Blessed by AI and anointed by Vaseline

CEOs as turncoats
Donald Trump has taken office. And, as expected, it is about being “quicker to work” than in his first term of office. In the meantime, the newly re-elected President has a network of experts and also the experience how political processes work. Although the election campaign is now over, it feels as if the President is in a reality TV show and with every new day there is a new episode of the series. The presenter and main character must out do himself everyday in the amount and substance of his governmental actions in order to keep fans and followers interested and to win over even more viewers. At an incredible pace and in such a manner which almost commands respect, he fires off veritable fusillades of executive orders and statements.

He knows all too well from his past work how the television business works. The problem is, however, that this is not about a television series but about the USA which is still an important country in economic and military terms. Announcements have to be followed by actions as long as they are not just threats in order to achieve a favourable “deal”. If this would be the case, followers would have to come to terms with one or the other disappointments. However, politics is usually more about announcements and fact checking and follow-ups are often missing.

This is probably all what is needed to generate euphoria and bonus points among his not too insignificant proportion of followers. What is also surprising in this context is the diametrically different behaviour of extremely volatile, almost Vaseline-anointed business representatives and CEOs, often from the IT sector and almost blessed with artificial intelligence, in order to please the sovereign or, perhaps to say, the tribune of the people. Opportunism is seen here ‘at its best’, and so much for corporate management guided by values.

And also in regard to the interest rate policy of the Federal Reserve (in short: Fed), the central bank of the USA, there is a groundhog day. As Trump has already said, he knows more about interest rates than the Fed Chairman, Jerome Powell. What Trump does not say is that import tariffs tend to have an inflationary effect and, therefore, make it difficult to achieve the desired interest rate cuts in order to stimulate the economy and the capital markets.

Real and financial economy as non-communicating tubes
In general the decoupling of the financial sector from the real economy continues to provide strange results. While in economic circles the talk is of developments in crisis, the stock markets celebrate new records. For example, on the 11th February 2025, the German share index DAX rose to 22,003.91 points exceeding 22,000 points for the first time in its history. A presenter of the radio news programme Deutschlandfunk (DLF) who was on this day reporting about the record actually said, however, that the reason was not only the falling interest rates but also due to the strong results of companies. Hearing this, one does not only have to rub one’s eyes but also one’s ears. The editors cannot have meant the steel and car industry nor the mechanical engineering sector and other shaken branches.

However, a slight improvement can be seen, which so far however, is only progressing slowly (unfortunately). New orders in general and also in the steel industry seem to be improving. The Purchasing Managers’ Indices (PMIs) in Germany, the Eurozone, South Korea, the USA and India, with the exception of Japan and China, have risen compared to the last survey. More favourable macroeconomic data from the USA and China, the two biggest economies, is also increasing the expectation that the worst is over.

Nevertheless, there are still adverse developments causing uncertainties, such as US tariff policies in relation to global trade dynamics, the economy of the largest metal producer China, and a potentially stubborn inflation. Everybody is waiting for the Chinese government’s biggest economic stimulus package which is still yet to be seen. It is unclear whether, when or in what form it comes. It would, however, certainly be an important catalyst to speed up an economic recovery. Ultimately it is to stimulate the Chinese consumer spending towards an increase again. The main problem in China is that consumers are currently very cautious.

However, growth expectations in Asia are not in general faltering, but they are not shifting. Not only Germany and other European countries struggling with demographics, but also in China, Japan, South Korea and Taiwan the aging societies are having an effect on economic dynamics. ASEAN on the whole can expect quite a stable growth of around 4.5%. In addition, in regard to tariffs, China is by far not so vulnerable. 85% of its gross national product is generated domestically and “only” 15% through exports. Of this, 2.5% goes to the USA, but the majority of 12.5% to the rest of the world.

Germany elects a new Bundestag
In Germany, the parliamentary election for the Bundestag takes place on the 23rd February 2025 which means the formation of a new government. The election campaign is being fought intensely since a case of “more of the same!” cannot be accepted at all. It can only be hoped that the democratic election leads to clear majorities so that the necessary course can be set in politics and framework and there is no continuance of lethargy and perseverance with a lowest common denominator heterogeneous coalition without any progress being made. So far, however, polls do not expect a clear constellation.

In the run-up to the election, the Association of German Metal Traders and Recyclers e.V. (VDM) has analysed the election manifestos of the parties in regard to raw material policies. The conclusion is that CDU, SPD and Greens see the expansion of the recycling economy as a prospect whereas the Liberal Democrats are more sceptical about the current regulations, such as the action plan for the circular economy. There can be no doubt, however, that decisive action is needed from the new Federal government, and also from the EU Commission, so that a smooth trade in recycled materials can be ensured and counterproductive trade restrictions can be avoided.

