Is the coronavirus a black swan? Concrete information is not in abundance. Virologists have hardly been heard. Panic reporting is no help. So far, markets are more or less untouched.


ISSF published stainless steel smelting production for the first nine months of 2019. This reflects the weak steel economy. All regions, with the exception of China, are contracting.


China recognises the economic advantages of metal scrap. One does not speak of metal scrap anymore, but of “renewables”. A good concept which also has tradition in Germany.


After 2010, the German Federal government is now revising its raw material strategy. E-mobility and climate change make the overhaul necessary. The circular economy is a central element and also fair markets.

Corona not (yet) disturbing the markets
With the coronavirus the world once more has a black swan. This term was coined by the publicist and stock broker, Nassim Nicholas Taleb, and is used to describe an event which happens seldom, is unexpected and can have considerable consequences. Amidst all the varying news reports at the beginning of the year, it may have been unclear how the epidemic would develop, but now more and more facts are surfacing. The last part of that sentence can, however, not be taken for granted, as information had been very sparsely released by China, just like during the SARS epidemic. It did not want to appear vulnerable before the eyes of the world and its own people, which could have cast a shadow over the far reaching power held by government and Party in China.

This strategy proved to be unsuccessful, for in today’s use of the internet and the experiences of the Chinese people every day, things could no longer be brushed under the carpet. The doctor who actually discovered the new virus at the end of last year was initially cited and admonished by the authorities for making his findings public. Now this doctor and whistleblower, Li Wenliang has been honoured by the government for his courage. Unfortunately he was himself infected by the virus and has died.

The exchange markets for stocks and commodities may have so far been largely unaffected, not having succumbed to the sometimes dramatic reporting in the western media, but this will now depend on the coming days and weeks whether the virus will have a more lasting effect on the development of the Chinese and global economy, and whether it does grow to become a black swan or stay as a cygnet.

Investors are still hesitant, as a quick drop in new infections or the invention of an effective vaccine could be taken as a sign the worst is over. The first quarter of 2020 will certainly leave economic traces of the virus, especially in China. Also other nations will, to a great extent, be hit via the global supply chain and by the Chinese passion for travel. On the other hand, the following quarters could then possibly be spurred on by a positive recovery effect.

With this in the background, the nickel price on the London Metal Exchange (LME) could not hold its level of above USD 14,000.00/mt and made a correction down to a low of around USD 12,500.00/mt, only then to make a retracement in the direction of USD 13,000.00/mt. But the usual lower demand for commodities during Chinese New Year celebrations, the hugely increased LME nickel warehouse stocks and the high stainless steel stocks in China will also have played a part in this price move.

It must be awaited what happens now with the virus. Most of the information about the virus reported in the western media does not really provide anything of much use. Unfortunately, doctors and virologists are not given much chance to speak. Some of them seem to be more of the opinion that the virus is of a more harmless nature, unless the infected person already has a pre-existing medical condition or has a weak immune system. It would be interesting to learn then whether Li Wenliang suffered anything in this regard. As well as this, nothing can be read about whether it is known if the virus can be passed on already when symptoms are not yet shown.

Journalists prefer to report every day on how many newly registered cases of infections there are and on the number of countries which are now affected by the virus. Just one case is enough to increase the number of countries. It would be far more interesting to know just how high the real actual number of infections is, for many of those infected apparently do not always show all the symptoms, which can increase the chance of further infections, as they are the ones who do not necessarily feel the need to self isolate.

ISSF figures reflect the steel economy
The publication of stainless steel smelting production by the International Stainless Steel Forum (ISSF) for the first nine months of 2019 says a lot. In a year on year comparison all the regions mapped in the ISSF statistic show a decline. Production in Europe was lower, by 7.2%, in comparison to the same time frame of the previous year, in the USA by 7.5%, in Asia (without China and South Korea) by 5.4%, and the rest (Brazil, Russia, South Africa, South Korea and Indonesia) by 3.1%. The only exception was China. Output there was 11.7% higher, so that taking the average, there was still an increase in growth, on a global scale, of 3.4%. The declines in production, induced by less demand, have of course led to lower commodity demand in those markets, putting pressure on margins.

The figures still outstanding for the fourth quarter of 2019 should not change the picture much, although then presumably China will probably show some weakening. One does not have to be a magician or a prophet to have cautious expectations for the first quarter of 2020, especially as the outbreak of the coronavirus has already caused the closure of factories with production halted. The creation of the somewhat unusual regional categories of the ISSF is purely and simply so that the figures of a single region cannot be indicative of the production of just one producer.

Towards the end of last year, the ISSF, founded in 1996, had an important change in personnel. John Rowe stepped down from his position as Secretary-General. His post was taken up by Tim Collins, who had previously been with the Outokumpu Stainless Group for many years in the field of strategy development, supply chain management, sales and marketing, and logistics. After completing a Metallurgical degree at the University of Sheffield, he began his career with British Stainless Steel, at the time still independent, before the merger with Avesta and then Outokumpu.

Greece to liquidate the nickel producer LARCO
Greek authorities have taken the decision to liquidate the Greek nickel producer LARCO. According to a report by Fastmarkets MB (Metal Bulletin), the company had been struggling financially for the last 35 years. Taking this action means that the Greek state is practically liquidating itself as the state was a majority owner of the company. Over the years debts had risen to over 400 million Euro. In addition, according to the Greek energy minister Hatzidakis, LARCO did not even have appropriate environmental licensing.

