Commodities Roundup: Aluminum prices remain elevated; gold falls as dollar gains; natural gas prices to remain high this winter, EIA forecasts

Here’s a quick rundown of news and thoughts from particular commodity markets, including aluminum prices, steel prices’ potential seasonal lull and the Energy Information Administration on natural gas prices this winter.

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

Aluminum prices remain elevated

Aluminum prices continue to trade near all-time highs, even as other metals have started to trade sideways.

As MetalMiner’s Maria Rosa Gobitz explained earlier this month, rising prices have prompted some producers to increase capacity.

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“Alcoa announced it is restarting the Alumar aluminum smelter in Sao Luis, Brazil. Alcoa owns 60% of the smelter, while South32 owns 40%,” Gobitz wrote. “Operations were suspended in 2015, as aluminum prices declined. Its restart could bring a total operating capacity of 447,000 metric tons, with the first molten metal expected in the second quarter of 2022.

“With this planned restart, Alcoa will have approximately 80% of its 2.99 million metric tons of global aluminum smelting capacity in operation.”

Steel starts to settle

Much to the chagrin of steel-using companies, steel prices have, until recently, embarked on a nearly uninterrupted rise since mid-2020.

U.S. steel prices have started to show signs that they are potentially leveling off. U.S. three-month HRC and scrap prices declined in September, for example.

However, steelmaking raw material prices, not to mention energy costs, continue to rise. Furthermore, a seasonal lull in steel prices during Q4 is typical, so it remains to be seen if prices have in fact peaked.

“While steel price increases seem to have started to slow, seaborne metallurgical coal prices remain at an all-time high amid global supply tightness and strong demand,” Gobitz explained. “However, market participants expect prices to correct during the last four months of the year as Chinese steel consumption decreases.”

Iron ore down amid Chinese property market woes

Speaking of steel and China, iron ore — an important steelmaking ingredient — has seen plummeting prices of late, as concerns over China’s massive real estate sector could dent steel demand depending on how widespread the problem becomes.

“On the one hand, steel production is rising in many provinces following power and environmental shutdowns over the summer,” MetalMiner’s Stuart Burns explained.

“On the other hand, debt-laden property group Evergrande is just the (admittedly very large) tip of the iceberg that is the Chinese property market. That is a market Beijing is clearly intending to curb and bend to its will.

“While arguably overdue, the fact remains, construction absorbs some 25% of Chinese steel production. A slowdown in the sector will have a profound impact on Chinese domestic steel demand.”

GM, GE Renewable Energy to work together on rare earth supply chain

Automaker General Motors has signed a memorandum of understanding with GE Renewable Energy to develop a supply chain for rare earths and other materials needed for electric vehicles and renewable energy.

The companies will “evaluate opportunities to improve supplies of heavy and light rare earth materials and magnets, copper and electrical steel used for manufacturing of electric vehicles and renewable energy equipment.”

Initially, they will focus on a Europe- and North America-based supply chain, GM said.

Gold falls as dollar gains

In precious metals news, the gold price retreated last month as the U.S. dollar gained strength.

The gold bullion price fell 3.1% over the month, as the U.S. dollar index rose to just over 94 as of Oct. 1.

Meanwhile, the dollar gained amid indications from the Federal Reserve that it could soon begin to ease asset purchases.

“If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” the Fed said in a Sept. 22 statement. “These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.”

Natural gas prices likely to remain elevated

Lastly, in energy news, the Energy Information Administration forecasts natural gas prices will remain high through the upcoming winter.

“In our October Short-Term Energy Outlook (STEO), we forecast that natural gas spot prices at the U.S. benchmark Henry Hub will average $5.67 per million British thermal units (MMBtu) between October and March, the highest winter price since 2007-2008,” the EIA said. “The increase in Henry Hub prices in recent months and in our forecast reflect below-average storage levels heading into the winter heating season and strong demand for U.S. liquefied natural gas (LNG), even though we’ve seen relatively slow growth in U.S. natural gas production.”

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