Commodities Roundup: U.S. auto sales still sluggish; rising LME aluminum load-out queues?; gold prices surge

commodities

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:

U.S.-China trade relations

MetalMiner’s Stuart Burns recently interviewed Rodger Baker, Stratfor’s senior vice president of strategic analysis, regarding the state of U.S.-China trade relations, particularly as influenced by the political situation in Hong Kong.

“Many of the flash points have already been identified, from U.S. attacks on Chinese technology companies and supply chains to questions on China’s ability (or willingness) to fulfill the purchase commitments of the Phase 1 trade deal,” Baker said. “September and October is the next big soy buying season, and that is rather close to the U.S. elections, so China’s decisions to accelerate or curtail purchases at that time will be a critical test of the trade dynamic and will likely be based on China’s assessment of the likely path of the U.S. election.”

The full Q&A can be read here.

Auto sales still slow but recovering

In the automotive world, U.S. sales remained down in June, but the rate of decline has softened.

For the second quarter, however, General Motors reported sales fell 34%, while Ford’s fell 33.3%.

Honda’s Q2 sales were down 27.9%, while its June sales were down 15.5%.

As coronavirus-related travel restrictions have been lifted in some parts of the country, it remains to be seen what impact the surge in cases in states like Texas, Arizona and Florida will have, or the impact of a potential resurgence of cases in states that have managed to bring case numbers down.

LME aluminum load-out queues, premiums

In other news, Burns delved into the latest developments in LME load-out queues and physical delivery premiums.

“A recent Reuters article doesn’t say so in as many words but certainly suggests conditions are fertile for warehouse operators to incentivize metal deliveries again and, in the process, queues could form at exit,” he wrote.

“The article focused on what it termed a ‘flash squeeze’ in LME rollover premiums from one day to the next, termed tom-next, where short sellers who had to roll over their short positions by buying today and selling tomorrow — usually a small contango.”

Construction spending drops 2.1%

U.S. construction spending in May fell 2.1% compared with the previous month, according to the U.S. Census Bureau.

May spending reached a seasonally adjusted annual rate of $1,356.40 billion in May.

The Architecture Billings Index, meanwhile, posted a May reading of 32.0, which marked an increase from its 29.5 reading in April — a slight improvement, but still well into contractionary territory (anything below 50 indicates billings contraction).

“Business conditions at architecture firms remained extremely poor for the third consecutive month in May,” the latest ABI report states. “While the ABI score of 32.0 for the month was somewhat higher than the April score, it still indicates that the majority of firms saw their billings decrease yet again (any score below 50 indicates declining billings). Indicators of future work remained grim as well, and while a larger share of firms reported an increase in inquiries into new projects in May than in April, most firms still saw a decline.”

Rare earths processing plant to open in Colorado

According to mining.com, a pilot rare earths processing facility has finally opened in Wheat Ridge, Colorado.

The plant, run by USA Rare Earth and Texas Mineral Resources, will process heavy rare earth concentrate from Australia’s Arafura Resources. Rare earths metals are used in high-tech products like smartphones, and they're difficult to extract.

Modi launches coal mine auction

As MetalMiner contributor Sohrab Darabshaw explained, Indian Prime Minister Narendra Modi has put 41 coal mines in the country up for auction.

“In late June, India’s Prime Minister Narendra Modi announced the launch of an auction for 41 of India’s coal mines for commercial purposes,” he wrote.

“While the government called it a ‘big ticket reform,’ some opposition party leaders and experts have opposed it and expressed reservations about the move.

“The prime minister’s announcement to award coal and lignite blocks on a revenue-sharing basis has ended almost seven decades of policy curbs in the coal sector.”

Gold prices surge

For precious metals watchers, gold prices have ascended to nearly nine-year highs amid a rise in economic uncertainty.

The gold price closed Wednesday at $1,810/ounce, its highest level since September 2011.

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