The latest prices and key trends from the SM Commodities Index.
Oil prices surged in May as major oil producers issued in the largest production cuts in history, according to IHS Markit.
The Brent crude oil price increased from $18/barrel in April to $29/barrel in May, a 59% rise. Following the demand-driven price decline in the previous months, OPEC plus Russia and a number of smaller producers reached an agreement to pare back output to tighten the market.
Iron ore has continued to outperform most raw materials, rising another 6.2% in May. Chinese demand remains firm with blast furnace operation rates around 87.4%, but disruptions in seaborne supply continue to plague an extremely tight supply situation in the iron ore market, forcing prices higher.
Port stocks in China have fallen to a four-year low of 108 million metric tonnes and average iron ore stocks at steel mills are at 23 days on hand, down from typical levels of 28-32 days.
The most recent hit to supply has been the shutdown of Vale’s Itabira complex in Minas Gerais, Brazil, which represents 12% of Vale’s production. This unexpected shutdown is due to a court order, protecting worker safety due to concerns about the spread of Covid-19 in the region.
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