For a packet of biscuits

The three months futures price on the London Metal Exchange has been climbing higher in recent weeks. The middle of February, after the first technical correction of the picture-book trend since the start of the year, saw nickel at USD 12,400.00/mt, but then the rise continued. On 6th March a high of USD 13,765.00/mt was reached. However, the increase happened somewhat quickly so another technical adjustment was to be expected, in order to correct the overbought situation. This has brought prices down now to just over USD 13,000.00/mt, yet still a very solid price level. Who would have thought that at the end of last year?

Parallel to price adjustments, weaker Chinese economic figures were released and the US-Dollar against the Euro could notably firm up to USD/EUR 1.12 from USD/EUR 1.14. But this does not really show any great change in the situation, even if the European Central Bank (ECB) has lowered its growth prospects for the Eurozone, and has left interest rates at zero. Draghi is the first ECB President not to have made an interest rate increase during his time in office, which began on 1.11.2011. And this will probably remain so.

The figure of 11, present in that date, and very much connected to carnival rituals, leads directly to the German carnival season. Although just finished, echoes linger on. For this year’s carnival saw remarks, comments and jokes, in a manner never seen before, being critically scrutinised by self-proclaimed upholders of the moral high ground (in earlier times these have also been called moral apostles) and the press, which continually chase after news grabbing headlines. But please, this does not mean that in the past everything was better.

Three examples: In a carnival event in Cologne, the well-known carnival speaker, television presenter and entertainer, Bernd Stelter made jokes about the double barrelled name of Annegret Kramp-Karrenbauer, the new CDU leader and perhaps the next Chancellor of the Federal Republic of Germany, who is sometimes referred to as AKK, because of difficulty in pronunciation and length of her name. A man and wife in the audience, not from the Rhine area but also with a double-barrelled name, became so loudly incensed that Mr. Stelter’s act had to be interrupted until the couple was politely asked to leave the auditorium.

From being the “victim” of a seemingly inappropriate joke, however, AKK then became herself the focus of heavy criticism.  She is from the Saarland where they are not really known for their exuberant and outrageous humour, but, again at a carnival event, she made a weak joke about the plans of the Latte-Macciato group in Berlin who want to introduce toilets for the third sex. Finally it was reported in the media that a children’s day care centre in Hamburg, on the initiative of parents, has said that children should not dress as native American Indians anymore as this could be taken as discrimination of a minority group.

Now, it is not known by the author if many native Americans live in Germany, but as a society we have reached a point where, for some, everything revolves around principles and being a know-it-all on what is right and what is wrong. This more western German mentality has already got on the nerves of the eastern part of the country, where it is also of little surprise that the Green party has not been able to make any inroads. Really it should be about the inner frame of mind. If this is in order, and shaped by openness, tolerance, politeness and empathy, then no minority nor nationality will have a problem if conceptions may not always be politically correct or that sometimes a joke is made at the expense of others.

It should also be recognised that the essence of carnival, which pokes fun at all and sundry, is to take part and not stand as an outsider. This shows that one is taken seriously. Of course, negative connotations should not be lightly bounded about or expressed in direct communication to intentionally upset the counterpart. This should be obvious if the frame of mind, as previously described, is intact, and neither AKK nor Mr. Stelter have followed such goals. We can eagerly discuss and speculate, but at the same time we should not wrap everything in cotton wool.

In how far the following stories have to do with carnival is left up to the reader’s imagination. It is well known that, in international comparisons, this publication is read by an intelligent and well informed circle: The demand for secondary commodities in the stainless steel sector is very strong at the moment. Especially in Asia, including the Indian subcontinent, interest is considerable. Yet significant differences open up in regard to the valuation of stainless steel scrap. At times there is the feeling that some consumers would like to have commodities for nothing. This is, of course, not basically possible, as there is a global market and international commodity flows which ensure a balance of prices.

But, perhaps, steel producers actually are dreaming of the Venezuelan fuel market. Research made by Deutschlandfunk has shown that, whilst in Venezuela food products cannot be bought, fuel for car owners is more or less free. Actually, one tank of fuel costs 100 Bolivar. However, in 2018 the inflation rate was about 1.5 million percent, so the government, in August 2018, felt itself compelled to make a currency devaluation at a ratio of 1:100,000. The state controlled price, however, after the currency reform remained unchanged at 100 Bolivar, which corresponds therefore to 0.001 new Bolivar.

This has led to the bizarre situation of petrol being de facto free of charge. Seeing as there are not even small enough denominations of coins and paper money to pay 0.001 Bolivar, car drivers are paying in the smallest amount of cash denomination they happen to have. Or they can have the fuel in a swap with perhaps a packet of biscuits. What can be learnt from this parable? Venezuela also celebrates carnival, or Mardi Gras, but the people have nothing to laugh about, even when petrol is more or less being given away and stainless steel scrap, as a global commodity, still has to be paid for in hard currency.

The investment bank, Goldman Sachs, which can certainly be classed as one of those analysts which regularly updates forecasts, has once again adjusted its outlook. After months of recommendations to purchase commodities, it has now become a little more cautious. Goldman Sachs has now reported that commodities are no longer undervalued. However, a stronger than expected recovery in global growth could change this, so some industrial metals may still offer attractive price levels for the moment. Without doubt, nickel must belong to this group. Generally, however, further price rises have to be supported by better fundamental data, so the outlook is not as good as it was a few months ago.

Several newspapers over the last weeks have been reporting on a possible merger of Commerzbank and Deutsche Bank. In the past, both banks have already had a moderate experience of two mergers (Dresdner Bank, Postbank). Discontent amongst employees must be quite high. In February 2009, the former chief CEO, Josef Ackermann, believed that in ten to twenty years the work force would be proud that survival had been achieved autonomously without any state help. Looking back on the last ten years, however, Deutsche Bank can only be described as catastrophic. Should there now be a merger with Commerzbank this would then involve state ownership after all. With this indirect state aid, refinancing conditions for Deutsche Bank would be greatly improved. Probably then in a show of gratitude, the state can take care of those made redundant.

At the time, Ackermann also enthused about the good quality of a loan book. Even today, Deutsche Bank is the house bank of the present American President, Donald Trump. Should he be re-elected, his long-term financing would have to be negotiated in the middle of his second term. Whilst Deutsche Bank, in the past, had been showing interest in Mr. Trump, he was being met with rebuff time after time by local banks. The ARD and DLF even recently reported that Russian nationals were possibly involved in the financing and had given guarantees to make it possible.

According to a European Union funded study in a project of the Mineral Intelligence Capacity Analysis (MICA), the contribution of the circular economy in metal production helps more in the reduction of greenhouse gases than all other measures. Researchers analysed production of seven important metals (including nickel, iron) and, taking into account five factors (1. development of demand, 2. recycling rate, 3. metal content, 4. energy efficiency in production, and 5. employment of renewable energies) looked at the effect they will have on the environment between 2010 and 2050.

An example of the findings is that an increased share of renewable energies would have little influence on present iron production since coke, a fossil fuel, is needed in production. In aluminium and stainless steel production, the influence is already very significant today through production in electrically driven plants. Researchers estimate, on average, that the production of metals will only see a significant fall in greenhouse gases from 2050 to 2100. By this time, there should be a sufficient availability of scrap everywhere. But even today, every ton of stainless steel scrap used in production helps towards climate protection.