Isn’t there anything positive?

A shockwave goes around the world
The stainless steel market continues to be in an autumnal depression, perhaps in line with the weather at this time of year. Although this terminology is not universally correct, for it is already spring in the southern hemisphere. Globally, and primarily in Europe, it is the service sector which is pushing the rather moderate dynamism in economic output rather than industry or manufacturing. And certainly not by the building trade. There is little investment, despite slowly falling interest rates, for uncertainty is high. And the demand for the required raw materials and components is correspondingly low.
This is no surprise in a phase of contraction, coupled with geopolitical and other conflicts and the public’s loss in confidence in the relative political systems. In the democracies of this world this has come to light in election results and governmental crises, which at the same time, do not give the feeling that in other systems of order, people are greatly enthused and satisfied and jumping for joy.

The electoral result in the USA has recently been under intense discussion, albeit with less controversy, more, as so often nowadays, with a clear categorisation of good and evil. In this context the author here was able to attend two interesting presentations. In both, genuine experts and observers – and this is by no means meant ironically – of the former President and his administration at the time, addressed the electoral implications of the now newly democratically re-elected President, Donald Trump.

It was specifically about such things as the announcement that at the beginning of the presidency 4,000 civil servants in Washington would be temporarily retired in a possible act of revenge against judicial and security forces, and also about future appointments and the behaviour expected from the Supreme Court (the highest court of the USA) in controversial laws and acts, and the feared unpredictability of Trump as well as his preference for teams of rivals (different schools of thought).

It is clear that the renewed Presidency could begin with a bang, for, in contrast to the first time, the new, former President has the necessary apparatus and governmental experience. Furthermore, he holds the majority in both chambers of Congress (Parliament), the Senate and the House of Representatives, which should make it easier to pass laws. Of course, the threat of tariffs, a trade war with China and other countries and regions were also discussed. The presentations were also about the Federal Bank and how this is dealt with, the budget and deficit, foreign policy and security and also the climate policy.

On balance, the following expected “megatrends” in regard to the new Presidency were presented in detail, including before and after. 1. An increasing protectionism and a marginalisation of the World Trade Organisation (WTO), 2. The USA’s fixation on China at the expense of Europe and other regions, 3. The decreasing willingness of Americans to support their allies and 4. A systematic polarisation of American society.

At the end of the presentations, the mood of the attendees was at least no better than at the start, since the new Presidency was not seen as very positive for most countries, especially for Germany and the European Union (EU) on the whole. For this reason, the question was asked whether there was anything positive to say in view of all these many challenges, which at first caused the speaker to become speechless with a shrug of the shoulders. In a second attempt, a “positive” message was conveyed that the direct effect of tariffs for Germany and the EU would not be so bad, because this was the result of an economic analysis. And President Trump is presumably not a warmonger.

Admittedly, the author of this publication and the person who put forward the question had to ask himself how he would have answered this difficult question. And actually, there is something very positive. Without massive outside pressure, as experience as shown, nothing much gets changed, and things just more or less continue as always. This is because it is comfortable to do so. Prosperity sometimes invites wrong judgements and also massive wrong decisions, along the lines of doing nothing is better than being active and causing damage. Germany has probably been an example of this for the last twenty years.

Now, however, with a disruptive President Trump who is prepared to assert himself and is not shy of conflicts,
institutions, politicians and citizens will be pushed out of their comfort zones and be tested. At best, and this is a justified hope, they can remember their undoubted strengths and finally be pressured into making the urgently needed and overdue decisions. This will not always be pleasant and also initially at a cost, with perhaps a loss in prosperity. But in the long run, those countries involved which take action will see a better future, or at least have future sustainability finally ensured.

And, there is not only just one way to attain this, but alternative good ways coexist. For example, it is also possible, without losing sight of self-interests, to speak with a President Trump and “make deals”. But only if (economic and strategic) significance, arguments and offers are made, joining forces with others and being, above all, prepared. For Trump, over the last four years, has prepared for his victory in great detail. This jolt which the previous and present German Chancellor or German President has not managed has now gone through the whole of society. In this sense, it is time to roll sleeves up and make a start!

In this huge context, the almost insignificant nickel market on the London Metal Exchange (LME) is holding well with prices around USD 16,000.00/mt, which has, however, also to do with the production cost curve and certain supply shortages in Indonesia. In mid November, rates had fallen to a low of around USD 15,500.00/mt. Despite a recovery, prices remained rather volatile within a certain range.

