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Metal markets in limbo

14 September 2020
 |

During the first half of 2020, COVID-19 has triggered turmoil on the metal markets. But in early September, there are signs that the worst may be over - at least in the Far East, namely China and South Korea. Japan has been partly hampered by the resignation of its long serving Prime Minister Shinzo Abe. But this shouldn’t be a major setback. North America is totally different - not only because of the elections in November, but also because of the Corona death toll, still raging from Alabama to Wyoming.

But in the USA the presidential election in November is also fast approaching. The uncertainty on the US metal market continues to grow, especially due to tensions in world trade: Since July 1st the new USMCA, the US-Mexico-Canada trade Agreement, is in force.

Firstly, there had been no primary aluminium exports from China to the US. On the contrary: China has put export duties on its primary metal. By imposing tariffs on just the most energy-intensive Canadian aluminium, North American business groups widely oppose the reintroduction of tariffs on Canada as “a step in the wrong direction”. That goes even for the US Chamber of Commerce. “These tariffs will raise costs for American manufacturers, are opposed by most US aluminium producers, and will draw retaliation against US exports”, said Myron Brilliant, the chamber’s head of international affairs. According to the ‘Financial Times’, the US Aluminium Association already in July wrote to Robert Lighthizer, the US trade representative, to outline the need for a reliable source of raw (primary) aluminium.

Rusal, the Russia based aluminium giant, reports that in North America primary demand dramatically decreased by 18.2 percent to 2.8 million tons in the first half of 2020: “This was due to a late but strong Covid-19 outbreak.” In South America, the pandemic is taking an especially heavy toll in Brazil. In Argentina there are some signs of recovery. In Europe, primary aluminium demand contracted by 16.1 percent to 4 million tons. Rusal blames this mainly on the “nearly complete automotive manufacturing shutdown, construction stops, a fall in retail sales due to the COVID-19.” After its lowest level in April, the Eurozone industry is moving towards stabilisation. The PMI was reaching 47,4 in June - above market expectations. The EU, the ECB and the governments are aiming at encouraging the development of manufacturing mostly affected by the virus. They concentrate their help on automotive production and the overall health of the economy. Rusal predicts that the recovery will boost aluminium demand.

In China, the PMI has grown to 51.2 in June - from 50.7 in May. This indicates a gradual manufacturing recovery. Market sentiment towards the upcoming months is strong. According to China’s Association of Automobile Manufacturers, automotive production increased by 6.3 per cent month on month and 22.5 per cent year on year to 2.23 million units in June. The demand of consumer products such as drink cans is improving as well. All this let to an improved primary aluminium demand in the second quarter. The first half year demand remained unchanged at 18 million tons.

Author: Dr. Katharina Otzen-Odrich


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