This week we recorded another month of price movements on the MetalMiner IndX. Some were up (Renewables and Grain-Oriented Electrical Steel or GOES), some were down (Construction, Aluminum and Copper) but most of them were simply flat. Steadiness: The sister-kissing tie of metal prices. Nothing lost and nothing gained.
Aside from stressing the need to invent Core-Optimized Mechanical Electrical Steel so that we can have both COMES and GOES price indexes, what can we learn from this?
Well, for one thing, oil prices are still driving down most commodities. In rapidly economically collapsing Venezuela gasoline can now, thanks to government subsidies, be purchased for 2-cents a gallon. Before you book the next flight to Caracas, red gasoline cans in hand, remember that oil exports account for more than 50% of the country’s GDP. The subsidies that once helped everyday Venezuelans are now choking them as oil continues to not bring in the revenue necessary to run their country.
In Venezuela products are so scarce you could get a job standing in line. Source: Adobe Stock/Andrey Popov.
While oil prices did increase a bit this week, they are still far below $50 a barrel and my colleague, Stuart Burns, warns that this rally will be short-lived. Low oil prices are dragging down all commodities and metals are no exception. Read more
Almost everyone, by now, has heard of the deadly Zika virus which has prompted the World Health Organization to declare a global public health emergency. But this virus has felled another unlikely victim: a car in faraway India. You heard right.
India’s leading automobile manufacturer Tata Motors never saw this one coming. Its newest hatchback, the Zica, is about to be officially launched, yet, the name, which matches with that of the virus if you ignore the spelling, sent the company into a public relations tizzy.
Tata Executives Tim Leverton and Mayank Pareek at the official unveiling of the new Tata Zica at an auto show in Goa last December. Source: Tata Motors
For months, the marketing division spent thousands of dollars on Zica’s promotional activities until the virus Zika came along. Now, Tata Motors has announced a name change, though at press-time, the new name is not officially out yet.
Zika vs. Zica: Bad Timing
Auto analysts are now wondering whether the change has come too little, too late since the hatchback is to be launched at the Auto Expo in New Delhi on Wednesday. Zica, by the way, stood for “zippy car.”
Sadly, what also turned out to be “zippy” was the rapid spread of the Zika virus.
Zica’s marketing campaign included advertisements featuring football legend Lionel Messi. In another messy coincidence, Zica’s brand ambassador, too, hails from Argentina where the first case of a Zika-infected person, who reportedly contracted the disease after being bit by a mosquito, was from.
New Name But Not Yet
In a statement announcing the rebranding, Tata said: “Empathizing with the hardships being caused by the recent Zika virus outbreak across many countries, Tata Motors, as a socially responsible company, has decided to rebrand the car.”
Tata has said for the time being, though, the compact car will still carry the Zica label. At least until the auto show ends. The new name will be announced in a few weeks.
For auto lovers, the Zica was Tata Motors’ first hatchback offering after the globally famous Nano, billed as the cheapest car in the world. And for those of you out there who love to get your hands greasy with vehicular details, Zica is said to have a 1.2-liter petrol (gasoline) engine or a 1.05-liter diesel engine, both with three-cylinders. The petrol engine will be a new all-aluminum one. Both the engines are paired to a five-speed manual transmission.
Along with the Zica, Tata Motors will be showing off a slew of new models including two forthcoming SUVs. Over 80 vehicle launches are expected at the Auto Expo 2016, with Fiat-Chrysler-owned Jeep making its India debut.
Essentially penalizing people for saving money seems like a curious thing to do to try to turn around a struggling economy, but it’s not the first time banks have gotten a push to force them to lend. The European Union has done it, too, in recent memory.
Boy does Toyota Motor Corp. ever wish it had a bigger supply chain this week. Source: Adobe Stock/cacaroot.
My colleague and metal price analyst Raul de Frutos wrote that, “negative interest rates mean that depositors must pay regularly to keep their money in the bank. This measure encourages people and businesses to spend, invest and lend money rather than pay a fee to save it and keep it safe.” Read more
The finished steel import market share was an estimated 26% in December and is estimated at 29% for the full year. If the 29% figure holds up, it will be a record for the proportion of finished steel imports coming into the US from elsewhere in one year.
