Commodities Roundup: Automotive powers HRC demand; Iron ore wobbles; Productivity up in Q1

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Here’s a quick rundown of news and thoughts from particular commodity markets, including automotive sector news, iron ore price volatility and much more.

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

Carbon emissions driving corporate strategy

As governments around the world announce their climate change initiatives, both short and long term, companies are increasingly tailoring their strategies for the greener future.

MetalMiner's Stuart Burns delved into the latest happenings on the board of oil giant ExxonMobil.

Whether your company is in the market for a source-to-pay suite or any stand-alone solutions in between, Spend Matters’ 5-step guide can help you along the “digital procurement buyer’s cycle.”

"In the US, activist investor Engine No. 1 forced at least two and possibly three directors onto the board of Exxon Mobil," he wrote. "In doing so, it aims to force a change in direction for the world’s largest oil company away from oil and gas and toward a lower-carbon future.

"What is remarkable is Engine No. 1 drove through the imposition of new directors despite holding a mere 0.02% stake (or $54 million) in the company. It won the backing of state pension funds, like that of New York state, and asset managers such as BlackRockVanguard and State Street, the Financial Times reported."

Elsewhere, Dutch court ruled oil major Royal Dutch Shell must "accelerate its strategy for energy transition by making steeper and quicker cuts to greenhouse gas emissions than it had planned," Burns added.

While the transition from fossil fuels to newer, renewable sources of energy won't be instantaneous — whether in the automotive sector, power generation in general or anything else — it is indeed happening.

"The fossil fuel industry is not going to disappear overnight," Burns added. "Nor are major industrial activities that have a heavy carbon footprint, like steel production.

"But the drivers of those business models, the economics, are already on the move. There will be winners and losers."

Peru struggles with pandemic

Elsewhere, Burns reviewed the ongoing Covid crisis in Peru, the second-largest producer of copper. (Last week's roundup overviewed recent copper price movements.)

As he noted, the country is facing a skyrocketing death rate from the pandemic. Furthermore, its presidential election features two relatively unpopular candidates.

"The frontrunner in last month’s first round is a previously obscure ex-teacher by the name of Pedro Castillo. Castillo’s Marxist policies have rattled markets, plunging the Peruvian stock market by 12%," he wrote. "It has also prompted a fall in the currency to a historic low of 3.85 to the dollar, the Financial Times reports.

"His party, Peru Libre (Free Peru), wants nothing short of revolution, the post reports. It aims to overturn the free-market model that has governed the country for a generation.

"In its manifesto, the party says foreign mining companies should be forced to pay 80% of their profits to the state rather than the 'miserable' 10%, 20% or 30% they pay now."

Iron ore volatility

The price of iron ore, a key steelmaking raw material, has showed significant volatility.

After peaking just before mid-May, the iron ore price fell sharply into bear territory, Burns noted earlier this week. Late last month, Beijing "sought to dampen inflationary raw material costs by issuing a string of warnings about speculation and excessive pricing."

"Having achieved its objective in dampening prices, you would think Beijing would have left it at that," Burns continued.

"But last week, China’s Ministry of Industry and Information Technology said it will seek to establish a mechanism to contain steel output based on carbon emissions, pollutant discharges and energy consumption, Bloomberg reported."

Increasing supply could spell the end of the current price run-up.

"However, most observers believe iron ore’s current rise is a last hurrah and see rising Brazilian output, up 20% over the last 14 days and 16% year over year, as leading indicators of a fall in prices," Burns wrote.

Hot rolled coil prices rise in Europe

Buyers in western Europe are facing rising prices for hot rolled coil and general shortages of supply.

"Sources confirmed prices for hot rolled coil at €1,120-1,130 ($1,370-1,385) per metric ton exw for rolling and delivery into Q4," he wrote. "That compares with hot rolled coil prices of €1,000-1,020 ($1,225-1,250) in May.

"Cold rolled coil is now carrying a premium of €125 ($150) per ton over HRC, sources indicated."

Strong demand from the automotive and construction sectors has powered the increases, he added.

GM to increase automotive deliveries to US, Canada

Speaking of automotive, General Motors this week said it plans to increase its deliveries to customers in the US and Canada.

It will increase production of its Chevrolet Silverado and GMC Sierra by about 1,000 trucks per month as of mid-July. The automaker also said shipments of Chevrolet Colorado and GMC Canyon mid-size pickups will increase by about 30,000 total units from mid-May through the week of July 5.

Productivity up in Q1

The Bureau of Labor Statistics reported US nonfarm business sector labor productivity rose by 5.4% in Q1 2021.

Furthermore, output during the quarter increased by 8.6%. Meanwhile, hours worked jumped by 3.0%.

Manufacturing sector labor productivity, however, fell by 1.7% in the first quarter of 2021. Manufacturing output increased by 1.4% and hours worked increased 3.1%. Meanwhile, manufacturing productivity increased by 1.8% from Q1 2020 levels.

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