Jackson Hole: All the Hiking, Skiing and Monetary Policy You Need
Buyers of most commodities began the week by eagerly watching the annual Central Banker get together at Jackson Hole, Wyo., particularly for any clue as to when the Federal Reserve will finally raise interest rates.
But our own Stuart Burns explained that aging populations, slower productivity growth and a reluctance around the world to spend and invest have propelled advanced economies into so-called “secular stagnation” and it might be some time before the fragile U.S. economy can stomach a rate hike.
A bigger concern for those of us that write about economics for a living is now that “kitchen sinks” and “bazookas” have been exhausted, what metaphors will we use to describe central banking policy tools? Hopefully, the central bankers at least got some good hiking in at Jackson Hole.
Mind the US-International Steel Price Gap
There is an unprecedented price arbitrage between U.S. and international prices right now. This price gap even widened further in June as China’s prices fell while U.S. prices held near their highs. Our own Raul de Frutos says the gap will eventually close so U.S. steelmakers need to sell while the selling’s good.
Aleris Purchased, Everybody Zhongwang Chung!
At least somebody is finally making deals as China’s Zhongwang acquired U.S.-based primary aluminum producer Aleris for $2.33 billion. Zhongwang isn’t just a funny new-wave band name, the extruder is owned by Liu Zhongtian and his firm’s embroiled in anti-dumping cases in the U.S.
The cases against Zhongwang allege that the firm has been selling aluminum extrusions at below cost and that the Chinese entity receives state aid in the form of financing and other benefits giving it an unfair advantage. If Liu had a U.S. company, though, he could produce extrusions here and avoid the entire mess.
Chinese Steel Ramps Down, Indian Steel Ramps Up
While the aggressive Chinese steel sector is trying to ramp down production, neighboring India is looking to fill any steel gap. Robust local demand and tariffs against Chinese steel have helped India’s steel companies and now they’re looking to take their appeals abroad. Translation: more global steel overcapacity.
Just like you can research prices to decide whether or not to hedge in our new MetalMiner Price Benchmarking service, Mexico has done its research and decided to hedge oil prices again next year. Mexico has covered 250 million barrels of crude, more than last year’s 212 million at a price of $42/barrel for 2017. The hedge is covered by 46 trades. Mexico saved billions doing so the last two years.
Election Alert! Who Will Build All That Infrastructure?
What do candidates Hillary Clinton and Donald Trump’s plans really mean for the roads, bridges and infrastructure that everyone agrees need to be repaired? Can they even be successfully executed? With construction unemployment near an all-time low at 4.9% who is the next president going to get to work on all those jobsites? Also, can you imagine all the orange cones on the interstates?