China's Steel Production Declines, Coffee Quality Premium Falls: Market Updates
Aa
Share
Metals – China steel production extends decline
The latest numbers from the National Bureau of Statistics (NBS) show that monthly crude steel production in China fell by 7.3% year-on-year and 2.7% month-on-month for a second consecutive month to 90.1mt in May 2023 as domestic steel producers continue to curb output amid falling margins.
Meanwhile, cumulative output rose by 1.6% YoY to 444.6mt over the first five months of the year – overall growth was impacted by the lower production numbers in the April and May months. Among other metals, Chinese primary aluminium production rose by 1.1% YoY to 3.42mt in May 2023. Cumulatively, output rose almost 3.4% YoY to a total of 16.7mt over the first five months of the year. Chinese primary aluminium production might pick up in the coming months given the recent plans of Yunnan to bring back about 1mt of capacity from the end of next month.
Meanwhile, spot gold prices extended the downward rally for a fifth straight session and were trading marginally down this morning, following the latest comments from the Federal Reserve that more rate hikes are possible as the risks to inflation are still on the upside. At its latest meeting, the Fed kept interest rates steady at 5-5.25%.
Looking at the ETF holdings, gold ETFs reported outflows of 12.9koz yesterday, (the 12th consecutive session of outflow) taking the total known gold ETF holding to 93.8mz as of yesterday, the lowest level since 8 May.
Agriculture – Coffee quality premium continues to fall
The spread between Robusta and higher-quality Arabica coffee dropped to around US¢59.7/lb this week (the lowest since December 2020), following the diverging fundamentals between the two types of coffee. Robusta coffee inventories in major producing regions such as Vietnam, Indonesia, and India are shrinking given the increased demand. Moreover, concerns about the potential impact of El Nino weather on crops in the nations near the Pacific have also been supporting robusta prices. The USDA projected a 5% YoY decrease in Brazil's Robusta coffee output for the season to 21.7m bags due to poor weather conditions.
On the other hand, Arabica coffee prices have been under pressure due to the prospects of a massive crop from Brazil and weaker global demand. The commencement of harvest in Brazil for the season, following two years of lower production due to bad weather, has added to the downward pressure on Arabica prices.