US steel and aluminium tariffs
In the early hours of the 9th February 2025 it became known that the United States would levy a 25% import tariff on all steel and aluminium imports with effect from 12th March. Trump had introduced similar tariffs during his first term of office. The tariffs were an important part of his election promises, which means that this step was not entirely unexpected. According to the US Trade Ministry, the tariffs would impact Canada, Brazil, Mexico, South Korea, Vietnam and Japan the most – the biggest exporters of steel to the USA.

Data from the US Census Bureau show that stainless steel imports in 2023 amounted to a total of 935 thousand tonnes. It is expected that the domestic steel mills located in the USA will profit from the tariffs as soon as they take effect. This would then also support the European stainless steel producers who have production plants located in the USA. But the last word has also not been said on this matter.

EU Commission strengthens green steel to secure climate targets
The EU Climate Commissioner Wopke Hoekstra has stressed that Europe must invest in its green steel sector in order to reach the decarbonisation targets and strengthen economic security. At his Commission confirmation hearing Hoekstra emphasised how important it is to make green steel financially attractive, including through a mix of public and private funding. He pledged cooperation with industry leaders and to effectively promote investment.

Hoekstra announced the inclusion of steel in a forthcoming EU plan for a clean industrial economy, which should support energy intense industries, such as steel production, to decarbonise while also remaining competitive. The plan aims to simplify regulations, to develop low-carbon technologies and to expand financing options. This is in line with the target of the EU of reducing emissions by 90% by 2040 and to become climate neutral by 2050.

Green steel, which is produced using renewable electricity and hydrogen is decisive for this transition. Recently the EU Commission approved an investment of 128 million Euros in a Swedish electric steel plant to promote this vision. Sadly, the crucial contribution of the recycling material steel scrap for decarbonisation was hardly mentioned at all.

Industry prepares for upcoming CBAM tariffs
The Carbon Border Adjustment Mechanism (CBAM) will finally introduce specific tariffs on high carbon steel and raw material imports into the EU from 2026. This is to prevent manufacturers from relocating their production to countries with less strict emission standards or favouring manufacturers in third countries which have lower standards. At the moment the CBAM is more or less in the preparation phase and tied up with numerous statistical and reporting obligations. It is expected that this measure, which will be introduced gradually, will have a profound effect on the steel industry.

While tariffs for users of scrap and producers of low-emission products is basically positive, some industry groups criticise that the ailing European steel industry could be put at a disadvantage in the global market. As described above, this is because imported primary raw materials will be needed in the long term for the production of steel and metals, in order to cover requirements. Also the correct technological capacities and infrastructure have to be in place in order to maximise the use of climate and CBAM favourable recycled raw materials.

Reuters illustrates how the industry, despite the criticism, is turning to measures in order to adapt itself before an impact is made. Electric arc furnaces (EAF) have proven to be the most viable route to decarbonisation and are now also being developed and built in all of Asia. China has a large project pipeline for electric arc furnaces, and also in India, Thailand and South Korea, Indonesia and Malaysia such capacities are being developed.

Indonesia announces nickel mining quota for 2025
As the news agency Reuters has now reported (see also coverage in previous editions) in an announcement by a highly ranked mining official, Indonesia has specified a quota of around 200 million tonnes nickel ore for 2025. This quota is a certain decline from 2024 when Indonesia’s production reached 215 million tonnes.

The official is quoted as following: “We have issued around 200 million tonnes. But if based on their performance evaluation, especially post-mining reclamation and environmental management, not meeting government requirements, we will cut,” said Tri Winarno, director general of mineral and coal at the ministry.
Indonesia had already announced in the last quarter of 2024 comprehensive cuts in its production quotas for 2025, but the government seems to have made a turnaround if earlier reports can be believed. Cuts once mentioned of 150 million tonnes would have reduced the global supply of the metal, crucial for stainless steel and electric battery production, by 35%.

Prices for Indonesian nickel pig iron were in a downward trend by the end of 2024, since consumer demand, especially in China, remained weak. Although nickel ore was in short supply and Indonesian smelters had to import ore from the Philippines, this was not enough to cover the weakening consumer demand. However, consumer demand seems to be improving in line with expectations of a strong budgetary expenditure in China and India, while the tariff and trade policy could also cause a change in sentiment.

In the meantime, the Philippines has also ratified a law ready for June, which would ban the export of raw materials in order to support the stockpiles of its mining industry. The ban should be imposed for five years after the law is signed in order to give mining companies the time to build processing plants.