Week in Review: Worries about Moody’s China downgrade?
Before we head into the weekend, let’s revisit some of the stories and analysis here at MetalMiner this week.
Moody’s Downgrade of China: Something to Worry About?
Earlier this week, our Stuart Burns wrote about credit rating agency Moody’s and its downgrade of China’s credit status by one level (from Aa3 to A1). Credit downgrades are handed down all the time — but what do they mean, exactly? And, specifically, what does it mean for the Chinese economy and its growth?
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Credit downgrades are never good, but China’s is different from other downgrade situations, particularly those in countries like Greece, Burns writes.
“Although China’s economy-wide debt is already 256% of GDP and rising, much of it is funded internally,” Burns wrote. “It is not reliant on overseas investors, and as such is easier for the Bank of China to manage.”
In conclusion, Burns writes China can overcome the downgrade, but that its growth can be expected to take a hit in the coming years.
Goldman Sachs too Bullish on Aluminum?
Raul de Frutos wrote Wednesday about Goldman Sachs’ “optimistic” forecasts for aluminum prices. De Frutos wrote that he’s been bullish himself about aluminum since last year, but offered reasons why Goldman’s expectations might need to be tweaked.
Those reasons included: a rise in aluminum output, a potential slowdown in Chinese demand and a slump in raw material prices.
Aluminum is outperforming other industrial metals this year, but de Frutos that the market wouldn’t hit Goldman’s forecasted mark if $2,000/metric ton if several things fail to happen.
Only time will tell if Goldman’s forecasts were overly optimistic or not.
Ford gears up for electric, driverless world
On Thursday, Burns wrote about automotive giant Ford and its efforts to prepare for an automotive buying market that will feature more and more electric and self-driving cars.
It’s a time of transition for Ford, which recently tapped Jim Hackett to be its next CEO and to lead the company forward into the new age of electric and self-driving vehicles.
Ford isn’t the only one looking to the future, of course. Burns writes that Volkswagen predicts that 25% of its sales will be electric cars by 2025, and 50% by 2030.
However, the electric car market has a long way to go before it can be considered truly competitive with the traditional combustion engine.
One example illustrating that point? Sales of electric vehicles in Denmark — a country that has been a leader in renewable energy — dropped 60.5% in the first quarter of 2017 compared with the same time period in 2016, according to a Bloomberg report.
With that said, per European Automobile Manufacturers Association data, Denmark was the only major European market to see a decline in electric car sales in the first quarter of 2017 compared with the first quarter of 2016.
The U.S., however, is a different story.
“What Ford and many other automotive companies may find is that the pace of adoption for electric vehicles accelerates worldwide but begins to diverge between the U.S. and other major markets, such as Europe and China,” Burns wrote Thursday.
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