How to combat steel imports? Why not just ban them all? Source: Jeff Yoders
For all of 2015, US steel production hit 86,843,000 net tons, or about 71% of capacity. That’s down 9.3% from the 95,706,000 net tons in 2014 when the industry ran at nearly 78% capacity.
The price of oil slipped below $27 this week and panic ensued in places other than the disco. Global stock markets fell as investors feared the worst and followed the Royal Bank of Scotland‘s advice and sold everything but bonds.
The Dow Jones industrial average was down more than 8% on the year and US equity funds have fared even worse. They were down 10.4% earlier this week. After a steep sell-off Wednesday, global stocks were mixed Thursday with Asian markets continuing the previous trading session’s sell-off as oil prices continued to fall. European and then US stocks got a lift after the European Central Bank hinted at further stimulus measures.
Can the US steel industry finally catch a break? Source: Adobe Stock/Inzyx.
My colleague Stuart Burns adroitly pointed out that while commodities such as oil, and the metals we track daily, are oversupplied, none of this has anything to do with demand. Most of the panicked investors are scapegoating China and demanding more stimulus, a course of action that would actually worsen the oversupply and the slowing economy there.
Like a tourniquet applied to stanch the bleeding of a limb injury, the oversupply that oil drillers and miners have built up to force out competitors — and the currencies purposely devalued to encourage exports — are now figuratively killing the limb.
Of course, that doesn’t mean the State Reserves Boardwon’t try it.
I am the oversupply. Fear me.
Producers have been, to a large extent, their own worst enemy. Just look at the position Freeport McMoRanhas put itself in, divesting part of its largest asset, the Glasberg mine, and all.
In times like these, we like to accentuate the positive. Steel-Insight’s James May reports that, thanks to anti-dumping actions and falling capacity, US steel mills are finally in the “sweet spot” that will allow prices to rise.
What a concept, eh? Rising metal prices. My colleague Raul de Frutos helpfully pointed out this week that we’ve actually been in a bear market for awhile and it could keep going so long as that pesky oversupply is there. Even that “sweet spot” James mentioned for US steel mills is a short-term thing. A paper ring. Prices will fall back to earth later in the year.
Just like Oprah giving out cars, our January Metal Price Trends report was generous with the dead cat bounces this month. You get a dead cat bounce, copper! You get one, too, aluminum! You get a dead cat bounce, raw steels! Everyone gets a dead cat bounce!
Okay, not everyone. Construction, stainless steel, renewables and rare earths all lost ground and automotive was merely steady.
Still, it’s the most positive movement we’ve seen for many of these metals since early last year. We say they’re dead cat bounces — a cruel-sounding investment term for a temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend (sorry, kitties) — because there is little reason to be optimistic that any of these gains will continue.
Stop Me Before I Bounce Again!
The main driver of commodity, and now stock market losses, has been the slowing Chinese economy and it’s looking worse this year than it did at the end of last. Financial institutions such as RBS are even advising clients to sell everything, save bonds, that’s not tied down.
This is great news for buyers but exactly what metal producers don’t want to hear. What’s worse, for them, is that everything the Chinese government is doing to try to turn their economy around, including a panic button system for its stock markets that actually caused more panic, isn’t working. My colleague Raul De Frutos also pointed out that purposely devaluing the yuan actually hurts metal prices.
How Low Can it Go?
The other big driver of the commodity price rout, the price of oil, shows no signs of turning around, either. Oil hit $30 per barrel this week stoking bankruptcy fears among US energy companies and it even temporarily created some nervousness among OPEC nations who clamored for an emergency meeting.
So don’t expect these price increases to continue as transportation and production costs follow oil’s race to the bottom. My colleague at our sister site Spendmatters, Kaitlyn McAvoy, reported that Goldman Sachs is predicting $20 per barrel for oil this year. It’s not a very happy new year for metal producers… or cats.