This step has not come as too much of a surprise since the European Commission, to make matters worse, said it was taking Greece, which owns 55% of Larco, to the European Court of Justice over its failure to recover around 135 million Euro in illegal state aid. What is certain, is that the money has not been lost, but is in the pockets of others. LARCO produces an estimated 18,000 to 20,000 tons ferronickel annually, so stainless steel production will lose out unless an investor can be found who wishes to take over the company.

China recognises the economic value of metal scrap imports
It is well documented that China has been trying to gain control of the problems of waste imports from wealthy countries, from disordered sorting to illegal disposing. To this purpose it has ordered an extensive import ban on all waste, and by definition this unfortunately of course includes, amongst metal waste, metal scrap. Scrap has, therefore, only been imported to China within a quota system. The Chinese authorities have, however, quickly come to realise that metal scrap is actually a valuable, competitive and, above all, sustainable commodity, so a ruling was made to give such secondary materials a new name, or rather, a new classification.

These secondary materials are no longer called scrap but “renewables”, meaning renewable commodities and, therefore, no longer fall under the general import ban. This new regulation should come into effect in July 2020, so that imports of scrap should rise significantly in the second half of the year, which would have a positive influence on price developments for secondary commodities in Asia. This renaming in China may seem innovative and certainly even fitting, but it is by no means novel. Long before the introduction of the European Waste Framework Directive, under which scrap also falls, Germany already had a category between product and waste, the recyclable material (“Wertstoff” / “Wert” = value).

As the name says, these are valuable secondary commodities and this specific category has been appropriately treated and regulated. Recyclable materials are, therefore, not subject to the regulations of waste legislation, which is often seen as unreasonable and overstepping the mark. In this aspect, the Waste Framework Directive of the European Union (EU) was a regulatory step back. Only many years later did the EU correct its mistake in that the category of “end of waste” was introduced, which means that certain clean types of scrap are not classed as waste but as products.

It is just that over the years, the steel recycling industry and steel producers as scrap consumers, had had to come to terms with the Waste Framework Directive so that, even today, most scrap, even if meeting the end-of-waste criteria, is treated for simplicity’s sake, as waste. The EU administration had not come to full agreement about good waste, for scrap and companies, because of product criteria, are also subject to the REACH chemical regulation which comes, for those companies involved, at a considerable cost and is subject to lack of know-how. Scrap is neither just a normal product nor a chemical.

The German Federal government formulates a new raw material strategy
The German cabinet, in mid January, published the new raw material strategy of the German government. This was devised under the guidance of the German Ministry for Economy and Energy, in close cooperation with other departments. The strategy names 17 concrete steps which should ensure a safe, responsible and sustainable commodity supply for Germany, for its industry and for exports. Such a commodity strategy was first released by the German government in 2010.

The “update” should prepare German industry for new challenges in this field. For changes such as electromobility and climate change have influences on commodity demands and on the valuation of individual commodities. Some of the measures from the first commodity strategy were kept or developed more. New measures target all of the problems which are not new to industry insiders.

Amongst these are the responsible raw material extraction and sourcing in view of keeping to environmental and social standards, the compliance of due diligence in the supply chain analogue to the existing guidelines of the OECD, and also the mechanism and protection of a fair framework for companies in global competition for commodities, in other words, ensuring a level playing field. As well as all this, the recycling economy should be encouraged. The German government would like to support research and development projects in processing technology and metallurgy. This is especially valid for those commodities which will be used in future technologies.

Change of management – the LME has a Chairwoman
The new chair of the Board of the LME, Mrs Gay Huey Evans, OBE (Officer of the Order of the British Empire) in an interview to the news outlet, Fastmarkets MB, spoke about today’s challenges facing the Exchange. At the beginning of December, the experienced financial expert took over the position from Sir Brian Bender who had held the position of LME Chairman for almost ten years. In the interview she spoke about the future of the traditional floor trading which takes place twice a working day on the Exchange.

Even today traders sit in a ring formation on red leather sofas, in keeping with a tradition more than one hundred years old. Commodity prices are traded either in open outcry or by hand signals. Because many market traders nowadays mainly use the three months contract as a hedging instrument, the LME saw the possibility of replacing the traditional method of trading with a new digital method.

Hardly two months later, at the beginning of February, the LME decided to keep the traditional floor trading. For industry, the price settlement, which is determined in the ring, is important, since many physical contracts are based on the official closing price of the day. This means that the LME is one of the few exchanges in the world which still has traditional floor trading.

LME (London Metal Exchange)

LME Official Close (3 month)
February 11, 2020
  Nickel (Ni) Copper (Cu) Aluminium (Al)  
Official Close
3 Mon.Ask
LME stocks in mt
  January 14, 2019 February 11, 2020 Delta in mt Delta in %
Nickel (Ni) 177,600 208,722 + 31,122 + 17.52%
Copper (Cu) 128,100 170,000 + 41,900 + 32.71%
Aluminium (Al) 1,381,175 1,239,800 – 141,375 – 10.24%

Oryx Commodity News

Oryx Commodity News informs about current, industry-relevant topics