Commodities Roundup: Recovering steel demand in 2021; zinc surges; housing starts fall

Here’s a quick rundown of news and thoughts from particular commodity markets, including a 2021 steel demand forecast from the World Steel Association, surging metals prices, housing starts data and more.

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

World Steel Association forecasts 4.5% rise in steel demand

In a recent report, the World Steel Association forecast steel demand to rise by 4.5% in 2021.

Global steel demand rose by just 0.1% in 2020. The Covid pandemic dented demand across a variety of sectors.

“2021 has seen a stronger than expected recovery in steel demand, leading to upward revisions in our forecast across the board except for China,” said Saeed Al Remeithi, chairman of the World Steel Association Economics Committee. “Due to this vigorous recovery,  global steel demand outside China is expected to return earlier than expected to its pre-pandemic level this year.”

Aluminum alloy element shortages

Add aluminum alloys to the list of shortages impacting metal producers’ operations and, in turn, metal-using sectors.

This week, MetalMiner’s Stuart Burns delved into shortages of aluminum alloys used in the production of aluminum.

“The LME aluminum price has been rising relentlessly,” Burns wrote. “Furthermore, the availability of alloying elements is becoming so acute, both in terms of price and deliveries, that producers are sending out notes to clients advising that global shortages of raw materials like magnesium — critical in alloying higher grades of aluminum — could result in production stoppages and sharply higher prices later this quarter.”

As is often the case in metals markets, China is at the center of the situation.

China is the world’s largest producer of magnesium, among other alloying elements. The country is currently facing an energy crisis, as coil, natural gas and oil prices are all on the rise, leading to blackouts and hampering industrial output in the country.

Zinc prices surge to 14-year highs

Continuing the theme of rising prices, zinc rose to 14-year highs this month.

Belgian producer Nyrstar announced production cutbacks last week, citing rising power costs.

“Significant increases in the cost of electricity in recent weeks, and the cost burden of carbon emitted by the electricity sector which is passed on to industrial and domestic customers, mean it is no longer economically feasible to operate the plant at full capacity,” the producer said in an Oct. 13 statement. “Indirect cost compensation for energy-intensive producers to protect their competitiveness versus non-EU producers varies by European country and this puts Nyrstar’s Budel, Balen and Auby plants at a competitive disadvantage, compounding the impact of extreme energy prices.”

The firm said it would reduce production at its three European aluminum smelters by up to 50%.

Copper on the rise

Similarly, copper price have surged this month amid supply concerns. The rise comes despite declining growth in China. The country powered the metals rally in 2020 as its economy bounced back from the impact of the pandemic.

As Burns outlined, outlooks differ regarding the state of copper supply. The International Copper Study Group forecast a deficit of 42,000 tons for next year. However, Goldman Sachs predicts mining sector underperformance that will further restrict supply.

“Just last week Goldman predicted $10,500 per ton, only for the spot price to break though it shortly thereafter,” Burns wrote.

“The difference between the price for spot or prompt metal and that for delivery in three months on the LME has hit a record $350 per ton, according to the Financial Times.

“In short, it is displaying all the hallmarks of a market under extreme duress.”

Oil, natural gas prices on the rise

As previously mentioned, oil and natural gas prices are also on the rise.

The WTI crude price closed Tuesday at $82.96 per barrel, the Energy Information Administration reported. The price increased by $2.32 per barrel from the previous week and by $42.13 from a year ago.

Meanwhile, in the European natural gas market, Dutch TTF gas futures surged to €116 per MWh earlier this month, according to ICE data. Prices on the Dutch TTF hub eventually retreated, falling to around €90 per MWh to start this week.

In the U.S., Henry Hub prices have risen steadily since Q1 2021. The price closed Tuesday at $4.81 per million British thermal units (Btu). The price declined from $5.25 per million Btu a month ago. However, it marks a significant increase from a year ago, when it sat at $2.30 per million Btu.

US housing starts fall in September

In the housing market, U.S. housing starts reached a seasonally adjusted annual rate of 1,555,000 in September, the Census Bureau reported.

The September rate marked a 1.6% decline from the previous month. However, starts increased by 7.4% on a year-over-year basis.

Natural gas prices projected to rise

Last week, we covered a recent Energy Information Administration report, which projected natural gas prices will remain elevated through the upcoming winter. In its Short-Term Energy Outlook, the EIA forecast Henry Hub prices averaging $5.63 per million Btu from October 2021-March 2022. That would mark the highest winter gas price since 2007-2008, the EIA said.

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