Commodities Roundup: Geely, Volvo to merge; E.U. opens anti-dumping probe for aluminum extrusions; iron ore rises despite headwinds

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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:

Geely, Volvo to merge

MetalMiner's Stuart Burns delved into the planned merger of Volvo and China’s Geely.

“Some 18 months ago, Volvo tried to list independently, but the idea was dropped in the face of low investor valuations,” Burns wrote. “Now-owner Geely has announced the Volvo and Geely brands will merge to be listed in Hong Kong and Stockholm, the Financial Times reports.

“The deal would unify the bulk of Geely Chairman Li Shufu’s growing stable of automotive brands and investments to create a company worth some $30 billion — on par with Ford, AutomotiveNewsEurope wrote this past week, adding the new company’s combined annual shipments would surpass 2 million, rivaling shipments of BMW-branded cars.”

India’s auto sector reaches crucial point amid emissions goals

Reporter Sohrab Darabshaw weighed in this week on the Indian auto sector and the impact of the country’s emissions reduction goals.

“The country has embarked on a clean energy drive following its commitment to the Paris agreement in 2015 and has now dedicated itself to reduce its emissions by 2030,” Darabshaw said.

“Reduction of vehicular emissions is part of this program. So, even though the sale of automobiles in the last year or so has been dismal, hopes are pinned on a push for electric vehicles (EVs).”

As Darabshaw noted, a number of automakers showed off their electric vehicle concepts at a recent auto expo in India.

“Amongst the well-known companies showing off their EVs at the Auto Expo were: Renault, with its K-ZE model that comes with its capacity to charge the battery from 30% to 80% in just 30 minutes; Indian manufacturer Mahindra’s compact electric vehicle eXUV300; and China’s Great Wall Motors’ (GWM) GWM R1,” Darabshaw note. “Developed on a 33 kWh battery pack, the GWM R1 offers a top speed of 100 kph. R1’s fast charger has the capability to charge up to 80% in 40 minutes; one charge allows the car go up to 350 kilometers.”

China’s steel sector and the coronavirus

The coronavirus outbreak in China has exerted a wide-ranging impact on commerce in the country and beyond, including on the metals sector.

As a result, China’s steel sector could see some cutbacks as stocks rise amid the health crisis.

“The popular wisdom was this virus would peak in a week or so and a falling rate of infection would encourage relaxation of travel bans and some return to normality,” Burns explained.

“Steel mills have kept producing in the expectation the bounce-back would be dramatic, but there are signs a combination of an uncertain demand outlook and falling prices compressing margins may hasten steel mill cutbacks before the month is out.”

E.U. launches anti-dumping probe for Chinese aluminum extrusions

The E.U. is opening an anti-dumping probe into imports of Chinese aluminum extrusions.

“Aluminum extrusions from China are currently subject to anti-dumping duties in the U.S., Canada, Australia and, for a more unique reason of its own, Vietnam, Aluminium Insider reported,” Burns wrote.

“But despite repeated complaints from the industry and industry bodies like European Aluminium, the European Union has done no more than require a surveillance license system to report and monitor imports of aluminum into the E.U.

“In a move many consider overdue, the European Commission has now opened a probe into whether Chinese exporters of aluminum bars, rods, profiles, tubes and pipes sold them in the E.U. below cost, Bloomberg reported Friday.”

Iron ore rises despite lagging steel demand

Elsewhere, Burns analyzed the iron ore market and its rising prices despite sluggish steel demand and impacts from the aforementioned coronavirus outbreak.

“China’s iron ore imports in February are running well below preceding months and the corresponding month last year as steel mill inventories rise, finished steel prices are flat, and deliveries are hampered by transport restrictions and a lack of construction activity.

“Yet, the iron ore spot prices extended gains to hit fresh three-week highs late last week, with the benchmark 62% grade settling at $88.50 a metric ton in Shanghai. The price on China’s Dalian Commodity Exchange rose 1.0% to 628.50 yuan ($90.01) a ton, advancing for a fourth straight day, and climbed 6.4% from last week. Singapore iron ore was steady at $86.04 in afternoon trade, the article reports.”

Slowing growth in Europe

Economic growth in the eurozone is at its lowest level in seven years, according to the Financial Times. Furthermore, industrial production and overall growth in Germany, Europe’s largest economy, have flatlined or, worse, declined.

Nonetheless, stocks showed strength this past week.

“Yet stocks rallied this week on the basis that if industrial production is falling, there will be pressure on the European Central Bank for a further rate cut,” Burns wrote.

“The market expectation seems to be negative 0.5% rate may be cut to negative 0.6% in March and bond-buying quantitative easing may be ramped up from €20 million per month to €40 million.”

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