Commodities Roundup: Iron ore and steel demand; steel capacity utilization rises; copper continues hot streak

commodities gold coffee coal agriculture Adobe Stock

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:

Iron ore price and steel demand

As has been the story for a number of commodities, China’s recovery from the coronavirus pandemic has powered gains in several sectors, including metals and metalmaking raw materials.

Iron ore, for one, has been one of the major risers in recent months.

However, as MetalMiner’s Stuart Burns noted, despite China’s recovery and fears regarding iron ore supply disruptions in Brazil, the iron ore price is being hampered by lagging steel demand outside of China.

“MetalMiner’s tracking of iron ore and coke prices in China have shown recent weakness,” Burns wrote. “Reuters cautions falling prices and rising inventory for finished steel products portend weaker demand.

“A disconnect between input costs and output costs rarely lasts for long. With plentiful raw material supply, there is little to support steelmaking material prices in Q3.”

Prices on the SHFE have declined modestly of late, with both rebar and HRC falling just over 1%.

“These are not dramatic changes, but they are suggestive of a gradual easing of demand and rising inventory,” Burns noted.

“Seaborne iron ore, coking coal and coke prices appear to have more downside risk than upside this month.

“As such, all it will take is for investors to lose faith and take profits for a sharper correction to follow.”

Steel capacity utilization rises

While the steel sector has been impacted by the pandemic, U.S. steel capacity utilization rates have been making gains in recent weeks.

For the week ending July 25, the rate reached 58.9%, up from 58.3% the previous week. However, for the same week in 2019, the rate reached 79.4%.

Production for the year to date totaled 44.55 million net tons, marking a 20% year-over-year decline.

Stainless demand and the nickel price

Several metals have made major gains in recent weeks and months, but nickel remains down 5% from its position at the end of last year, Burns explained.

“This is despite recent comments by Elon Musk during a second-quarter earnings call. Musk called on miners to efficiently mine more nickel to meet Tesla’s massive upcoming demand for the metal, reported,” Burns wrote.

“As Reuters observed, the much greater market for stainless steel still remains the main driver for nickel demand and, hence, price.”

Tata Steel launches new scrap steel plant in India

MetalMiner’s Sohrab Darabshaw weighed in on Tata Steel’s new scrap steel plant in India.

“Tata Steel has set up the new plant in Haryana in central India. The plant is expected to have an annual capacity of 500,000 tons, the Hindu Business Line reported,” he wrote.

“Tata has set up the plant in collaboration with Aarti Green Tech Ltd, a subsidiary of Aarti Steel.

“The plant will add to Tata’s domestic production volume of 2.99 million metric tons as of the quarter ending in June.”

U.S. looks to strengthen rare earths supply chain

The U.S.’s dependence on China for rare earths has been a long-standing concern in the U.S., particularly the Department of Defense.

China controls over 80% of the world’s rare earths output, a reality which has prompted the U.S. to explore alternative supply sources, including partnerships with rare earths firms in other countries.

“Potentially the biggest shakeup to the U.S. rare earths market in years was announced this month, in a move by the U.S. to bolster the country’s rare earth supply chain that has been almost totally reliant on an increasingly belligerent China,” Burns wrote.

“It would be convenient to think the Pentagon’s announcement that Australian rare earth miner Lynas Corporation had secured U.S. government funding to design a A$50 million ($36 million) processing plant in Texas was in response to recent threats by China to withhold material supplies to Lockheed Martin.

“But the reality is an agreement has been cooking for months.”

Copper prices continue to make gains

The copper price has been among the fastest risers within the base metals complex.

According to the International Copper Study Group, the LME average cash price in June rose 9.7% compared with the previous month.

In terms of output, copper mine production and refined production were both relatively unchanged through the first four months of the year compared with the same time frame in 2019.

However, copper mine production in April fell 3.5%, as some countries began to feel the impact of the coronavirus pandemic. Peru, in particular, saw mine production fall 33% in April and 17% over the first four months of the year.

Share on Procurious

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.