After suffering for some seven years through to 2015, the world’s steelmakers have had cause for cheer over the past couple of years. Following some heavy losses and write-downs, they finally appear to have emerged from the wreckage of the global financial crisis. An economic upswing has taken root in most regions of the world, Chinese steel output and export growth has slowed noticeably, and steel prices have enjoyed an upward swing in consequence.
In a previous article, we discussed how the real prices of commodities tend to fall in the long term (i.e. once adjusted for inflation).
While there are a number of factors contributing to this, perhaps the most important is that of technological advance.
A recent article in The Economist highlights this argument with regard to the steel industry. The article discusses the growing application of two different steelmaking techniques – Castrip and Belt Casting.
Following the sharp upturn in galvanized steel prices seen during the early months of this year, German steelmaker ThyssenKrupp announced back in April its intention to re-open its Galmed plant in Valencia, Spain by the end of this year (outbound link in Spanish). The facility, which can produce up to around 400,000 tonnes per year of hot-dipped galvanized steel (HDG) had previously been shuttered in late 2013.
And with Spanish car production up by around 11% during the first half of this year as well, the time seemed right to re-open a facility that previously shipped large quantities of HDG to Spain’s automotive factories.
But there are now thought to be doubts creeping in at ThyssenKrupp, which may opt to delay the re-opening of its Galmed plant until March 2017.
Nissan to maintain its presence in the UK
Nissan has today announced that it is going to fabricate its new Qashqai model in the UK, as well as produce its X-Trail SUV.
This follows previous concerns that the company would allocate production of its new models to other plants in Europe following the UK vote to leave the EU back in June.
No details yet of any assurances promised to Nissan in particular but good news for the UK automotive industry in any case.
UK automotive industry update
An update on the UK automotive industry post-Brexit, which we discussed a few months ago in the article here...
In short, Nissan is to make a decision next month on its future UK operations and investments. This follows the meetings this week with the UK government, from which some vague assurances about compensation for potential trade tariffs post-Brexit have emerged.
The decision taken by Nissan next month will have large ramifications for the UK’s automotive industry, given that the company currently produces around 30% of cars in the country.
But while we await the decision, the articles throw up a couple of immediate questions.
Firstly, is any compensation to Nissan even possible? Any reimbursement of imposed tariffs would almost certainly end up in front of the WTO.
Secondly, how long until we hear other UK-based car manufacturers demand compensation as well?
After having gone after imports of both hot-rolled coil (HRC) and cold-rolled coil (CRC) this year, will the European Commission soon be turning its attention to imports of galvanized steel? (primarily hot-dipped galvanized material (HDG))
In all likelihood yes but just how effective would any import restrictions be?
Let’s take a look at the case for implementing trade protection measures on these products and what effect they may have.
A useful article from The Economist to consider when looking at the big picture of global economics in the long term. And food for thought over what this may mean for global commodity markets.
Shifting demographics have had a profoundly positive effect on the global economic environment since the Second World War. As the article indicates, a booming young population helped to spur inflation, rising real incomes and a greater propensity to take on debt.
That trend began to reverse in Japan during the 1990s and will hit much of the rest of the world in the near future. The current backdrop of low interest rates, low inflation and a diminished propensity to invest is likely to be here to stay.
In a world of sluggish growth, low inflation and stagnant house prices, debts become much harder to pay off…
…as workers age, they are less likely to want to take on debt. And if an ageing workforce means slower growth, companies won’t want to borrow to invest.
To generate growth in our ageing world may require a big improvement in productivity, or a sharp jump in labour-force participation among older workers. To date, the signs on productivity are not encouraging and elderly employment ratios have a lot further to go.
A month on from the UK’s referendum vote to leave the EU and the focus has quickly shifted onto how the relationship between the EU and the UK will be managed in the future, and indeed whether the UK may benefit or suffer from its decision to leave the EU.
One industry that has a particular interest in this changing landscape is the UK’s automotive industry. With around 80% of its output heading for international markets (more than 50% alone heads to other EU countries), and with the majority of components used by the industry imported, the UK’s automotive industry will be a keen observer of how the UK’s international trading relations develop over the coming years.
Just under ten years ago, during June 2006, Mittal Steel finally gained control of Arcelor, creating what in turn is still today the world’s largest steelmaker, ArcelorMittal.
Mention the Spanish stainless steel industry and one is likely to think first and foremost of Acerinox, one of the world’s largest stainless steelmakers with production facilities not only in Spain, but also in Malaysia, South Africa, and the USA.
Spain is also home to another world leader when it comes to stainless steel products, however. That company is Tubacex, the focus of this article and the world’s largest producer of stainless steel seamless tubes.