SM Commodities Index - September 2020

13 October 2020

The latest prices and key trends from the SM Commodities Index.

The steel scrap market improved in September, as steel order books recovered and drove to stronger production, according to IHS Markit. Steel production continues to be red-hot in China – scrap prices reflecting the higher scrap charging rates – but other countries are now starting to recover.

Brazil and Turkey in particular have shown strength with strong raw material buying in the third quarter. Turkish buying exceeded expectations, while Brazilian scrap prices have outperformed all, rising to all-time highs on poor scrap availability and very strong construction demand in the country.

Meanwhile, the US and Europe are starting to react to growing demand, restocking low scrap inventories due to reduced activity since March. Steel prices also seem to have bottomed, giving steel producers more scope to increase production. Capacity utilisation in the US remains subdued at 64% but this is steadily improving which is driving competition for scrap cargoes between domestic steel makers and exporters who are currently profiting from Turkish buyers willing to pay high prices for obsolete grades.

Corn prices have rebounded significantly since the onset of Covid-19 as US yields failed to live up to expectations, along with spill-over support from strong bullish sentiment for soy. China has been a strong buyer of soybeans as Brazilian supplies dwindle and the Chinese livestock industry rebounds from the Asian swine flu.

US corn exports have also added to the bullish market support with sales to China. Some believe Chinese corn import demand could reach a record 20 million tonnes. The longevity of the price rally is in question as it is counter seasonal.  

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