June saw a cooling off from the commodity surge of May – and the most cooled (one could say ‘chilled’) of all was the price of US lumber (timber), which collapsed last month from the huge rally earlier in the year.
Oil though rose, copper fell, iron ore bounced a little, while other prices were mixed. Agriculturals like corn, wheat and soybeans sold off because of improving growing conditions in the US summer.
After the stunning rally earlier this year which saw futures prices surge to an all-time high of more than $US1,670 a thousand broad feet of lumber (timber) in April, prices slumped quickly, plunging more than 40% in June alone.
That was after they hit a low of $US264 a thousand broad feet at the end of March, 2020. They ended June at $US$US710 a thousand broad feet.
So large was the slide that after being up sharply in the first quarter, it ended the first six months of the year down more than 18%, making it one of the weakest performing commodities this year. The slide in the first half was the first since the first half of 2015.
There were plenty of economists using the surge in lumber prices as the basis for the warnings about inflation, but the comparison has slipped from their commentaries in the past month as the price has slid.
But it is still well above the long-term price range of $US300 to $400 a thousand broad feet thanks to continuing solid demand from home building. But even that is now easing with new housing mortgages down 7% in June from a year ago.
Keeping prices high are Donald Trump’s silly import duties on Canadian softwood shipments (softwoods are used extensively for housing frames). There are talks going on to work out a settlement. If that happens then the price of lumber will slide again.
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For Australian investors, iron ore prices are now the major commodity price watched each day and the rebound in June from the selloff in late May (after hitting all-time highs around May 12) also capped the strongest year for the key commodity with the price more than doubling.
Iron ore fines with a 62% Fe content and delivered to northern China is the key product for Australian investors and companies like BHP, Rio Tinto and Fortescue Metals.
Wednesday saw the price end June (and the financial year) at $US214.08. That was up $US1.75 a tonne on the day according to MB Fastmarkets.
But it was up by just over $US15 a tonne over May (a solid rise of 7%). In the quarter the price was up 29% and up 31% in the six months.
But over the year to June 30 the price more than doubled (up 114%) and in the year hit all-time highs in May of $US237.50 a tonne.
The price of the lower quality 58% Fe fines hit a record of $US207.22 a tonne on the same day.
They ended June 30 at $US185.95 which was just over the double at the end of 2019-20 of $US90.30 a tonne.
And the price of 65% Fe fines from Brazil hit an all-time high of $US267.80 a tonne on the same day. 65% fines ended June 30 at $US251.90.
They saw the biggest rise of all over the year to June of $US139 a tonne or a rise of 124%.
The premium between 65% fines and the 62% product widened as Chinese steel mills sought out the higher-grade fines for economic (a higher crude steel yield) and environmental reasons (less energy to process and less pollution from sintering and blast furnaces).
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Copper also went for a big run in 2020-21 and ended June 30 at $US4.2890 a pound on Comex, up 55% over the year, 22% in the first six months of 2021 and up 7.7% in the June quarter.
The price hit an all-time high in trading in May of $US4.88 a pound ($US10,949 a tonne) and finished at a record $US10,724 a tonne on the London Metal Exchange (for three-month metal) on May 14.
Copper is now the key electric vehicle, renewables metal play, alongside nickel.
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Oil is back in the spotlight tonight with the OPEC + meeting which will discuss cutting the current production cap by a million barrels a day.
The group is expected to discuss extending its deal on cutting oil supply beyond April next year.
Reuters reported that it had seen an internal OPEC report which said the oil market would be in deficit in the short term but that a glut was on the horizon once the OPEC+ supply cuts ended.
And OPEC Secretary General Mohammad Barkindo said on Tuesday that demand is expected to rise by 6 million barrels per day (bpd) in 2021, with 5 million bpd of that coming in the second half of this year.
Goldman Sachs forecast that demand will rise by a further 2.2 million bpd by the end of 2021, leaving a 5 million bpd supply shortfall.
August Brent crude (which expired on Wednesday), ended the session up 37 cents, or 0.5% at $US75.13 a barrel.
The September contract was up 34 cents to settle at $US74.62 a barrel.
in New York, US West Texas Intermediate crude (WTI) settled up 49 cents, or 0.7% at $US73.47 a barrel.
Both crude benchmarks ended just below highs last reached in 2018, and recorded their seventh monthly gains in the past eight months.
WTI rose more than 10% in June while Brent rose over 8%.
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And finally, gold prices suffered from the sling and arrows in every mention of inflation from Federal Reserve statements and speeches by members as speculation continued about the timing of the first interest rate rises and the impact of rising cost pressures in the global and US economies.
Comex gold futures prices ended the 12 months to June 30 at $US1,7771.60 an ounce, down half a per cent of the year, down 6.9% from the start of 2021 and down 7.3% in the past month.
The only gain was the 3.7% bump in the June quarter after a series of lows were reached in late March and early April.
Gold weakness came despite a fall in the value of the US dollar against most major currencies in the year to June. The US dollar index was down 5% in 2020-21. Year to date it rose 2.7% (explaining some of gold’s weakness in 2021).
The Aussie dollar rose against the greenback over the year but has fallen in the past few months (it was around 75 US cents on Thursday morning in Asia).
The fall in US bond yields since March also help explain gold’s weakness. The yield on 10-year US Treasuries ended June at 1.47%, down from the peak of 1.77% in late March but up sharply from a year ago as yields recovered with the rebound in the uS and global economies.
Gold will continue to trade in volatile conditions while the future of US inflation and interest rates remain uncertain. Demand and supply fundamentals are having little or no impact.
The return of Covid in a new wave of infections in parts of the US, UK, Africa, Asia, Australia, Russia and some parts of China is starting to worry markets and that could help gold in the short term.
