It is hard to believe that we are coming up on the close of the first quarter of 2008. What a quarter it has been! We thought it would be fun to review our predictions from the beginning of the year and grade ourselves. At the same time, we will chime in with what we believe is in store for metals buyers and traders in Q2 and beyond. In case you missed our original predictions, you can find them here. Read more
Articles in Category: Ferro Alloys
You’d think that with the current high price of metals, an impoverished country like Zimbabwe would be doing everything in its power to court foreign investors and others to invest and grow the economy. But you would be wrong.
In an unbelievable move last week, 84 year old President Robert Mugabe essentially nationalized all public companies by enacting a law which requires such companies to give up a 51% majority stake to indigeneous Zimbabweans according to this Mineweb article. The metals angle here? According to the article, Zimbabwe is second only to South Africa in world reserves of platinum and chrome.
The insanity of this law is proven out by taking a look at Zimbabwe’s history under the er ugh um leadership of Robert Mugabe. Under Mr. Mugabe, Zimbabwe has:
- Passed a land reform bill in 2000 effectively forcing whites to give up all of their farmland to less experienced indigenous people which resulted in shortages of basic commodities and a crippled economy (66% of the people are employed by farms); the move also made Zimbabwe, a net exporter of foods a net importer
- In 2007 he put in place price controls resulting in panic buying and empty store shelves
- From just a numbers perspective, GDP is now at -6%. Industrial production growth (including mining) was at .5% (you can see where Mugabe’s new law will take the numbers), unemployment is 80%, life expectancy is 39.5 years, and 24.6% of the population has HIV/AIDS
The list of Mugabe Ã‹Å“accomplishments’ goes on and on ” an unsustainable fiscal deficit, the philosophy of printing money to pay for the deficit, an overvalued exchange rate, and GDP per capita of $500 per year.
The new law, which will affect mining giant Rio Tinto, Impala Platinum Holdings Ltd and Aquarius Platinum Ltd will likely speed up the country’s decline ¦further increasing its inflation rate, already the world’s highest at 100,000% (no that isn’t a typo).
What a shame with world record pricing for gold, coal, platinum, chromium and iron ore and historically high pricing for nickel, copper and tin Mugabe couldn’t leave well enough alone. We’ll continue to see high prices for platinum and chrome as Zimbabwean exports fall off the map. But sadder still is the fate of the 12 million citizens subject to Mugabe’s hair brained policies.
If you caught the first part of our series on green innovations in the metals industry, you’ll know that the MetalMiner staff is excited about following the growth and development of green metals. We love hearing about eco-friendly improvements and new practices in the metals industry. The men and women behind GreenAlloys share this excitement for going green, and they decided to take a step to make metals recycling and low-lead products more prominent in our society. Earlier this week, I had the opportunity to talk to Al Barbour, president and CEO of Concast Metals Products Co., the company responsible for GreenAlloys. If you want to be a progressive company or manufacturer today, you need to look at what the end customer wants, he says of his eco-friendly metals company, touted as the next generation of environmentally-friendly alloys and materials. The view of society is moving in this direction, this green direction. This is a trend that will remain long-term. Read more
The papers are all worrying about the power shortages being experienced in South Africa and reporting with various levels of alarm the likely impact on the price of precious metals, base metals, Ferro alloys and the stock of companies producing these materials. The reality is the recent outages in South Africa were a disaster waiting to happen. Excessive rain has made the coal reserves unusable at the plants of some of South African state power producer Eskom and power plants have been idled or on reduced production while the country struggles to share what is available.
Mines and metal smelting works have been closed this week and a limited number look set to resume working as agreements are reached with Eskom on what power it can reliably provide. The reality is this is a problem many years in the making as South Africa has failed to tell the whole story over major new power plant investment and infrastructure upgrades. It is no surprise therefore that Eskom says it will be 2012 before full service can be reliably resumed. Read more
To suggest that prices are going to remain firm let alone possibly rise in the face of a potential recession seems perverse but that is the prospect facing the US Tool Steel market in 2008. As predicted in a recent article on Cobalt the metal price has continued to rise with trading this week at $49/lb on the spot market, levels last seen in 1978. The price of a range of other tool steel raw materials have been driven upwards by a combination of tight supply and the changes in Chinese Ferro Alloy export taxes reported in MetalMiner. The Chinese authorities doubled taxes to 20% on a range of Ferro Alloys in an effort to husband domestic supplies and dissuade investment in what are seen as polluting industries. This week has seen increases in Ferro Moly, up $2/lb to $34/lb following 20% price increases during 2007.
Molybdenum has faced a squeeze as supplies reduced 5% during the year but demand increased by 4% per annum. Analysts expect production to slide by 20 million pounds this year due to reduced output from Kennecott Utah Copper, Codelco in Chile and reduced Chinese exports.
Ferro Tungsten rose $.50/lb this week to trade on the spot market at nearly $16/lb. With the exception of Nickel just about every ingredient in tool steel is on an upward trend driven by the same combination of global supply tightness and reduced Chinese exports following the recent tax changes. Even Natural Gas, a key cost component for North American Stainless Steel mills has been rising on the back of Oil. An additional cost driver, at least for the US market is the weakness of the US dollar, which will increase the cost of imported material. With so much of the US market traditionally supplied from imports, exchange rate weakness will force importers to raise prices and allow domestic producers to push through raw material cost increases that much more readily.
Where this will lead Tool Steel prices as the year unfolds would look to be a one way story. Universal Stainless & Alloy Products increased prices back in September, according to Platts.
Certainly in the short term we see H1 prices continuing to rise, so cover your short term requirements now to carry you through for 6 months but after that, all bets are off. If demand slumps enough (and it appears as though most think China is not immune from an American recession), tool steel will come off too.