From Agnieszka Sousa and Kirat Kayakiran at Bloomberg Business, via davidstockmanscontracorner.com:
The world’s biggest aluminum makers will be under even more pressure to make deeper production cuts and stave off a price slump that saw the metal trade near its lowest level in six years on Wednesday.
China, which accounts for half of the world’s aluminum output, is on pace to export record amounts of metal products this year, helping to deepen a worldwide glut. Producers outside China, including Alcoa Inc. and United Co. Rusal, had already cut back capacity through last year. Still, 1 million metric tons more, enough to supply Japan for six months, will probably be curtailed within a year, according to Macquarie Group Ltd.
China’s economy is poised to grow at its slowest pace in a quarter of century. As the country shifts toward a consumer-driven economy, more of its processed aluminum is making its way overseas, inflating supplies. Additionally, China scrapped export duties on some products in April, exacerbating concern that the glut will widen.
“The aluminum price is going to be pretty horrible for a while, until we see some western world production cuts,” David Wilson, an analyst at Citigroup Inc. in London, said by phone.
A slump in aluminum’s price, which Wednesday extended declines to the lowest since 2009, has hurt share prices and sapped producer earnings. Alcoa, among the first in the Standard & Poor’s 500 Index to report quarterly earnings Wednesday, has dropped 30 percent this year in New York as of Tuesday’s close.
To continue reading: Global Deflation Alert: Aluminum
From Masumi Suga and Ichiro Suzuk at Bloomberg Business, via davidstockmanscontracorner.com:
China’s demand for steel has peaked, if the Japanese experience of the 1970s is anything to go by. That could spur more trade conflicts as the nation ships its excess production overseas.
The current decline in Chinese steel output signals the growth period for the commodity has ended in a country where the pace of economic expansion is slowing. Risaburo Nezu, a senior research adviser at RIETI, a think-tank linked to Japan’s trade ministry, expects a prolonged slump, with an absence of growth in demand likely for the next 10 or 20 years.
“Once a country attains a certain stage of economic development, demand for steel stops growing,” Nezu said last week in an interview in Tokyo. “China is left with excess capacity that’s said to be 300 million tons to 400 million tons, equivalent to three to four times Japanese output. It won’t be easy to deal with this.”
Nezu’s view mirrors concerns running deep through an industry battered by a flood of cheaper metal from China, maker of half the world’s steel. Waning demand in China and new supplies from emerging markets from India to Brazil are set to cool the market and potentially stoke tensions among suppliers.
The situation in China “could trigger more cases of trade measures among steel suppliers” to protect earnings, said Yoku Ihara, president of Growth & Value Stock Research. “The industry is facing more negative factors than positive.”
To continue reading: Global Deflation Alert: Steel
