2016 commodities outlook: From super cycle to super correction

Last year was once again rather disastrous for commodity prices. Average prices of the base metals traded on the LME all dropped massively, while average prices of oil, iron ore and steel also fell sharply. The general downward trend that has been in place since 2011 continued.

Continue reading 2016 commodities outlook: From super cycle to super correction

Brazil the redeemer

Recently-released financial results from Europe’s stainless steelmakers painted a predictably grim picture. With nickel prices, and thus stainless steel prices, falling, large-volume buyers have had little appetite to restock, instead waiting for a clear bottom in prices. The pernicious effects of deflation in action.

That said, Aperam appears to be outperforming its peers this year. Why is this?

Continue reading Brazil the redeemer

Russian steelmakers benefit from rouble weakness

With commodity prices dropping sharply over the past 15-18 months, many economies have been hit hard. Oil-rich Saudi Arabia issued its first government bonds since 2007 earlier this year as it looked to cover a widening budget deficit caused by the collapse in oil prices, while commodity-dependent Brazil and Russia have entered outright recession this year.

It is the latter of these countries that is the focus of this article, and in particular Russia’s steelmakers. How have they coped with the significant falls in domestic GDP this year, of some 3.5-4%, as well as a sharply weakened currency and a large jump in inflation and interest rates?

Continue reading Russian steelmakers benefit from rouble weakness

Prices down but profitability quietly creeps up in Europe’s steel industry

With prices of many commodities at multi-year lows, recent financial releases from some of Europe’s major steelmakers delivered a reminder that not everything is bad in the steel industry.

Following an improvement in profit margins last year, Europe’s steelmakers have continued their resurgence during the first half of 2015.

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Why, when most stories surrounding the steel and commodity markets are overwhelmingly negative these days, might this be the case?

Continue reading Prices down but profitability quietly creeps up in Europe’s steel industry

While not directly discussing global metals markets, this superbly-written and informative article from David McWilliams is well worth a read.

It gives a great historical perspective to the problems of economic stagnation that the Western world faces, comparing the deflationary ‘China effect’ of today with that of the ‘Argentina effect’ that occurred during the late 19th century, touching on both the economic and political implications.

Much of what we now term “secular stagnation” derives from the original China effect. The floor of incomes of industrial workers all over the western world is now set in Shanghai rather than Stoke. Countries that respond to this competitive threat by trying to borrow to maintain lifestyles will find themselves choked by low growth and rising debts.

This wider macroeconomic discussion and the reaction of the Western world to it has profound implications for all industries. But for the commodities sector, where price has such overriding importance, the impact will perhaps be most severe.

 

US tinplate industry in trouble

A recent article in The Economist highlighted the problems being faced by US manufacturers in the face of a strengthening dollar.

Indeed, with economic data for Europe increasingly surprising on the upside so far this year, and that of the USA increasingly disappointing, there are ever more questions over whether the positive economic data coming out of Europe is merely coming at the expense of that in the USA following the large shift in value of each region’s currency.

Put simply, US goods have become much more expensive in overseas markets while European goods have become relatively cheaper.

A look at the world’s tinplate industry, which has shown little-to-no global growth over the past decade, suggests that growth in one region at the expense of growth in another is very much a real phenomenon.

Continue reading US tinplate industry in trouble

It’s not often that The Economist runs a piece on the world’s steel industry but there is an interesting article this week on whether “peak steel” has been reached.

Looking at Chinese demand for steel…

China’s annual growth rate has slowed from double-digit figures to around 7%. The massive investments in infrastructure that the government unleashed as a stimulus response to the global financial crisis are subsiding. Property markets around the country are cooling fast, leaving developers with a nasty debt hangover.

The article goes on to detail the implications for prices, both of steel and its raw materials i.e. iron ore and is well worth a read for a good overview of the sector.

Acerinox leading the way in Europe’s stainless steel industry

Recently-released results from Europe’s stainless steelmakers showed a decline in margins for all three of the continent’s major producers – Acerinox, Aperam, and Outokumpu – during the final quarter of 2014.

Continue reading Acerinox leading the way in Europe’s stainless steel industry