BMTI Dry Bulk Commodity Update (17 Jun 2020)

The current commodity price rally is in danger of outrunning fundamentals, Goldman Sachs warned this week, noting that strong downside risks remain in the agricultural and energy sectors. The warning was oriented more towards oil, which the bank has called ‘to much, too fast’ while it allowed that metals markets remain ‘extremely strong’ as recent Chinese infrastructure demands have exceeded expectations. wheat field

Export prices for Russian wheat remained relatively stable in recent days even as grain prices elsewhere, notably the US, suffered bearish pressure after the USDA upgraded its outlook for global wheat pro­duction by 4.9 Mt. Black Sea-based wheat values have been less prone to decline due to ongoing con­cerns about the crop conditions in Russia. Wheat loaded from Russian Black Sea ports is trading at US$ 205/mt FOB this week, essentially unchanged from the week before. Other estimates have the price closer to US$ 206/mt, also in sideways trend. Egyp­tian state grain buyer GASC purchased 120,000mt of Russian grain last week, also buoying sentiment and reducing overall supply. Russia exported 35.6 Mt of grain in the last eleven months, 14% lower than the same time a year ago, according to SovEcon data. State stockpiles are currently at around 0.4 Mt.

European steel producers, concerned about a pos­sible flood of import shipments as post-corona de­mand returns, last week implored the EU in strong terms to cut its import quota programme, measures that were put in place in 2018 to protect domestic producers. Industry group Eurofer said the European Commission’s current safeguards do not consider the collapse in demand suffered by the trade bloc this year and that stockpiling at Asian producers may flood the EU market in the second half of the year. European steel demand has plummeted by some 50% since March while around 40% of the EU steel workforce has been laid off or is working part time.

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