US election volatility keeps metals on the edge


Industrial metals have remained under pressure as the US presidential election looked set to dash hopes of a sweeping, climate-focused stimulus package. The metals complex remained volatile whipsawed by the uncertainty around the US election result

Heading into the US election, it is expected that the most supportive macro backdrop for base metals in a decade, as strong demand from China — which has just announced a net zero emission target — and the prospect of a Democrat clean sweep that brought the green agenda to the fore.

Prices of iron ore prices came off early in Asia as Biden started off looking promising before rebounding as the election race looked increasingly tighter than “most had expected”.

Trade participants are  concerned over softer winter steel demand as they anticipate stricter output cuts and environmental controls during the winter season. There’s also fewer buying interest among trading houses due to high inventory levels, while the demand for low-grade fines are believed to decline as spreads between low- and medium- grade fines narrowed.

Coming back to domestic market overall, the data on coal imports and iron ore exports suggest that India's steel and industrial sectors are recovering faster than expected.

India's coal imports, depressed by the impact of coronavirus this year, regained ground in September, but in an uneven uptick - shipments rose for higher-grade coking and thermal grades, but slid for lower-rank fuel used mainly in power plants.

India's total coal imports in September were estimated at 14.62 million tonne by Refinitiv vessel-tracking and port data, up from 12.97 million in August.

In the long term, iron ore demand is going to come down as the space for recyclable materials is fast gaining ground, lessening reliance on virgin ore.

Coal demand is likely to evaporate by 2050 as a gas-based economy takes over, including increasing dependence on natural gas as well as technologies such as coal gasification, coal bed methane, syngas to SNG and other ways of minimising dependence on coal gain ground.

In order to increase capex in steel industry for the ambitious target goal, the government needs to rethink its stiff tax structure, particularly the duties on raw materials. Further, iron ore beneficiation should get a leg-up with a view to utilisation of low-grade fines, instead of focusing entirely on exports. That will be the ultimate value-addition for low-grade Indian fines which we have in plenty.