Here’s a quick rundown of news and thoughts from particular commodity markets, including ongoing shipping struggles, crude oil prices and much more.
MetalMiner, a sister site of ours, scours the landscape for what matters. This week:
Supply chain woes continue
Disruption among shipping lines continues to wreak havoc on global commerce.
MetalMiner’s Stuart Burns this week overviewed the state of the global shipping sector, which continues to feature rising freight rates and port congestion.
“Freight rates have soared since the beginning of the year,” he wrote. “Port congestion has increased and container availability has decreased. Shipping line shutouts have become a common feature.
“Bloomberg reported that China has partly shut the world’s third-busiest container port after just one worker became infected with COVID-19. All inbound and outbound container services at Meishan terminal in Ningbo-Zhoushan Port were halted recently until further notice, closing approximately 25% of the port’s total container handling facilities.”
US natural gas exports
According to a recent Energy Information Administration forecast, US natural gas exports will exceed imports this year.
The EIA forecast exports will exceed imports by 11.0 billion cubic feet per day.
Natural gas exports accounted for 23% of US energy exports in 2020, the EIA reported.
Uncertainty in the Chinese steel market
Elsewhere, Burns also took a look at what’s going on in the Chinese steel market.
“Although much was made of China’s ambitions to reduce emissions over the coming decade, after an initial flurry of anxiety the industry settled back to assume changes would be eased in gradually,” Burns wrote.
“Indeed, Beijing even sought to play down the rate at which changes would be imposed following a sudden spike in prices as expectations of steel shortages took hold.
“But over the last couple of weeks, it is becoming clear that cutbacks are happening. Output in the second half of the year is expected to be considerably less than the record first half.”
Oil prices have taken a fall in recent weeks, but that scenario is unlikely to continue in the longer term.
“Brent crude prices dropped 6% last week, its largest week of losses in four months, while WTI slumped nearly 7% in its biggest weekly decline in nine months, according to Reuters,” Burns explained. “Support was further weakened when the IEA said demand for crude oil ground to a halt in July and was set to rise at a slower pace over the rest of the year because of surging infections from the Delta variant.”
Oil and gas rig levels recently reached 500, more than double the level it reached a year ago, Burns noted.
“With OPEC managing to retain fairly tight control on output and demand recovering close to pre-pandemic levels, it would take a significant escalation of global infection rates and widespread application of lockdowns to precede a prolonged fall in oil prices,” Burns added.
“The market remains in deficit. OPEC will be keen to keep it there.
“A rising US rig count is unlikely to turn that around anytime soon. So, today’s oil price softening may last no more than a few months before we see prices back about $70 again.”
Steel capacity utilization reaches 84.7%
After reaching 85.0%, the US steel capacity utilization rate has dipped in recent weeks, falling to 84.7% last week, according to the American Iron and Steel Institute.
US steel production last week totaled 1.87 million net tons, or down 0.2% from the previous week. However, the weekly output total marked a 26.6% year-over-year increase.
Meanwhile, copper prices have slumped of late, falling off after reaching an all-time high in May.
As Burns explained, there have been several walkouts at mines across South America, which would ordinarily support prices.
However, slowing — or, at least, perceived slowing — of demand in China and the spread of the Delta variant have led to copper’s cooling.
“Open interest (a measure of the net long positions) on the LME is estimated by Reuters at just 4.3% last week, a one-year low and indicative that investors are taking their cue from problems in China, where a stimulus-fueled recovery is perceived to be fading,” Burns wrote.
“Industrial output, fixed asset investment and retail figures out on Monday all came in below expectations. All of that adding to nervousness about the potential spread of the Delta variant within the country, the post reports.”
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