Commodities Roundup: Daimler to spin off trucks division; Liquefied natural gas volatility ahead; Rising silver demand

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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 a major announcement from Daimler, a look at potential volatility in liquefied natural gas prices and much more.

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

Biden reinstates UAE aluminum tariff

In trade news, market watchers have wondered how President Joe Biden would approach some of his predecessor's trade policies, particularly with respect to tariffs.

In 2018, former President Donald Trump imposed tariffs on imported steel and aluminum using Section 232 of the Trade Expansion Act of 1962.

On his last day in office, however, Trump rescinded the 10% tariff on aluminum imported from the UAE.

Biden, however, quickly reversed that move.

“The reinstatement suggests that it is unlikely the Biden administration will remove the aluminum tariffs imposed by the previous administration,” MetalMiner’s Maria Rosa Gobitz explained. “However, as of today, no further decisions were announced on aluminum tariffs.”

Rising renewables

On the energy front, the Energy Information Administration forecast the US’s share of electricity generation from renewables will double by 2050.

Renewables accounted for 21% of US electricity generation in 2020.

Wind and solar power will account for most of the growth during the 30-year period, the EIA forecast.

Copper demand outlook appears strong

After cooling in January — in part because of a slowdown in activity in China ahead of the Lunar New Year celebrations — copper prices have once again picked up.

On the demand front, copper demand is likely to remain strong in 2021.

“In the US, new home and home renovation demand spiked since the pandemic started, along with electronics demand,” Gobitz explained. “Analysts at CitiBank expect the copper market to shift into a deficit in the second half of the year with a minor surplus overall for 2021, Reuters reported. They also forecast deficits in 2022 and 2023.”

China, however, consumes approximately half of global primary copper output. As such, the country will remain arguably the biggest driver of demand.

Tin soars as other metals fall early in 2021

While other base metals cooled to start the year, tin prices remained on the ascent.

Why?

Several consecutive years of global tin market deficits are supporting prices. Furthermore, a combination of factors stemming from the pandemic have contributed to a draining of supply.

“A combination of pandemic hit supply, logistics delays in deliveries, and economies roaring back after lockdowns — particularly China’s electronics industry — has drained physical stocks held in places like the LME to just 810 tons,” MetalMiner’s Stuart Burns explained.

“Worse, 310 tons of that is awaiting physical load out, leaving just 500 tons.

“That is just half a day’s global consumption available for physical purchase.”

Daimler to spin off trucks division

In automotive news, Burns also delved into German automaker Daimler’s intention to spin off its trucks division.

The automaker intends to spin it off as a standalone unit, Burns explained.

“The truck and auto units have a combined market value of €72 billion,” he wrote. “However, they play to different song sheets. As such, the market does not fairly value either division.

“The sum of the parts, Daimler believes, is valued at less than the total of the parts. Currently, the truck division is worth about €32 billion.”

LNG price fluctuations

Spot buyers of liquefied natural gas should expect price volatility ahead, according to Saad al-Kaabi, Qatar’s energy minister and the chief executive of Qatar Petroleum.

“Long-term liquefied natural gas prices are generally linked to the price of oil,” Burns wrote.

“However, spot prices are a function of supply and demand.

“In January, a cold snap in Asia boosted demand for LNG in Japan, China and South Korea. That boost sent prices spiraling to record levels. Furthermore, traders struggled to secure enough cargoes to meet the surge in consumption.”

Rising silver demand

According to a report this week by the Silver Institute, global silver demand is expected to rise by 11% this year.

The spot silver price reached $27.66 per ounce earlier this week, well up from around $22.60 after Thanksgiving.

“The outlook for silver demand is bright, with the global total forecast to achieve an eight-year high in 2021 of 1.025 billion ounces, thereby recovering all losses sustained in 2020,” the institute said Wednesday. “This reflects expected gains in the critical segments of industrial demand, physical investment, jewelry and silverware fabrication.”

Find more insight on MetalMiner’s LinkedIn.

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