Commodities Roundup: Oil producers miss reduction targets; Steel capacity utilization falls; Importers face uncertainty, rising costs

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:

India takes aim at aluminum, copper imports

Like the E.U., India is keen to curb the flood of aluminum and copper imports coming into the country.

As such, India has announced an import surveillance scheme that will require importers to register and report their import levels, MetalMiner’s Stuart Burns explained.

“Only by accumulating hard data can the country develop sensible policies, promoters of the scheme argue,” he wrote.

“As such, China, Japan, Malaysia, Vietnam and Thailand are among the major exporters of copper. Those countries accounted for 45% of India’s $5 billion in copper imports for 2019-2020, the article reports.”

As for aluminum, Burns noted aluminum imports in 2019-2020 amounted to nearly $4.4 billion, with China accounting for the largest share.

Oil price stabilizes as some producers miss output cut targets

Elsewhere, Burns delved into the oil price, which has bounced back from its dismal lows earlier this year.

However, the oil price remains below 2019 levels, even after coordinated output reductions by OPEC+.

While the output cuts have helped to stabilize prices, not all oil producers have adhered strictly to the reduction mandates.

“The incentive to cheat is huge,” Burns explained. “The sense by many smaller players that they suffer from output agreements more than the ‘big boys’ breeds a sense of resentment at times.

“That is particularly true among parties that have little else in common other than a desire to maximize oil revenues.

“So, the Saudi oil minister’s thinly veiled dressing down of OPEC partners UAE, Nigeria and Iraq for overproducing is met with protestations but little in the way of immediate compliance.”

After falling below $13 per barrel earlier this year, the Brent crude oil price has since stabilized over the last three months, generally trading around the $40 per barrel mark.

U.S. steel capacity utilization dips

Although the U.S. steel sector’s capacity utilization rate has generally been on the rise over the last few months, the rate slipped last week.

For the week ending Sept. 19, steel capacity utilization fell to 64.5% from 65.1% the previous week.

U.S. steel output in the year to date is down 20.1% compared with the same time frame in 2019.

India turns net exporter of steel to China

Amid a downturn in domestic demand, India has become a net exporter of steel to China and other countries, MetalMiner contributor Sohrab Darabshaw explained.

From April through August, Indian steel companies exported as much as 80% of their output.

Out of India’s total steel exports during the period, China accounted for 45%.

Copper mine production down 1%

Meanwhile, for copper watchers, copper mine production felt the impact of the COVID-19 pandemic, particularly in Peru.

Copper mine production fell 1% during the first half of 2020, the International Copper Study Group reported.

Peruvian mine output fell 20% in the first half of the year. Furthermore, output fell 38% in the two-month period of April-May, as a result of work stoppages related to the pandemic and adverse weather conditions.

Rising import costs

The current logistics environment is one of uncertainty and rising costs, as MetalMiner’s Stuart Burns explained yesterday.

Those pushing the idea of a “decoupling” of the U.S.-China trade relationship, can pump the brakes: it’s here to stay for the foreseeable future.

“A fair part of the current pressure on shipping space and costs is coming from increases in trade between Asia and the U.S.,” Burns wrote.

“The pandemic has spurred demand for Chinese-made goods from electricals like laptops and associated electronics to PPE equipment, including masks and gloves.”

On the shipping side, while the pandemic has posed a litany of challenges, shipping lines have actually enjoyed a run of profitability.

“Shipping lines are removing sailings,” Burns added. “Initially, the measure constituted a coping mechanism during spring lockdowns. However, since then, as the success in raising freight rates became apparent, the measure became a blatant move to improve profitability.”

Commodities Roundup will be on a brief hiatus for the next two weeks. We'll return on Oct. 16 with more commodities news. 

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