Commodities Daily - March 2, 2018

Oil pressured by stock market selloff; partially counterbalanced by dollar slump. We expect today’s Baker Hughes rig count (21:00) to impact prices only if it shows a rise of 10 or more, following the addition of just one rig last week. A large increase in the rig count would likely push Brent closer to $63/bbl today. We expect it to trade in the $63-64/bbl range. Oil is also likely to continue exhibiting increased sensitivity to the dollar and stock market movements.
Gold surges after Trump surprises markets with import tariff announcement. Today, we expect the heat from yesterday’s Trump comments to ease, with both the dollar and gold trading sideways. Gold may fluctuate around the $1,315/oz mark. Be wary of Sunday’s events in Europe, which will be priced in to the euro today.
Trump to impose 25% duties on steel and 10% on aluminum. US President Trump yesterday said he plans to introduce next week a 25% tariff on steel imports and a 10% duty on aluminum “for a long period of time.”
The news is likely to send steel prices higher over the short term, as customers will try to buy as much as possible before the tariffs are introduced. Over the longer term, global net exporters such as Brazil, Mexico, Russia, South Korea and Japan are likely to see regional balances changing, but since China is strongly committed to capacity cuts, the market rebalancing could go more smoothly than it would have done if the US had introduced similar measures in 2015, for example.
For aluminum, we see no chance of domestic producers making up the missing volumes quickly, as the US imports 2.0-2.5 mln tonnes of primary aluminum and semis per year. This means that regional premiums, which are already climbing, should rise further, hitting domestic customers and probably compensating exporters, especially exporters of primary metal such as RUSAL (which ships 700 ktpa to the US), for the loss.