SM Commodities Index - January 2021

22 February 2021

Commodity prices continued their rally in January.

 The combination of supply bottlenecks, a strong global rebound in manufacturing and a weak US dollar have all contributed to this commodity price rally. Optimism about the global vaccine rollout and government stimulus in many countries have also provided upward momentum.

Steel scrap

Steel scrap rose sharply in January. Increases of 10% or more are the normal seasonal pattern for January as northern hemisphere weather hampers scrap collection and transportation, but this was well above norm. The market reacted to fears of increased demand from a new mill in the United States and a lifting of import tariffs in China. Both concerns are real but were over-blown, such that scrap is already retreating in February. 


What started out as a season of burdensome supplies with a race to the bottom in price estimates has now dramatically shifted to one of tightness for US corn supply. The 2020 US corn crop has been reduced through weaker yields, while exports have surged higher. With the record Chinese corn import demand, US corn exports could reach 2.9bn bushels for the 2020-21 season. The resulting changes to supply and demand has lowered US stocks, matching stock-to-use levels of the 2011-12 and 2012-13 seasons, and has lifted US corn prices significantly in January.

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