Commodities Roundup: Gold prices; rare earths supply chains; Brexit down to the wire

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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, including gold prices, European efforts to strengthen rare earths supply chains and the ongoing Brexit drama.

MetalMiner, a sister site of ours, scours the landscape for what matters. This week:

Gold prices rise in 2020 — what’s in store next year?

MetalMiner’s Stuart Burns checked in on gold prices, which posted big gains earlier this year but have since retraced.

“Physical demand could pick up in 2021,” Burns wrote. “China is forecast for potentially double-digit growth in 2021 with a strong tailwind from this year’s stimulus measures and a robust recovery in consumption.

“India, the other major physical gold market, does not look as positive. The country will likely have a slow vaccine rollout and is facing severe banking risks. That could hamper the Indian economy’s recovery in 2021. In turn, a slower recovery could impact consumer appetite for spending, with unemployment up and some sectors still struggling.”

Nippon Steel looks to export markets

Shifting from gold and gold prices to steel, MetalMiner contributor Sohrab Darabshaw noted Japan’s Nippon Steel plans to deemphasize the domestic market to take advantage of demand elsewhere, including the US.

“The aim, according to a top-level executive of the Japanese steel company, is to capitalize on overseas profit which,” Darabshaw wrote. “At present, uptake in the global automobiles sector is largely driving that profit.”

Shipping struggles

Among the many sectors impacted by the coronavirus pandemic this year, shipping has seen its fair share of choppy waters.

A combination of container shortages in Asia and port congestion in Europe has sent shipping rates upward, Burns explained.

“A number of shipping lines are suspending all freight bookings from Asia to Europe until the end of the month,” Burns wrote.

“Heavy and sustained demand has overwhelmed the container supply chain, creating chronic shortages in equipment and driving rates up. Further increases are likely in January.

“So far this year, sea freight rates have doubled on the Asia to European routes, an unprecedented rise that has caught importers off guard as they have incurred some substantial losses just as businesses are struggling to recover from or meet the ongoing demands of the COVID-19 pandemic.”

European group aims to strengthen rare earths supply chains

Given China’s overwhelming dominance of the rare earths sector, the rest of the world has scrambled to find ways to strengthen their supply chains, particularly the US and Europe’s.

As for the latter, the European Raw Materials Alliance — formed earlier this year — recently launched an effort aimed at finding solutions to issues impacting the European rare earths supply chain.

The group held the first meeting of the Rare Earth Magnets and Motors Custer, during which a rare earths action plan was presented. Ongoing work on the plan will “identify challenges and regulatory bottlenecks along the value chain and develop recommendations and actions for Europe.”

New wind, solar capacity

The U.S. renewables sector will see added capacity next year, as the country’s share of electricity generation from renewables continues to rise incrementally.

According to the Energy Information Administration, the US’s share of renewables power generation reached 18% in 2019. The EIA forecast that figure to rise to 20% this year and to 21% in 2021.

The EIA forecast an additional 23.0 gigawatts (GW) of new wind capacity in 2020 and 9.5 GW in 2021. Meanwhile, the EIA forecast an additional 12.8 GW of solar power this year and 14.0 GW in 2021.

Brexit down to the wire

What will the UK’s relationship with the EU look like after Brexit?

The end of the Brexit transition period is fast approaching, as the two parties continue to negotiate before the Dec. 31 deadline.

“The pound has fluctuated these last few weeks as deadlines have passed,” Burns wrote. “Agreements have failed to materialize. Positive and negative news have vied for prominence.

“In practice, it is in both parties’ interests to reach a deal of some description. At the very least, a deal would minimize disruption at respective borders and keep trade flowing.

“But since when has politics succumbed to economic good reason?”

[Note: Happy holidays! This is the last Commodities Roundup of 2020 — the roundup will resume publication in January 2021.]

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