Commodities Roundup: Shipping rates rise; copper flattens; iron ore supported by Chinese demand, supply concerns

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:

Shipping rate increases

MetalMiner’s Stuart Burns took a look at the shipping sector and rising rates therein.

“We had hoped to post good news for consumers, namely that as manufacturing in China, Europe and North America recovers, freight capacity would increase. As a result of that increase, the disruption shippers experienced in the spring would subside,” Burns said.

“Unfortunately, if anything, it is getting worse.

“Shipping lines introduced blank sailings at the beginning of this year. This essentially removed scheduled services from the rotas due to an initial lack of demand for space, as China went into lockdown, and in an effort to contain costs and support freight rates.”

Shipping lines have managed capacity to support rates.

“The industry has been very agile in its capacity management,” Burns wrote. “As a result, there has been no fall in rates.

“Indeed, if anything, rates have risen steadily during the first half of the year and are looking particularly resilient now.”

Copper trends sideways

In this month’s Copper MMI report, MetalMiner’s Maria Rosa Gobitz notes copper’s price rise in recent months has flattened.

“LME copper prices continued to rise throughout July,” Gobitz explained. “The price reached a 14-month high by surpassing the $6,400/mt level.

“SHFE prices followed a similar trend.

“However, the price increase seems to have slowed. LME and SHFE prices have trended sideways for the last three weeks.”

Steel tariffs next for Canada?

Marking an escalation of trade tensions between the U.S. and its northern neighbor, President Donald Trump last month decided to reimpose the 10% Section 232 tariff on some aluminum imports from Canada.

The U.S. rescinded the 10% tariff on Canadian aluminum in May 2019 during negotiations over the United States-Mexico-Canada Agreement (USMCA), the successor to NAFTA. The USMCA went into effect July 1, 2020.

Now, the move has prompted speculation about whether Canadian steel will be the next target of U.S. tariffs.

“Canada will no doubt be hoping Trump’s latest move is aimed at domestic politics (in view of the upcoming elections),” Burns wrote.

“But regardless of the election outcome, the move has shaken producers and consumers on both sides of the border. Many of those producers and consumers had assumed the USMCA had settled North American trade policy for the foreseeable future.”

Chinese aluminum imports surge

Meanwhile, in the aluminum market, China’s imports of the metal have surged this summer.

June imports reached an 11-year high, Gobitz noted, marking a whopping 490% year-over-year increase.

Aluminum prices on the LME and SHFE have both trended upward, she noted, but the SHFE price has been stronger.

The SHFE price reached a year-to-date high Aug. 3.

Silver’s surge

Shifting to precious metals, while gold often dominates much of the headlines, silver has been a fast riser since March.

As Burns noted, investors are betting on silver to top $30/ounce.

The silver price, however, showed some signs of retrenchment this week.

With that said, the silver price is supported by solid fundamentals.

“The LME has operated the LMEprecious suite of exchange-traded contracts since 2017,” Burns wrote. “In a recent update note, the LME reported industrial demand for silver last year topped 16,200 tons. Furthermore, demand is forecasted to increase thanks to its role as a component in antennae for the new 5G mobile network infrastructures being rolled out around the world.

“Like gold, silver benefits from the jewelry market, which is expected to pick up as economies gradually recover from lockdowns. In addition, silver has a wide range of industrial applications, which are coming back fast — first in Asia, but now in Europe and the U.S.”

Resilient iron ore

Continuing the theme of China’s economic recovery, the country’s demand for steel has powered a rising iron ore price.

But Chinese demand is only one part of the picture.

“Well-managed supply from Australia and anxiety over availability from pandemic-hit Brazil will likely continue to support iron ore prices,” Burns wrote. “As if to support supply constraints — or, maybe, in retaliation for political discourse with Australia — China imported iron ore from a wider range of sources in Q2 and Q3. The most notable import sources were Canada, Ukraine and India, Reuters reported this week.”

He added analysts expect the iron ore price to remain above $100 per ton for the remainder of the year.

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