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.
How bad are things in Venezuela? Standing in line is now a profession.
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.
The Big Glut
My other esteemed colleague, Raul de Frutos, likened the metals oversupply situation to the film “The Big Short” and examined how easy credit and low home prices artificially created the housing bubble here in the US in the last decade. Overproduction and subsidized spending to create cities that no one wanted — in China and elsewhere — are the culprits for metals in what Raul calls “the commodities bubble.”
The answer? Don’t rely on fleeting economic stimulus to build things like homes and cities. Or even to buy them. Whether that stimulus comes from relaxed credit or actual government spending.
ATI Says Bye-Bye
My ultra-esteemed colleague Katie Benchina Olsen recently wrote about how Allegheny Technologies Inc. won’t be supplying commodity grade stainless steel this year and might not sell it ever again. You can’t blame ATI when you look at the prices of commodity stainless compared to its other value-added products, but it is a stark reminder of how yesterday’s high-flying metal — just look at the prices of stainless in 2014 — can be today’s price loser. There’s a Bob Dylan song here somewhere.
Dumpwatch: We Have Enforcement
The U.S. Senate passed a customs bill this week that includes the ENFORCE act which reauthorizes the U.S. Customs and Border Protection agency, streamlines trade rules that aim to keep importers from avoiding U.S. anti-dumping and countervailing duties, adds new protections for intellectual property rights and provides more tools to identify and address currency manipulation.
Its passage was applauded by metals industry groups and manufacturers and it now goes to the President’s desk where he can sign it or veto it as explained to me by this handy Saturday morning cartoon. I feel sorry for the kids today who can’t learn this stuff while eating cereal every Saturday morning between viewings of Bugs Bunny and the Transformers cartoons.
Long-touted by the aforementioned industry groups, the customs bill could be a game changer for US steelmakers who have long complained that importers, particularly China, were flooding the market with subsidized goods. President Obama will likely sign it and then we’ll get to see just how much enforcement actually comes out of the ENFORCE act.
As always, we will remain hyper-vigilant here on Dumpwatch and will tell you exactly what the new rules, and how they are enforced, mean for producers and metal buyers.