Commodities Roundup: Iron ore prices rise; steel prices slow; shipping rates retreat

Here’s a quick rundown of news and thoughts from particular commodity sectors, including iron ore prices, slowing steel prices, some easing of difficult logistics challenges and more.

MetalMiner scours the landscape for what matters. This week:

Iron ore prices gain

Iron ore prices have showed some upward momentum, MetalMiner’s Stuart Burns explained this week, citing a recent Reuters post.

“Rising imports and a 25% surge in iron ore prices over just three weeks into top consumer China have been taken by many as a sure bet steel demand is strong,” he wrote. “China buys some 70% of seaborne iron ore. As such, it is overwhelmingly the main driver of demand.

“The post cites Chinese customs data from Dec. 7 that reported November iron ore imports of 104.96 million metric tons. That total is up 14.6% from October and marks the strongest month since July 2020.”

One factor weighing on the global iron ore and steel market picture is China’s over-leveraged real estate sector.

“The jury is still out on whether heavily indebted construction firms will be allowed to survive. A few could be made examples of, even if the largest are allowed to continue,” he added. “Construction is unlikely to be the force it was in the last decade as Beijing continues in its efforts to pivot the economy toward a more sustainable consumption model.”

Steel prices slow

Meanwhile, MetalMiner analyst Nichole Bastin checked in on the steel market, where prices have slowed in recent months.

“The U.S. steel market continues to show weakness,” Bastin explained. “As HRC prices endure week-over week-declines, mill lead times have narrowed to historically average ranges.”

In trade news, after the E.U. reached a deal with the U.S. on its Section 232 steel and aluminum tariffs, now the U.K., Japan and South Korea want deals of their own.

“Alongside the establishment of Japan-U.S. Commercial and Industrial Partnership (JUCIP), the U.S. said in mid-November that it would open discussions with Japan about a possible ease to the current duties,” Bastin added. “This announcement prompted South Korea to officially request negotiations, as both Japan and the E.U. are major competitors to the Korean steel industry.”

Gold down to close November

Gold prices slipped to close November after having peaked at $,1867 per ounce mid-month.

The U.S. gold bullion price fell to around $1,785 per ounce to start December. On the heels of this week’s news from the Federal Reserve, which announced plans to accelerate tapering of its bond-buying program and signaled three interest rate hikes next year, the gold price regained some momentum.

The U.S. gold bullion price approached the $1,800 per ounce mark Thursday afternoon.

Renewables to account for 20% of US electricity generation

In energy news, according to the Energy Information Administration, renewables accounted for about 20% of the U.S.’s electricity generation in 2021.

That comes in at the same level as 2020. Meanwhile, the EIA forecast renewables’ share to rise to 22% in 2022.

Logistics challenges ease but bottlenecks remain

As Burns explained, logistics costs, at the very least, have eased of late.

“Freight rates have eased from peaks per 40ft container in the summer for some shippers of up to $15,000 to $9,000 last month,” he wrote. “Rates have fallen further to around $7,000 today, as reported by the the Financial Times.

“The number of vessels sitting off the ports of Los Angeles/Long Beach waiting to discharge have declined from 261 in September to 246 in October and 216 last month, the Financial Times reports.”

However, it’s too early to celebrate a return to what can be considered a pre-pandemic logistics “normal.”

“Businesses in Europe and the U.S. are reporting the same problems of port congestion,” Burns added. “A lack of hauliers and haulage capacity to move cargoes to and from the ports is exacerbating the situation.

“While rates may be easing, potentially opening up supply options that had become closed due to uneconomic freight rates, significant bottlenecks remain. Those factors may yet rear their head in the event of a recovery in volumes or COVID-related outbreaks shutting down ports (as happened last summer at Ningbo in China).”

This is the final Commodities Roundup to appear on SpendMatters.com, but more MetalMiner insights are available on LinkedIn.