethical concerns, as most of the world’s supply comes from the Democratic Republic of the Congo, where there are well-documented concerns over labor conditions (including the use of child labor).

The coveted material is used in a variety of high-tech capacities. For the average consumer, the electric vehicle sector is perhaps the most high-profile user of cobalt.

In that vein, electric vehicle maker Tesla — despite recently indicating its intention to eliminate cobalt from its supply chain — has signed a new cobalt supply deal with miner Glencore.

Burns opined on the state of mining in the DRC and the ethical concerns at the heart of the cobalt business.

“So, it could be seen as a brave move by Elon Musk and Tesla to go direct for cobalt supplies needed by their current Shanghai and future Berlin battery plants,” Burns wrote. “Teaming up with Glencore, who produces about a fifth of the country’s cobalt output, negates allegations of sourcing conflict minerals. It is true Glencore’s governance has been challenged and the miner is being investigated by the U.S. Department of Justice. However, to date, the worst that process has thrown up is an association with discredited individuals and old accusations of money laundering, referring to cases not just in the DRC but also Nigeria and Venezuela going back to 2007.

“While the DOJ and British SFO investigations are ongoing, the fact remains if you need cobalt, you need the DRC. If you are going to deal in the DRC, you need a well-established Western supplier, like Glencore, not despite the unsavory nature of the DRC market but precisely because of it.”

Freight rates remain high despite pandemic impacts

The coronavirus outbreak has had far-reaching economic consequences, impacting demand and, consequently, prices for a wide range of commonly used goods and services.

As for shipping, however, Burns explained seaborne freight rates have not fallen by as much as one might expect given the economic pressures seen in other sectors.

“Trade volumes dropped dramatically as the pandemic spread, one measure of that being transits through the Suez Canal, a crucial shipping route for the Asia-European trade,” Burns explained. “Container ship transits were down 15% year on year, faltering continuously since January, International Shipping News reports, and were down by 32% year on year in May to settle at an all-time low by the beginning of this month.

“Lines have been nimble and reacted quickly to changing events by blanking sailings, consolidating or sharing services, and laying up or idling unused vessels. Shipping rates have, therefore, held up well so far, which is maybe not what consumers want to hear; however, for the health of the industry, it at least helps ensure the survival of the major lines.”

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