Commodities Roundup: Oil price recovery; steel production down; shipping lines face disruption

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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:

Housing starts jump in June

U.S. housing starts in June jumped 17.3% compared with the previous month, according to data from the Census Bureau and the Department of Housing and Urban Development.

The June housing start rate, however, was down 4.0% compared with June 2019.

Oil price recovery

Earlier this year, oil prices plunged after being walloped by both declining demand amid the coronavirus pandemic and a geopolitical struggle between Saudi Arabia and Russia over proposed oil output cuts.

U.S. WTI prices fell to -$38/barrel in late April before bouncing back over the ensuing months. The WTI price was just over $41/barrel Thursday afternoon.

MetalMiner’s Stuart Burns opined on the oil price and how much more it could rise.

“The surge in imports in recent months has filled up inventories at attractively low prices,” he wrote. “However, as that objective is reached, it may presage a slowdown in further imports.

“Much depends on the path of the pandemic, both in terms of the imposition of new lockdowns and the depressing effect fear of the virus could have on travel and consumption.

“The oil price, like the global economy, is in for a choppy ride.”

U.S. steel capacity utilization rises

While U.S. steel production levels this year are still down compared with last year, the sector’s capacity utilization rate has inched upward in recent weeks.

For the week ending July 18, U.S. steel mills produced at a capacity utilization rate of 58.3%, up from 57.5% the previous week.

In other positive news for the domestic steel sector, U.S. Steel plans to restart a blast furnace at its Gary Works facility.

Automotive sales rise in China

Automotive sales in the U.S. have recovered somewhat but remain well below last year’s levels.

Meanwhile, China has now posted three straight months of automotive sales rises.

According to the China Association of Automobile Manufacturers, June sales rose 11.6% year over year.

May and April sales were up 14.5% and 4.4%, respectively, on the heels of a 43.3% decline in March.

Global aluminum production hits 5.27M tons in June

According to the International Aluminum Institute, global aluminum production reached 5.27 million metric tons in June, down from 5.45 million metric tons in May.

On a daily average basis, June production was up slightly compared with the May average.

China, the world’s top producer of aluminum, churned out 3.01 million metric tons in June, compared with 3.10 million metric tons in May.

In eastern and central Europe, production totaled 340,000 metric tons, down from 351,000 metric tons the previous month.

Shipping experiences disruptions amid coronavirus pandemic

Among other sectors impacted by the coronavirus pandemic, shipping lines are turning to desperate measures to stay afloat, Burns explained.

“In interviews with MetalMiner, brokers report a series of desperate measures shipping lines are adopting to handle the drop-in cargoes, previously unprofitable rates, and port disruptions,” Burns wrote. “In many cases, the measures appear to be causing more problems than they are solving.

“Lines are currently running blank sailings on almost every route. A blank sailing is when shipping lines temporarily terminate a service and switch the vessel to another route or even anchor up.

“As a result, containers are building up at ports because sailings fail to materialize as scheduled. Containers are arriving at ports booked for a particular sailing but are being shut out or rolled over to the next vessel, resulting in port delays of a week or more.”

In addition, freight rates are rising. For example, rates for India-Europe freight have jumped by 60% despite falling volumes, Burns explained.

Indian sponge iron manufacturers seek government’s help

As MetalMiner contributor Sohrab Darabshaw wrote this week, Indian manufacturers of sponge iron are petitioning the government to restrict exports of iron ore pellets.

“The Chhattisgarh Sponge Iron Manufacturers’ Association, in a letter to Prime Minister Narendra Modi, called for the levy of a 30% export duty on iron ore pellets,” Darabshaw wrote.

“The association also called for a ban on all exports above 63% Fe to safeguard the domestic steel producers, especially the secondary steel producers having no captive iron ore mine, the Financial Express reported.

“India exported 12.6 million tons (MT) of pellets in 2019-20, up from 9.3 MT the previous year.”

Global steel production down 7%

The World Steel Association reported global steel production fell 7% in June compared with June 2019.

Despite the overall drop, China’s production rose 4.5% year over year to 91.6 million tons.

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