Commodities Roundup: Airbus-Boeing saga continues; industrial production falls; housing starts rise

commodities

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, which this week includes the Airbus-Boeing saga, industrial production data and more.

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

Airbus-Boeing saga continues

The ongoing subsidy drama between Airbus and Boeing — and, by extension, Washington and Brussels — dates all the way back to 2004.

Both sides have argued the other’s government has illegally subsidized its plane manufacturer, which eventually has led to rulings at the WTO level that paved the way for new tariffs.

MetalMiner’s Stuart Burns delved into the latest development in the saga, that being the U.S.’s demand that Airbus repay interest on loans given to them at below-market rates.

“However, the U.S. side feels loans still on Airbus’s books continue to provide unfair support,” Burns wrote. “Furthermore, Washington thinks the European planemaker should repay interest on historic loans set at below-market rates.

“Brussels says if that’s the case then Boeing should repay previous subsidies in the form of tax breaks.

“The impasse has led to Washington applying $7.5 billion of, tariffs, that most favored tool, on E.U. goods. Meanwhile, the E.U. is asking the WTO later this month to apply $4 billion of tariffs on U.S. goods.”

Industrial production slides in September

In addition to the Airbus-Boeing saga, after four straight months of rising U.S. industrial production, output fell in September, the Federal Reserve reported.

Industrial production slipped by 0.6% in September. Industrial capacity utilization fell 0.5 percentage point to 71.5%.

Furthermore, manufacturing output fell 0.3% in the month.

Steel sector capacity utilization rises

Elsewhere, the U.S. steel sector saw its capacity utilization rate rise to 69.4% for the week ending Oct. 17, the American Iron and Steel Institute reported.

U.S. steel mills produced 1.54 million tons of steel during the week, up 2.2% from the previous week. However, output declined 15.0% on a year-over-year basis.

The sector’s capacity utilization rate has posted incremental gains over the last few months. Nonetheless, the rate remains well below the 80% mark reached last year and touted as an indicator of sector health.

Liberty Steel makes a push for Thyssenkrupp’s steel business

Earlier, we touched on the acrimonious Airbus-Boeing subsidy situation.

In other company news, Liberty Steel — a subsidiary of Sanjeev Gupta’s GFG Alliance — has made an offer to buy German firm Thyssenkrupp’s steel division.

Gupta and his GFG Alliance have been aggressive on the acquisitions trail, acquiring distressed assets around the world. Thyssenkrupp, meanwhile, has had a difficult year, including getting the boot from Germany’s blue-chip DAX index last year.

“Liberty runs plants and mines across North America, Australia, and India,” Burns explained. “The firm has global revenues of $15 billion and a workforce of 30,000.

“Thyssenkrupp’s beleaguered Steel Europe unit generates sales of approximately €9 billion with 27,000 employees. Together, the firms would become the second-largest steelmaker in Europe, behind only ArcelorMittal.”

U.S. housing start gains

Privately owned housing starts reached a seasonally adjusted annual rate of 1,415,000 in September, per the Census Bureau and the Department of Housing and Urban Development.

The September rate marked an 11.1% increase on a year-over-year basis. Furthermore, the rate increased 1.9% from August.

Lead, zinc demand forecast to fall

This week, the International Lead and Zinc Study Group released its forecast for 2020 and 2021 lead and zinc demand.

In 2020, the group forecast a decline in global demand of 6.5% for lead and 5.3% for zinc.

Demand next year, however, will rise, the group projected. The ILZSG forecast demand for lead — much of which comes from the automotive sector — will rise by 4.4% next year.

Meanwhile, the group forecast 2021 zinc demand will rise by 6.6%.

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First Voice

  1. Brent Downes:

    To be fair, a significant proportion (over 1/3) of the GFG Alliance claimed revenues come from the various commodity trading ventures, which are profitable but to a minor degree, and which employ very few staff.

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