Commodities Roundup: Are container rates peaking?; bullish stainless; US auto sector starts strong in 2021

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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, this week including coverage of container rates, January automotive sales and more.

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

Container rates peaking?

MetalMiner’s Stuart Burns delved into the issue of container rates, which have skyrocketed throughout the pandemic, and examined whether they have in fact peaked.

“Shipments have been delayed both at origin in Asia and at destination in Europe and ports on the US’s West Coast, like Long Beach and Los Angeles, where vessels cannot get in to discharge because of port congestion,” he explained.

“While some of the criticism is justified, last year lines certainly idled ships and blanked services (made already scheduled sailings unavailable), sometimes at short notice.

“As the months have gone by, we can see the current situation has more to do with red-hot demand than it does the machinations of the shipping line alliances.”

The pandemic last year led to shipments being pushed back into the second half of the year. Compounding the problem, port congestion resulted.

Price support for container rates, however, appears to be easing.

“Rates eased on European routes ever so slightly in December,” Burns continued. “That opened the possibility that rate rises have peaked.

“Nevertheless, for importers who have not already pushed shipment onto suppliers, beware fixing long-term cost and freight (CFR) contracts at current rates. They could stay elevated for weeks, maybe even another month or two.

“But rates should ease by Q2. Long-term contracts may find themselves stranded above the tide line on what may prove to be today’s high rates.”

Bullish stainless steel

Elsewhere, Burns looked into a bullish market for stainless steel in China.

Stainless steel prices have been rising over the last two years. Prices have plateaued of late, but that is likely a temporary lull ahead of the Lunar New Year holiday Feb. 12.

China’s imports of stainless steel surged by over 61% last year, much of it coming from Indonesia.

China’s economic recovery is likely to lose some steam in the second half of the year as stimulus measures wind down. With it, commodity prices will also likely retrace.

“Some softening in commodity prices is likely later in the year,” Burns explained. “However, analysts suggest the first half of 2021 will continue to benefit from the tailwinds of stimulus measures and rising optimism stemming from the rollout of vaccinations.

“By the same token, any significant setback in vaccine rollout or the unexpected spread of mutant virus strains proving immune to existing vaccines would upend that optimism.

“However, for now, China at least is expecting prices to continue their strong showing from 2020 into 2021.”

Auto sector posts strong January

The US automotive sector had a challenging 2020.

The sector felt the impact of the coronavirus pandemic. Automakers suspended production for an approximately two-month period from late March. Later, dealers struggled to maintain inventory to meet surging summer demand.

According to J.D. Power and LMC Automotive, new-vehicle retail sales were forecast to rise by 6.1% in January compared with January 2020.

“January continues the strong performance observed in Q4 of 2020 and points to a positive outlook for the balance of 2021,” said Thomas King, president of the data and analytics division for J.D. Power.

General Motors did not report sales results this month, as it reports on a quarterly schedule. Last month, we touched on the automaker's recent announcements regarding its carbon neutrality target.

US mines produce $82.3 billion in minerals

According to a recent report from the United States Geological Survey, US mines produced $82.3 billion in minerals last year.

That figure marked a decline of $1.5 billion from the previous year.

The report emphasized the US’s continued dependence on foreign sources for a number of critical minerals. More than half of US consumption of 46 nonfuel mineral commodities came from imports. Furthermore, the US depended wholly on imports for 17 of those commodities.

Steadying prices ahead

As with container rates, metals prices are likely to show significantly less volatility this year than last.

In short, 2021 is not 2020, Burns explained.

“The combination of stimulus and demand catchup will not be the feature in 2021 that it was in 2020,” he explained. “That will be true in China and the wider global economy.”

As indicated earlier, Chinese demand will likely soften as the year progresses and stimulus measures wane, making way for a more consumption-based economic growth model.

“Accepting that the one thing you can be sure of with forecasts is they will be wrong, the underlying rationale has some merit because it applies to pretty much the whole base metals complex,” Burns wrote. “Recent price movements suggest it applies to steel, as well.

“Supply is recovering fast. While exchange stocks do not necessarily reflect this across all metals — some, like aluminum and zinc, have far larger off-market stocks — a realization that they are there will temper expectations of higher prices.”

Western European HRC prices under pressure

On the other hand, prices for hot rolled coil in Western Europe face downward pressure, MetalMiner contributor Christopher Rivituso reported.

“Automakers slashed their demand for necessary electronic components as the pandemic struck,” he wrote. “Now, however they are facing competition from electronics producers and telecoms. Those sectors snapped up supply in order to upgrade their networks and produce more electronics, as housebound populations worked and sought entertainment from their homes.

“End users are also hesitant to buy before China’s Lunar New Year, which takes place Feb. 12. Users are waiting to see how demand will move after the weeklong celebrations in the world’s second-largest economy.”

Find more insight on MetalMiner’s LinkedIn feed.

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