Commodities Roundup: Precious metals movements; U.S. Steel nixes major upgrades; Copper price hits record high

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Here’s a quick rundown of news and thoughts from particular commodity markets, including precious metals movements, a major U.S. Steel decision, and booming iron ore and steel prices in Asia.

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

U.S. Steel cancels $1.5B Mon Valley Works upgrades

Earlier this month, U.S. Steel announced it is ending previously announced plans to execute massive upgrades to its Mon Valley Works operations.

The upgrades would have amounted to an investment of approximately $1.5 billion.

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MetalMiner CEO Lisa Reisman and Vice President of Business Solutions Don Hauser weighed in on the decision.

"The combined investments would have allowed U.S. Steel to produce thin gauge HRC at CRC gauges," they explained. 

"Buying organizations would have the opportunity to pay less per ton for this material than the cold rolled coil alternative. In other words, the price of steel from this line would have likely fallen somewhere between hot rolled and cold rolled prices.

"Today, only Nucor and Steel Dynamics have this kind of capability."

However, they zeroed in on the steelmaker's decision not to upgrade its coking coal facilities.

"Furthermore, it will permanently idle three batteries at the Clairton plant, according to the Pittsburgh Post-Gazette," they added. "In addition, U.S. Steel will reduce its coke production by 17%. This move suggests that U.S. Steel plans to trim production of steel produced via BOF production methods.

"Those production cuts will likely impact steel produced at the company’s Gary Works location. It has already shuttered capacity at Granite City."

Silver price movements

Precious metals have surged of late, but silver's outlook is perhaps not as bullish.

"After hitting a low of $24/oz back in early April, the silver price has seen a steady appreciation to just under $27.50/oz today," MetalMiner's Stuart Burns wrote.

"However, it has still not hit the artificial eight-year high seen in January, when it reached nearly $30/oz on the back of frenzied retail investors’ demand.

"Around $1 billion flowed into silver-backed ETFs on a single day in January, the Financial Times reported, after comments on the Reddit online forum WallStreetBets erroneously suggested that US investment banks were suppressing the price of the metal."

While silver is seeing some growth in industrial demand, that has worked against its desirability as a safe haven.

"Silver has benefited at times from its strong industrial use," Burns added. "However, its volatility due to industrial demand hampers its desirability, like gold, as a hedge against inflation or as a safe haven.

"While inflation fears are rising, they are doing little more than providing support to gold this year — and little for silver."

Gold jumps to three-month high

Sticking with precious metals, the gold price recently touched a three-month high.

Impacting the precious metal, the US dollar index has retreated in recent weeks to just over 90, down from over 93 as of the end of March.

Furthermore, 30-year Treasury yields also backtracked, falling to 2.25% last week. The 30-year yield hit a 2021 high of 2.45% in March.

However, the 30-year yield has bounced back this week, closing Thursday at 2.40%. The gold price has retreated from last week's three-month high, closing at around $1,815 per ounce on Thursday.

Cobalt prices surge

Amid the gradual uptake of electric vehicles around the world, one battery component that is consistently discussed is cobalt.

Cobalt's high cost and ethical concerns related to mining conditions in the Democratic Republic of the Congo leave some automotive manufacturers considering alternatives.

“The Financial Times reports that cobalt prices jumped 40% in Q1, laying the blame solely on battery demand,” Burns explained recently. “Of all the component metals in EV batteries, cobalt faces the most constrained supply base. A very significant percentage of that cobalt still comes from the Democratic Republic of the Congo.

“Some buyers, such as China’s CATL, have no reservations about investing in countries that face allegations of child labor. The firm recently invested $138 million in an undeveloped copper and cobalt resource in the country.

“Others are voting with their wallets. Those companies are restricting contracts to suppliers in Russia, Australia, Philippines and even, in the case of BMW, from Morocco.”

Iron ore, steel prices surge in Asia

Continuing the theme of ever-rising commodities prices, Burns touched on this week's boom in Asian iron ore and steel prices.

"Iron ore prices’ relentless rise this year went into overdrive Monday, hitting a +10% limit up and prompting the Dalian Commodity Exchange to raise trading limits and margin requirements in an effort to calm speculation," Burns wrote.

"Separately, the Shanghai Futures Exchange said it would set fees for closing positions on its steel rebar and hot-rolled steel coil futures contracts at 0.01% of the total transaction value. Those transactions had previously been free.

"Meanwhile, on the Singapore Exchange, the June contract for iron ore leaped 10.3% to a record $226.25 per ton."

As a result, Chinese steelmakers bumped up steel prices to compensate for the rising raw material cost.

"China is the world’s largest importer of iron ore and coking coal," he added. "Such rapid price inflation seriously impacts the country’s competitive position.

"As such, expect further action by Beijing. Prices have almost certainly detached themselves from the fundamentals, which hasn’t stopped speculators before. However, that does invite more determined action by Beijing to prevent matters getting worse."

Copper price reaches record high

Meanwhile, the copper price has also surged to a record high. (Last month, Burns outlined banks' differing opinions on the copper price outlook.)

The LME three-month price closed at over $10,700 per metric ton on Monday. The price is up approximately 19% from a month ago.

Supply tightness, strengthening demand and a sliding US dollar all contributed to the escalating price.

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