Commodities Roundup: GM electrifies; UK moves to strengthen rare earths supply chain; Copper price surge cools

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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 GM and its environmental targets, China's massive property market and more.

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

GM to invest nearly $800 million for Canadian EVs plant

The drive toward electrification continues apace in the automotive sector.

This month, General Motors announced plans to invest nearly $800 million to build “Canada’s first large-scale commercial electric vehicle plant.”

“Subject to ratification of a tentative 2021 agreement reached with Unifor and confirmation of government support, General Motors plans to bring production of its recently announced BrightDrop electric light commercial vehicle, the EV600, to its CAMI manufacturing plant in Ingersoll, Ontario,” GM said in its announcement this month.

“The nearly $800 million (1 billion Canadian dollar) investment will support GM’s timing to deliver BrightDrop EV600 in late 2021. The investment will enable GM to convert CAMI into Canada’s first large-scale electric delivery vehicles manufacturing plant.”

The announcement builds on previous GM investments in the electric vehicle space, as it and other traditional automakers attempt to catch up to Tesla.

In November, GM CEO Mary Barra said the automaker plans to add 30 all-electric models by mid-decade.

Furthermore, on Thursday the automaker announced its intention to be carbon neutral by 2040. Included in that target is its goal to “eliminate tailpipe emissions from new light-duty vehicles by 2035.”

Domestic groups push for Indian iron ore export ban

Indian industry groups have petitioned the government to institute an iron ore export ban, MetalMiner’s Stuart Burns explained.

Burns noted a whopping 90% of India’s iron ore exports go to China. China’s demand for the steelmaking raw material skyrocketed in 2020 amid its stimulus-driven economic recovery.

However, a ban might not be necessary with a 30% export tax set to kick in this quarter.

“In an effort to improve supply, the authorities have taken action against underused mining leases,” Burns wrote.

“According to the New Indian Express, production declined during 2020. Comparing the two years January to September 2019 to the same period in 2020, iron ore production totaled 110.95 million metric tons in 2019. Meanwhile, output reached 76.01 million metric tons in 2020, marking a 31.5% drop.

“Suggestions this is due to COVID-19 containment measures have not been accepted, as some mine leases have gone unworked for three consecutive quarters.”

UK strengthens rare-earths-to-turbine supply chain

Building on the aforementioned GM news, nations and businesses are facing the accompanying supply-chain challenges that come with such a shift to greener energy sources (Burns delved into those challenges earlier this month).

For renewables energy, that typically means rare earths.

In that vein, the UK is putting its money where its mouth is and investing in the development of an integrated supply chain for rare earth permanent magnet production, used in applications like wind turbines.

Pensana Rare Earths submitted a $125 million planning application to build a rare earth oxide refining facility in northeast England. Furthermore, in November, Innovate UK awarded funding to Less Common Metals, a rare earths alloy producer.

Copper mine production drops

In metals markets, copper mine production dipped by 0.5% year-over-year during the first 10 months of 2020, the International Copper Study Group reported.

Mine output in Peru, the second-largest copper producer, fell 14% during the period. Meanwhile, top producer Chile’s production was unchanged.

As for prices, copper’s 2020 surge appears to have hit a wall. After rising to over $8,100 per metric ton earlier this month, the LME three-month price has since traded sideways.

Steel output down 0.9% in 2020

As for steel, global output fell by 0.9% in 2020, the World Steel Association reported this week.

Only four countries in the list of top 10 steel producers posted year-over-year steel production growth.

Global output had increased every year from 2015 to 2019.

Unsurprisingly, China led the way, increasing its share of global output from 53.3% to 56.5%.

In the United States, steel output fell 17.2%, even as demand from automakers like GM surged throughout the summer.

China’s property market and steel demand

Speaking of China, Burns delved into the country’s massive property market and its ability to drive demand and GDP growth.

“The property sector, both the direct impact of all the construction and its indirect effect on everything from concrete to curtains, accounts for a quarter of China’s GDP,” Burns wrote. “That explains: a) why a runaway property market is such a driver of growth and b) why Beijing is at such pains to progressively control the market. Left unchecked, it poses a huge potential risk.

“Chinese real-estate developers are on the hook for more than $100 billion in bond repayments during 2021 alone, according to Moody’s. For the world as a whole, roughly one-tenth of outstanding bank loans to non-financial clients has gone to China’s property sector, whether as financing for developers or mortgages for homebuyers.”

Furthermore, on the materials side, China’s robust property sector has been a significant driver of demand.

“Property investment rose 7% over the full year compared with an overall increase of 2.9% across all types of fixed-asset investment, helping drive steel prices to record levels,” he wrote. “When the property market sneezes, the SHFE steel rebar price catches a cold. The price has shown significant sensitivity to new property market rules and regulation announcements.”

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