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  • Writer's pictureAtlas Commodities Limited.

The Atlas Short Range Outlook - Metals: January 2021

Demand continues to outstrip supply in the Commodity Bull Run and we expect to see a fundamentally well unpinned market through out Q1. Chinese demand for raw materials and semi-finished products has been providing significant support to the markets. As vaccines roll out, depleted supply chains are being replenished, with plans being made for increased production to meet demand as countries bolster their economies and order books have filled up well. Along with the continuing high demand in most domestic markets and especially in emerging economies, international availability of scrap remains tight.

Massive stimulus measures across the world, never seen before I might add have exerted further pressure on the US dollar, boosting commodities and assets. The market is out of kilter: however, you will do well to find any steel mill complaining about volumes and prices, though consumers and buyers on the other hand will have plenty to say! Nevertheless, they are willing to pay in order to buy in steel under the prevailing market conditions of continued short supply.

The spread between reinforcing bar and wire rod prices is at its highest level ever. We are also observing the highest spread between raw material and steel product prices for years, which will surely motivate steel producers to continue the ramp up of production.

Ferrous Scrap is driving price increases on semi & finished products and scrap appears to be a leading focal point, which in coming months and years may lead more Chinese capital investment into the scrap business. The rapid increase in scrap prices and the rise in demand before the holidays will keep everyone busy for the next few months...

This is not guess work - It is no secret the Chinese steel industry wants to speed up its conversion towards scrap-based production. Imported scrap may cool off domestic scrap pricing in China and may also bring in higher quality material which is hard to find domestically. Up to now, Chinese domestic scrap was priced much higher than scrap in the international markets. The markets will probably balance out and rewrite the logical trade routes. Japanese and some US West Coast scrap will be redirected to China instead of South Asia which will underpin demand for European (and now UK) scrap!

Russia’s revision of the minimum tax on scrap exports, China’s lifting of the scrap duties on imports and the healthy local market in the US may very well keep scrap prices up at a newly determined level, starting with a $4... into Q2.

Demand in the US market remains healthy, as was to be expected during the winter months, but supply is problematic. Most exporting mills are fully booked and their next allocations are for arrival in the second quarter. Since import offers in the market are now for arrival four to six months later, customers are reluctant to make decisions so far forward especially at the current high price levels. They are opting instead to buy domestically only one week at a time...

As the world is reawakening, domestic steel production is also much stronger in Europe and the Americas, especially considering the relative cheaper scrap vs. Iron Ore & CokinG Coal prices for integrated mills, most of whom are now maximising their scrap / hot metal ratio's at between 21-24.5%.

With everyone weary of the pandemic and the restrictions which have been holding us hostage in our homes, we are all eager to get out on the street and to start spending even before the summer arrives. Hopefully, the vaccines will help us get back to normal. Emerging from the pandemic and beginning to look at where new opportunities will arise will surely boost economies and employment figures should also rise in tandem.

The current market situation can be described as stable, with a limited downside expected into February considering these lofty levels - There remains an undertone of nervousness which is likely to result in lower prices in the short term.

The outlook for the next quarter is satisfactory, but the situation in the markets in the second quarter will depend on many factors that are as yet unknown.


Prices are expected to dip slightly into Feb 21 and developments after the Chinese New Year may be important. The fact that the incoming US administration is planning to put more funds into infrastructure is positive, but the effects of such action may only be observed from the second half of 2021.

When prices are as high as they currently are, the next vital factor is management when the correction actually happens.


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