Every year, the Consumer Electronics Show draws thousands of attendees to Las Vegas to showcase the latest ideas and examples of cutting edge consumer technology. It’s a nerd nirvana and this year was no exception with 170,000 attendees able to see the latest virtual reality technology, driverless cars, drones and, yes, the item that caught my eye an autonomous flying vehicle.
The Ehang 184. Now you can drone yourself to work and back! Source: Ehang.
The AFV is a single seat drone capable of carrying a human. Admittedly due to (they say) US legislation the Chinese Ehang 184 could not be seen in operation and even the firm’s YouTube clips show test flights that probably don’t involve a human passenger but the technology does appear to be approaching the point of manned testing and the company claims it has made manned test flights in less-regulated China. Read more
China suspended its recently implemented “circuit-breaker” system Thursday, after trading in Chinese stocks was halted minutes into the session because of a plunge in prices. The circuit breaker was a new tool this year that Beijing assured investors would calm the markets and keep massive stock price falls from happening in one day. They just happened on Monday and then, again, on Thursday. Fine work, Beijing.
Bye, Bye Circuit Breaker
“After weighing advantages and disadvantages, currently the negative effect is bigger than the positive one. Therefore, in order to maintain market stability, CSRC has decided to suspend the circuit-breaker mechanism,” a statement from the China Securities Regulatory Commission (CSRC) said in a statement announcing the sidelining.
The Chinese stock market’s circuit breaker was short-circuited. Source: Adobe Stock/signcloud.
The second trading suspension in China caused global shares to fall sharply on Thursday, with Wall Street opening more than 1% lower and European markets trading 2% down. Read more
The major trends that drove the winter — and spring, summer and fall — of low prices and producer discontent were nothing new: the slowing Chinese economy and its subsequent lack of construction demand, a race to the bottom between OPEC and US shale oil drillers eroding the price of crude and global economic sluggishness outside of the US. The domestic economy, while showing positive growth (2% in the third quarter), wasn’t exactly operating full-bore, either, as inventories remained high and inflation cut into buying power.
So, without dwelling too much on the past, we offer MetalMiner’s Year-in-Review, a look at the issues, news and trends that affected metal prices.
3D Printing: Now in Manufacturing
Additive manufacturing continued to transform aviation and other sectors. We saw the largest 3D-printed part ever made for commercial us by Airbus and Autodesk for use in the new A380. The interior partition is made up of 122 components and reduces the weight of the partition by 30%.
This partition cover can be customized for the individual airline and its branding. Strong but able to be used by anyone. Source: Airbus
In other materials science news this year:
Tin could possibly be used as a catalyst to enable clean carbon capture for electrical power generation.
A flexible aluminum-ion battery could one day replace the lithium-ion battery.
The Year in Dumping
It was a big year for dumping, dumpling. China continued to be the main nemesis of the US when it comes to illegally subsidizing and exporting steel, aluminum and several other metal products. China was also the culprit of choice for India, Russia, the European Union and, well, most of the world.
If you need a last-minute gift idea, look no further than Julia Child and Barcelona’s La Sagrada Familia.
Julia feels some steel. Sam G/Flickr
When I visited the historic site in 2013, progress was still — shockingly — slow. Photo by Taras Berezowsky
You see, both icons have recently steered us toward the stainless steel world. Child, for her part, wrote “A Life in France,” which my colleague Katie Benchina Olsen has been reading lately, and in it, according to Katie, Child complains that stainless kitchen knives dull too easily. For its part, the procurement committee of the Basilica of La Sagrada Família, the historic Antoni Gaudí-designed church in Barcelona, Spain, has been sourcing its stainless steel material needs exclusively from Outokumpu since 2013 and recently put out a press release about its supplier relationship with the Finnish producer (although we can’t really decipher the reason for the release, as there’s nothing particularly newsworthy in the whole thing…perhaps a new PO for the next phase of construction, which has dragged on for more than a century?)
At any rate, we thought it funny to riff on an oft-used phrase around the office and in our metals outlook analysis in regards to buying metal forward when prices are falling, which is: “don’t try and catch a falling knife” – in other words, you’re sure to get hurt every time.Read more