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Commodities Roundup: Hindalco diversifying aluminum; Rio Tinto aluminum certs; Trump’s trade deals; 2020 look ahead

12/20/2019 By


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.

MetalMiner, a sister site of ours, scours the landscape for what matters. This week:

India’s Hindalco aims to diversify

MetalMiner’s Sohrab Darabshaw delved into the difficult market for Indian aluminum producers, including Hindalco.

As a result, Hindalco is looking to diversify its operations, with eyes on the electric car, can and logistics sectors.

“In an interview with CNBC, Managing Director Satish Pai said the company is actively looking at the can market because of the ongoing anti-plastic movement,” Darabshaw wrote. “Demand for aluminum cans is going up, he pointed out, which meant Hindalco would be expanding its capacity in the near future.

“But what has come as a slight surprise was the aluminum major’s foray into logistics, with the launch of aluminum trailers — a first in India — and lightweight aluminum transport vehicles and trailers.”

Rio Tinto operations gain ASI certifications

Several operations for miner Rio Tinto’s Australia and New Zealand recently garnered Aluminum Stewardship Initiative (ASI) certifications.

“This certification expands Rio Tinto’s offering of independently certified, responsibly produced aluminum to customers around the world,” Rio Tinto Aluminum chief executive Alf Barrios said. “It continues our leadership on responsible aluminum production from mine to metal, so that our customers can meet the growing demand from consumers for sustainably sourced materials.”

Trump’s trade deals

Don Hauser, who recently joined MetalMiner’s commercial team from John Deere, weighed in this week on the U.S.’s recent trade developments, like the USMCA and China.

“Trade remains critical to President Donald Trump for two reasons. For one, he loves chasing a deal more than anything else,” Hauser wrote. “Second, he has staked his re-election on his ability to deliver trade deals that improve the U.S.’s economic position, but not necessarily large trade wins.

“Voters will likely see trade improvements as a win. It will take six months to see any actual results after the ratification and implementation of any deal.

“And six months from now will show results just in time for the election.”

WTO’s Appellate Body remains paralyzed

The WTO’s Appellate Body is at a standstill.

The U.S. has blocked appointments of new judges, leaving the seven-member panel with just one active member (at least three are required to issue appeals rulings).

As a result, the European Commission has put forth a proposal that would allow it to defend its trade rights, particularly as countries can appeal rulings “into the void” — that is, to a paralyzed Appellate Body.

WTO Director-General Roberto Azevedo said he would begin consultations aimed at resolving the problem.

“A well-functioning, impartial and binding dispute settlement system is a core pillar of the WTO system,” Azevedo said. “Rules-based dispute resolution prevents trade conflicts from ending up in escalating tit-for-tat retaliation — which becomes difficult to stop once it starts — or becoming intractable political quagmires.

“Obviously the paralysis of the Appellate Body does not mean that rules-based dispute settlement has stopped at the WTO. Members will continue to resolve WTO disputes through consultations, panels and other means envisaged in the WTO agreements such as arbitration or good offices of the DG … but we cannot abandon what must be our priority, namely finding a permanent solution for the Appellate Body.”

U.S. steel capacity utilization holds at 80.1%

For the second straight week, the U.S. steel industry’s year-to-date capacity utilization rate checked in at 80.1%.

For the year Dec. 14, the industry produced 92.6 million tons, which marked a 1.8% increase compared with production during the same period in 2018.

Looking ahead to 2020

Although the specters of recessions and growth slowdowns have loomed large throughout the past year, MetalMiner’s Stuart Burns wrote modest growth may continue into 2020.

However, some limiting factors are at play.

“The recovery would — indeed, could — be much stronger but for politicians’ unwillingness to use fiscal stimulus in some countries,” Burns wrote, citing a recent Stratfor report.

“Again, Germany leads the pack here, as a deep-seated commitment to always balance the budget philosophically prevents them from using fiscal stimulus, even though it would be of considerable benefit — not just to Germany but also its neighbors in the E.U.

“By keeping growth sub-optimal in Germany, growth remains anemic across much of the E.U. Stratfor predicts 1% growth for 2020. Only the U.K. may manage better, now that it has settled its political infighting and the re-elected Conservative government budgets for substantial infrastructure investment, said to be £100 billion over the next five years.”

U.S. industrial production rises 1.1% in November

In other positive economic news, U.S. industrial production increased 1.1% in November, according to recent data from the U.S. Federal Reserve.

Industrial production had been down in three of the previous four months.

“These sharp November increases were largely due to a bounceback in the output of motor vehicles and parts following the end of a strike at a major manufacturer,” the Fed said in a release. “Excluding motor vehicles and parts, the indexes for total industrial production and for manufacturing moved up 0.5% and 0.3%, respectively. Mining production edged down 0.2%, while the output of utilities increased 2.9%.”