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Commodities Roundup: Copper price trends; Chinese steel production; IPCC report

08/13/2021 By


Here’s a quick rundown of news and thoughts from particular commodity markets, including China’s relaxation of steel production curbs, movements in the copper market and much more.

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

Copper price movements

Earlier this week, MetalMiner’s Maria Rosa Gobitz overviewed movements in the copper market.

“LME trading volumes, along with prices, traded sideways for the first three weeks of the month and picked up pace toward the end of the month, signaling an uptrend,” she wrote. “Prices reached $9,856/mt before closing the month. Prices and trading volumes have dropped since.

“SHFE prices behaved similarly to LME prices, trading sideways the first three weeks of the month and climbing the last week,” she wrote. “The SHFE price closed the month at CNY 71,180/mt. Just like the LME, prices dropped the first week of August. Trading volumes on the SHFE were unusually lower than previous months. Even when prices jumped toward the end of the month, volumes picked up.

“The light movement in the SHFE could be due to a slowdown in the Chinese economy. This month, China’s Caixin Index fell by 6.4% compared to June. Consumer spending slowed due to higher prices. While new orders declined for the first time since May 2020.”

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Meanwhile, the copper market has awaited news from labor talks at BHP’s Escondida copper mine in Chile, the world’s largest. The labor union representing workers at the mine earlier this month voted to reject management’s latest contract offer. The move kicked off a 10-day period of government-mediated talks, after which the workers would go on strike if an agreement were not reached.

Earlier this week, however, Reuters reported the union and management had reached a tentative agreement.

China emissions targets

Meanwhile, MetalMiner’s Stuart Burns delved into China’s relaxation of emissions targets and its impact on steel prices.

“But although June saw a one-month fall the first half of this year has so far seen a robust increase in output to a new record, according to the FT,” he wrote. “Last year’s 1,054m metric ton, over a billion tons, was a record but, according to Morgan Stanley, this year is still expected to be 4-5% higher even if output falls in the second half.”

As a result, rising Chinese steel prices cooled off.

“MetalMiner’s monitoring of domestic Chinese steel prices has seen numbers come off across domestic markets and across all steel forms this week,” Burns wrote. “Although Chinese steel is largely shut out of US markets, China remains a substantial supplier to the rest of the world, with exports up over 30% year on year during the first half of this year.”

This comes after global output declined in June compared with the previous month, including a month-over-month drop in China’s output.

Decarbonization cooperation

Speaking of emissions, MetalMiner’s Christopher Rivituso covered news of a collaboration between Salzgitter-Flachstahl and Anglo American to decarbonize the steelmaking process.

“The work will include methods to reduce carbon emissions by researching iron ore pellets and lump ores that would be suitable for use in direct reduction steelmaking, Anglo American said in an Aug. 4 announcement,” Rivituso wrote.

Steel capacity utilization dips to 84.8%

The US steel sector’s capacity utilization rate dipped to 84.8% last week, the American Iron and Steel Institute reported.

The rate fell from 85.0% the previous week. Steel production during the week ending Aug. 7 totaled 1.87 million tons, or down 0.2% from the previous week.

IPCC report: what it means for metals, metal-using industries

The recent release of the Intergovernmental Panel on Climate Change’s (IPCC) latest report on climate change scenarios has prompted a range of reactions, Burns noted.

It remains to be seen if industries and nations can meet the emissions targets necessary to stave off the more dire climate-change scenarios. However, one thing is clear: the movement toward cleaner sources of energy will have widespread impacts on just about every industry, including metals.

“Of more relevance is the fact that governments will likely step up their policies, possibly dramatically, to support a switch to decarbonization, to the build out of renewables, and to the adoption of less-polluting technologies,” Burns explained.

“Automotive, aircraft, shipping and, most of all, productive industries like steel, aluminum, zinc and thermal power generation will go through enormous change if they are to achieve current environmental pledges (plus those that could be made at this year’s upcoming COP26 gathering).”

CPI up in July

Meanwhile, for US consumers, costs continue to rise for just about everything.

According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) for All Urban Consumers rose by 0.5% in July. The index had jumped by 0.9% in June.

“The indexes for shelter, food, energy, and new vehicles all increased in July and contributed to the monthly all items seasonally adjusted increase,” the Bureau of Labor Statistics said in its report. “The food index increased 0.7 percent in July as five of the major grocery store food group indexes rose, and the food away from home index increased 0.8 percent. The energy index rose 1.6 percent in July, as the gasoline index increased 2.4 percent and other energy component indexes also rose.”

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