Since the beginning of this year, commodity prices have surged due to factors including pent-up demand generated during the COVID-19 pandemic, global shipping problems, and other supply constraints.
U.S.-based recyclers face the same conditions as manufacturers. About one-third of commodities collected and processed in the U.S. are exported. “One of the supply chain difficulties lies in the shipping container markets; this affects our members’ exports,” ISRI senior economist Bret Biggers explains. At the same time, major industrial countries are trying to stabilize commodity prices in their domestic markets.
Here is a current snapshot for global metals.
China Situation
To cool inflation, China released 100,000 metric tons of copper, aluminum, and zinc from its national reserves on July 5. On July 21, Beijing announced the country would release another batch of national reserves including copper, aluminum, and zinc. Some 30,000 metric tons of copper, 90,000 metric tons of aluminum, and 50,000 metric tons of zinc were released in late July, according to the National Development and Reform Commission and the National Food and Strategic Reserves Administration, with reports of significant bidding activity.
Chinese copper fabricators bought copper cathode at bigger discounts against exchange prices during a second batch of sales by China’s state reserves administration July 29, bidders told Fastmarkets. “I won a bid at 70,007 yuan ($10,767) per [metric ton] for material stored in Ningbo, and the discount is bigger than our purchases in the first batch [of sales],” a plant source told Fastmarkets, without specifying the volume involved.
Chinese downstream fabricators bid for discounted zinc during the second round of state auctions, with the 50,000 metric tons of zinc almost sold out on July 30, sources told Fastmarkets. The discount stands at around 1,500 yuan ($331.30) including shipment fee calculation, and has considerably catalyzed the sell-off, sources added. Auctioned materials are located in 20 sites across 15 provinces, unlike the initial sell-off when state reserves were mostly open in the Hebei province of northern China. The stocks are dated from 1973-2013, according to an attachment from the state reserves bureau on July 21.
Zinc fabricators’ winning bids ranged from 19,000 to 21,000 yuan per metric ton ($2,932.73 to $3,241.44), lower than bids of 21,100 to 21,200 yuan per metric ton for the July 5-6 batch. Zinc had the biggest discount compared to copper and aluminum, Fastmarkets reported.
Russian Duties
Russian authorities may peg a mineral extraction tax levied on metals producers to the global price of their products as soon as 2022. Russia has already imposed new export taxes for steel, nickel, aluminum, and copper, which will cost its producers $2.3 billion in August to December 2021. Those taxes, which came into effect Aug. 1, will be operational until the end of 2021. The measure is set to maintain domestic prices for metal products amid the worldwide prices spike.
Another Factor
The United States International Trade Commission determined June 17 that silicon metal imports from Malaysia have materially injured the U.S. industry. The Commerce Department determined the metal is sold in the U.S. at less than fair value. As a result of the commission’s affirmative determination, the Commerce Department will issue an antidumping duty order on imports of this product from Malaysia.
Market Volatility
The volatility of the metals markets is an ongoing issue, as shown in these numbers posted by the London Metal Exchange and tracked by Argus:
- Recycled steel (Heavy Melt 1/2 CFR Turkey): $470.00/ton (one month) on Aug. 3 versus $474.00/ton on May 4; highest price for the period of $525.00/ton on May 11.
- Aluminum: $2,595.50/ton on Aug. 3 versus $2,434.50/ton on May 4; reached high of $2,635.00/ton on Aug. 2.
- Copper: $9,583.50/ton on Aug. 3 versus $9,961.00/ton on May 4; high of $9,781.00/ton on July 29.
- Lead: $2,435.00/ton on Aug. 3 versus $2,165.00/ton on May 4; high of $2,445.50/ton on Aug. 2.
- Nickel: $19,324.00/ton on Aug. 3 versus $17,861.00/ton on May 4; highest price $19,892.00/ton on July 30.
- Tin: $36,437.00/ton (highest price in three months) on Aug. 3 versus $32,397.00/ton on May 4.
U.S. Response
The Federal Reserve has confirmed its continued emphasis on ensuring the market functions smoothly. Loan rates will continue to be near historically low levels, allowing recyclers to continue expansion projects (equipment, machinery, facilities) and providing for availability of funds for new loans. Planning for projects in the near term appear to be supported somewhat by stable and expected market conditions.
Such import dependency led the Biden administration to initiate a supply-chain task force to build domestic resilience in everything from medical supplies to lithium-ion batteries. The task force’s report concluded, in part, “The United States must secure reliable and sustainable supplies of critical minerals and metals to ensure resilience across U.S. manufacturing and defense needs, and do so in a manner consistent with America’s labor, environmental, equity and other values.”
Commerce Secretary Gina Raimondo recently said some tariffs on imported goods—such as the Section 232 taxes on imported steel—can be effective. The Biden administration is keeping tariffs put in place by the Trump administration in 2018. U.S. importers will still face high freight costs to move metal to the domestic market, assuming there is available freight capacity.
The volatility of the international marketplace is changing frequently. ISRI will notify members when those changes happen. The Market Report and specialized emails will keep members on top of the latest developments. To receive markets-related communications, click here.
Image courtesy of Storyblocks.
