2011 Begins: Part Two – Oil Price Increases, China Rare Earth Export Quotas and Trade Wars

For our second of two posts looking at what stories will impact metal-buying organizations in 2011, we’ll focus on international trade policy and the macro picture.

The story: China Cuts Export Quotas on Rare-Earth Metals mentions that China will cut quotas by 35 percent from the first half of 2010 to 14,508 metric tons, according to the Wall Street Journal.

Why we think it is significant: Two aspects of this latest announcement by China’s Commerce Industry appear significant. The first, despite all of the global protests around both China’s rare-earth export ban and previously announced decreases in rare-earth export quotas, China obviously does not appear at all concerned about any of the global backlash against its policies. Second, what these additional export quota decreases also suggest is that China does not believe it has violated any WTO agreements, despite a recent USW petition.

The story:
Oil Nears $100, 2008-Style Surge Not in Cards discusses the threat of oil crossing the triple digit barrier. And though this particular article suggests that the similarities between 2008 and 2011 end at this point (approximately $100 barrel) because supply concerns do not exist today as they did in 2008, the story has significance.

Why we think it is significant: Aluminum, for one, maintains a high degree of correlation to oil prices. When oil prices rise, aluminum prices also tend to rise. But perhaps what one can consider most significant to metal buying organizations: the relationship between rising oil prices and freight/logistics costs. As the price of oil and subsequently gasoline increases, so do freight surcharges levied by mills. Though the alarm bells remain quiet for now, oil prices remain a key factor to monitor.

The story: In this case, several recent stories highlight the ongoing international trade wars, if we can call them that: Sitting Out the China Trade Battles and Obama’s China Wind Power Complaint Backed by Companies and finally, China Has Failed to Implement WTO Pledges US Says

Why we think it is significant: Though some (even some of us on these virtual pages) have suggested that “protectionism appears to be on the rise, the issue of free trade and rules-based free trade continues to garner headlines and will greatly impact the sourcing strategies of metal-buying organizations throughout the world.

MetalMiner and its sister site, Spend Matters, along with Nucor, will host a live simulcast, International Trade Breaking Point on March 1, 2011.   If your company sources products from overseas, you will not want to miss this half-day event:

Register for the live simulcast today!

–Lisa Reisman

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