Commodities Roundup: Copper heats up; Metals shipments decline year over year; Oil price picks up

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Here’s a quick rundown of news and thoughts from particular commodity markets, including the copper bull story, US steel capacity and rising oil prices.

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

Copper bull story continues

The copper price has continued to rise, leading MetalMiner’s Stuart Burns to delve into the important metal’s bull story.

“Many bulls are touting the green revolution story as reasons to buy,” Burns wrote. “Automakers’ announcements of impending ends to the internal combustion engine and a total switch to electric has fueled projections of soaring demand.

“Meanwhile, a lack of new mine investment over the last few years leaves the supply landscape short of new projects to meet projected demand.”

Looking ahead, Burns added that while short-term pauses for profit taking would not be a surprise, the overall long-term narrative for copper appears robust.

“So, for investors to take profits and the copper price to fall back should not come as too much of a surprise after such a strong rise in prices,” Burns wrote.

“Furthermore, it does not undermine the longer-term bull narrative for the metal. It does suggest, however, copper consumers think carefully before fixing all their requirements for the year at today’s price.

“Maybe the relentless copper price rises are not a given. However, the trend line has been strong to date.”

Aluminum tariff future

The copper bull narrative is strong — what about aluminum?

Among other departures from his predecessor, President Joe Biden reversed a final-day move by former president Donald Trump with respect to aluminum tariffs.

Biden reimposed the 10% Section 232 tariff on aluminum coming from the UAE, which Trump had rescinded on his final day in office. (Trump originally imposed the blanket Section 232 tariffs on steel and aluminum in 2018.)

Zooming out, however, Burns weighed in on the flaws of the aluminum tariff policy and its fate going forward.

“But even accepting that the Covid-19 pandemic made 2020 far from a typical year, it has become clear the tariff strategy has not worked on a number of levels,” he wrote.

“While the inflationary cost of finished goods has been minor, the aluminum content even of a can of beer is a small fraction of the total product cost. It remains true that consumers have had to foot the bill.

“It was always the intention that domestic producers would raise their prices to the import plus tariff price. The corresponding uplift was what was supposed to allow them to operate profitably again, to arrest the decline and reopen idled capacity.”

Steel capacity utilization rises

Meanwhile, the US steel sector’s capacity utilization rate ticked up to 77.0% last week.

US steel output for the week ending Feb. 20 totaled 1.75 million net tons, or down 7.2% year over year. The total marked an increase of 0.1% from the previous week.

In other steel indicators, the Federal Reserve’s industrial production index for raw steel reached 92.1730 in December. An index reading of 100 is equivalent to 2012 activity.

Rusal to supply Kosei with low-carbon aluminum

In another collaboration between the two companies, Russian aluminum giant UC Rusal will supply aluminum to Japanese automotive component maker Kosei.

“In the last 30 years, Rusal has proved to be a key partner of Kosei,” MetalMiner contributor Sohrab Darabshaw wrote. “Rusal has supplied the Japanese company with primary foundry aluminum alloys. Kosei uses in the material in factories in India, Japan, Thailand and the US.

“As part of the new deal, Rusal will be selling its proprietary low-carbon aluminum ‘ALLOW’ to Kosei. ALLOW is a low emitting aluminum, pushing out about 2.4 metric tons of CO2 per metric ton of metal smelted. Meanwhile, that compares to the industry standard of about 12 metric tons of CO2 per metric ton of aluminum.”

Last week, we touched on efforts among aluminum industry players, including Rusal, to curb emissions from their production processes.

Metals shipments decline

In other news, the Metals Service Center Institute reported metals shipments in the US and Canada have gradually recovered but still remain below pre-pandemic levels.

US steel shipments fell by 15.8% in January on a year-over-year basis. Meanwhile, aluminum shipments fell by 5.6%.

Oil price gains

The US oil price has continued to rise in recent weeks.

The WTI crude price closed last Friday, Feb. 19, at $59.24/barrel, according to Energy Information Administration (EIA) data. In just a few days, the price closed Wednesday at $63.22 per barrel, which marked an increase of $2.08 per barrel from the previous week and an increase of $13.32 per barrel from a year ago.

According to the EIA, US crude oil inventories were at 461.8 million barrels for the week ending Feb. 12, down by 2.9% from 475.7 million barrels two weeks prior. Crude oil inventories are at about the five-year average for this time of year, the EIA reported.

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