Commodities Roundup: Iron ore outlook; UK EV supply chain challenges; US oil, natural gas output forecasts

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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:

Iron ore outlook

Amid recovering steel demand — in large part powered globally by China’s stimulus-driven recovery efforts — the demand for iron ore, too, has surged.

MetalMiner’s Stuart Burns delved into the steelmaking material and asked if it has already reached peak prices for 2021.

“Finished steel prices in China have fluctuated strongly through the winter,” Burns wrote. “Rebar prices are coming under considerable pressure, but coil prices are holding up well. That disparity underlines the relative strength of manufacturing compared to construction.

“In 2020, iron ore demand proved to be extremely strong, as infrastructure investment drove a robust recovery in the economy.

“But as the effects of those stimulus measures ease through 2021, demand should soften. In turn, mill output will, too — and, hence, iron ore demand.”

UK electric vehicle supply chain

Elsewhere, Burns took a look at the development of the UK’s electric vehicle supply chain.

In short, the UK needs to secure more battery-making capacity if it is to reach its green goals.

“Uptake of EVs has risen from some 3-4% in the late 1990s to 10% during 2020,” he wrote. “Under current government targets, electric vehicles will account for 100% of all cars sold in the UK by 2030.

"However, currently the UK has only one battery factory at Nissan’s Sunderland plant. Britishvolt plans to bring another plant onstream in Blyth by 2024. Combined, these two plants will have about 15 gigawatts of capacity, enough for 250,000 electric cars.

“The SMMT estimates, however, some 60 gigawatts of battery-making capacity will be needed by 2030.”

Gold pulls back

In the precious metals sector, gold prices recently pulled back after surging to around $1,957 per ounce during the first week of January.

The gold price dipped all the way down to below $1,830 per metric ton.

Meanwhile, the US dollar index has recovered slightly over the last week. The index had fallen to around 89.44 before recovering to 90.10 as of midday Thursday.

Copper gains after holiday lull

The copper price, which posted a strong 2020 of price gains, experienced a bit of a holiday lull in December.

However, the copper price has started to pick back up again in 2021. The LME three-month price moved above the $8,100 per metric ton mark earlier this month.

On the supply side, MMG declared force majeure at its Las Bambas mine in Peru amid ongoing protests from the local community.

Elsewhere, the massive Oyu Tolgoi underground mine expansion project faces uncertainty. The mine project, which is jointly owned by Turquoise Hill Resources (majority-owned by Rio Tinto) and the Mongolian government could face termination, as the government has expressed concerns about rising costs.

Steel surges

Steel prices continued to post significant gains over the past month.

US three-month HRC jumped by 20.4% to $962 per short ton.

In other steel news, the U.S. Treasury recently announced new sanctions targeting the Iranian steel industry.

Stainless steel outlook strong

Meanwhile, in stainless steel market news, Allegheny Technologies Incorporated last month announced it will exit the standard stainless steel sheet product market.

“The move reduces availability of standard 36-inch and 48-inch-wide material,” MetalMiner’s Maria Rosa Gobitz wrote.

“The announcement comes as part of the company’s new business strategy. ATI will focus on investing in enhanced capabilities on higher-margin products, primarily in the aerospace and defense industries.”

US oil, natural gas output to fall this year

In energy news, the Energy Information Administration (EIA) forecast U.S. oil and natural gas output to fall in 2021.

The EIA forecast crude oil production will fall by 0.2 million barrels per day this year to 11.1 million barrels per day.

Meanwhile, after falling by 2% last year, natural gas production will fall by another 2% in 2021, per EIA’s forecast. Output is expected to drop to 95.9 billion cubic feet per day (Bcf/d) this year.

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