Commodities Roundup: EU Steel Quotas, a Mid-January Review and More Brexit Drama
For the buyers and category managers out there, especially those of you deep in the weeds of buying and managing commodities, here’s a quick rundown of news and thoughts from particular commodity markets.
From price movements to policy decisions, we scour the landscape for what matters. This week:
EU Imposes Steel Quotas
European Union member states this week voted to impose steel safeguard measures extending to 2021 as the trading bloc grapples with the Trump administration’s Section 232 tariffs on steel and aluminum.
The quotas come after the EU imposed provisional steel safeguards in July 2018, a few months after the Section 232 tariffs went into effect, as member states were concerned about diverted supplies of steel flooding Europe.
“As GDP growth slows — recent data shows it is certainly slowing in Europe and China — manufacturers’ factory gate prices will come under pressure as this translates into lower sales,” MetalMiner’s Stuart Burns wrote ahead of the vote. “Heightened raw material inputs will therefore squeeze margins in the year ahead.”
A Mid-January Review
We’re already more than halfway into January, a good time to take stock of metals’ performance thus far in the new year.
As MetalMiner’s Irene Martinez Canorea wrote this week, base metals started the year trading up after slumping across the board to close 2018.
“Base metals traded higher at the beginning of January,” Martinez Canorea wrote. “However, momentum appears to be weaker once again.
“The DBB index has shown weakness since June 2018, when it started this short-term downtrend. MetalMiner has recently revised its market outlook, advising buying organizations to closely follow how the index develops.”
U.S. Steel Capacity Utilization
The capacity utilization rate of U.S. steel mills hit 79.5% as of Jan. 12, according to a recent American Iron and Steel Institute (AISI) report.
The percentage is up from the 73.6% posted during the same period in 2017. An 80% utilization rate is widely considered to be an indicator of industry health.
Production in the year through Jan. 12 reached 3.23 million net tons, according to the AISI report.
An Automotive Alliance
In automotive news, Ford and Volkswagen announced a new alliance by which the companies would collaborate on the production of commercial vans and pickups as early as 2022.
In addition, the automakers have signed a memorandum of understanding to investigate potential collaboration on autonomous vehicles, mobility services and electric vehicles.
“Over time, this alliance will help both companies create value and meet the needs of our customers and society,” Ford CEO Jim Hackett said. “It will not only drive significant efficiencies and help both companies improve their fitness, but also gives us the opportunity to collaborate on shaping the next era of mobility.”
Alcoa Reports 4Q, Full-Year 2018 Earnings
Aluminum producer Alcoa Corp. this week reported its financial results for the fourth quarter of 2018, as well as full-year results.
The firm’s 4Q net income total was up from $119 million in the third quarter, but down from $195 million in 4Q 2017. The company reported adjusted net income, excluding special items, of $675 million for 2018 as a whole, up from $563 million in 2017.
The Brexit Saga Continues
The drama behind the UK’s ongoing bid to divorce the European Union continued unabated this week.
The British House of Commons soundly rejected Prime Minister Theresa May’s Brexit deal on Tuesday; however, May survived a no-confidence vote the next day.
As MetalMiner’s Stuart Burns explained, the proceedings now exist in a state of limbo, replete with widespread impacts on the European marketplace.
“Brussels, it must also be said, is not showing any interest in agreeing or even discussing an alternative deal,” he wrote. “However, the door has been left open by several European leaders for the UK to just forget the whole thing and stay in the EU. Many sections of Parliament are against that, but it may yet appear as an option in a mooted second referendum.
“As it stands, it is hard to see any clear way forward. As such, the most likely outcome remains Britain leaves without an agreement — the hard Brexit option — however opposed to that the House of Commons may be.
“If they can’t agree on an alternative, that’s all that’s left.”