Commodities Roundup: LME steel contracts; China’s copper imports; ThyssenKrupp mulls steel unit selloff

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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:

LME steel contracts gain trust

MetalMiner’s Stuart Burns delved into London Metal Exchange (LME) steel contracts, which still trail far behind the Shanghai Futures Exchange (SHFE) in volume but are gaining in credibility.

“Undeterred, and maybe encouraged by the success of the SHFE in China, the LME continued to innovate,” Burns wrote. “In 2018-2019, the LME introduced contracts more directly applicable to the US and European manufacturing markets, like hot rolled coil and steel scrap."

As Burns noted, 2020 proved to be an irregular year. As such, it might not be fair — or useful — to compare trading volumes year over year.

Nonetheless, the LME’s offerings are gradually gaining trust.

“The LME’s contracts now have fully developed forward curves and bid-offer spreads as tight as half a dollar,” he added. “That is the minimum tick size allowed, supporting the fact the contracts are rapidly becoming widely adopted and trusted as providing fair price.

“In conversation with MetalMiner, the LME pointed out the evolution of an active over-the-counter (OTC) market as further evidence the contracts are gaining rapid acceptance. That acceptance goes not just for the financial sector but from across the industrial and manufacturing landscape.”

Jaguar Land Rover pauses production at UK plant

Meanwhile, in automotive news, Burns touched on a production stoppage at Jaguar Land Rover’s Castle Bromwich plant in the UK’s Midlands.

Many workers from the plant are being transferred temporarily to JLR’s Solihull plant.

“The levels are higher in this third wave because infection rates generally in the population are higher," he wrote. "The testing system is more comprehensive, picking up more track-and-trace close contacts that result in quarantine."

ThyssenKrupp wins engineering contract for water electrolysis plant

In energy news, Germany’s ThyssenKrupp announced it has won an engineering contract to build an 88 megawatt water electrolysis plant for Canadian energy company Hydro-Québec.

The plant, when completed, will produce 11,100 metric tons of green hydrogen annually. The hydrogen and oxygen will go toward production of biofuels from residual waste for the transportation sector.

China’s surging copper imports

What do China’s record import totals for metals like copper mean for its economic recovery plans and for the world at large?

“As a result of rail and power electrification and electronic manufacturing, China’s copper imports have surged,” Burns wrote.

“China’s reached record volumes of unwrought copper and copper product imports in 2020. Copper imports totaled 6.68 million tonnes — up fully a third from 2019, according to official General Administration of Customs data.

“The country imported more concentrate and less refined metal as Q4 progressed. However, strong demand still helped maintain the upward momentum on copper prices we have seen since the spring low point when the pandemic first hit.”

But copper is just one part of China’s economic recovery. Steel, too, had a robust year of record output, which also drove immense iron ore demand.

China’s recovery will likely continue in the first half of 2021, Burns added.

European automobile registrations slump

In other economic indicators of the times, European automobile registrations are down throughout the bloc, MetalMiner contributor Christopher Rivituso reported, citing European Automobile Manufacturers Association data.

“Registrations in the 27-member bloc fell to 9.94 million units from January to December,” Rivituso wrote. “The total marked a 23.7% decline from slightly over 13 million in 2019, the ACEA noted.

“The EU’s largest economy, Germany, recorded a 19.1% decline in registrations to 2.92 millions from 3.61 million.”

ThyssenKrupp mulls steel selloff

Circling back to ThyssenKrupp, the German firm continues to struggle with what to do with its steel division.

One option it has reportedly considered is to spin it off as a standalone unit.

However, it has been losing money. The Financial Times last year reported predicted losses of 1 billion euros for 2020 for the steel division.

“That is a not inconsiderable proportion of total group losses of more than €5.5 billion reported by the Financial Times this week," Burns added.

Find more insight on MetalMiner’s LinkedIn.

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