ECB takes clear stance against tariffs and trade barriers
In a press conference on the 17th October in regard to the lowering of key interest rates, Christine Lagarde, President of the European Central Bank (ECB) and Vice President Luis de Guindos emphasised the importance of free trade for the European economy. Both made it clear that any tightening of trade barriers and tariffs would damage the EU economy. Lagarde underlined that trade – alongside consumption and investment – is a main driver of economic activity and any constraint or uncertainty in trade is disadvantageous to the open European economy. Additional tariffs or other trade barriers would restrict trading possibilities for the EU with the rest of the world.

Actual economic data in the USA, the eurozone and Great Britain indicate a stabilising global economy. In the USA, retail sales rose in September, and the number of initial jobless claims fell, which also supports hopes for a “soft landing” of the US economy. The eurozone is also giving out positive signals: Inflation is at its lowest level since 2021, which gives the ECB more room for monetary policy measures. Stability of the economy in Great Britain is being strengthened by lower inflation and a record number of newly created jobs.

At the annual meeting of International Monetary Fund (IMF), Lagarde recently warned of the effects of increasing trade barriers, which could result in higher inflation and burden the global economy. Lagarde urged for international cooperation, in order to promote economic growth and warned against a drift towards protectionism, especially which geopolitical tensions are increasing.

The recent decision of the EU Commission to impose additional tariffs on the import of electric cars from China contradicts the warning words of Lagarde. Although, at the beginning of October, Germany voted against the punitive tariffs out of concern of a big trade conflict, a sufficiently large enough majority of other member states voted in favour. In reaction to this, there could be in turn higher tariffs on the import of combustion engines exceeding a certain cylinder capacity from the EU to China. German car manufacturers and their suppliers would be especially affected by this.

In this context, it also remains to be seen whether the revised version of the Waste Shipment Regulation (WSR) has an effect on exports of scrap in countries outside the EU. In our last edition, we already reported about this in detail. While the revision of the WSR does not constitute an explicit export ban, it does indirectly hinder free trade, which would then be just as damaging as the trade barriers which the ECB is warning against.

Nickel market facing challenges due to changing EV battery dynamics
The boom of electric vehicles (EV) significantly increased demand for metals such as lithium, nickel and cobalt. But the recent trends on the EV market have influenced prices and demand for these metals considerably, especially for nickel.

The sharp price increases for these metals in the years 2021 and 2022, combined with a sluggish growth in demand, have led to an overproduction and, therefore, a surplus in supply. Despite an increase in global sales by a total of 20% in 2023 of vehicles with alternative drive technology, the market has changed dramatically in sales of this type of vehicle. The preference for pure electric vehicles (BEVs) has decreased due to concerns about the driving range and the insufficient charging infrastructure. Instead, hybrid and plug-in hybrid vehicles (PHEVs) which combine a battery with an internal combustion engine have gained in popularity. In the first eight months of 2024, the growth of BEV sales slowed to 10% year-on-year, while PHEV sales grew by 46%.

In the meantime, China, the biggest electric vehicle market, has also introduced the so-called EREVs, “extended-range electric vehicles”, a type of PHEV which uses the petrol engine exclusively to charge the battery thereby enabling a range of over 1,000 kilometres. EREVs now account for 31% of plug-in hybrid sales in China. According to Adamas Intelligence, comparative developments are expected now also in Europe and the USA.

The transition to hybrid has decreased the need for lithium, nickel and cobalt in batteries, since the battery capacity of PHEVs is only about a third of the capacity of a pure electric vehicle. In addition to this, lithium iron phosphate (LFP) batteries which use neither nickel nor cobalt are becoming increasingly popular. In April 2024, the Chinese EV battery manufacturer CATL introduced the new LFP battery technology, which is a cheaper and more environmentally friendly alternative to the conventional nickel-manganese-cobalt battery.

With the increasing spread of LFP technology, the demand forecast for nickel and cobalt has been revised downwards. Since car manufacturers such as Ford and General Motors are showing interest in LFP batteries, the future of nickel in the electric vehicle market does not look so certain. The market still has to adjust to these developing technologies and consumer preferences, which are in a position to significantly change the demand for metals in the EV industry in both structure and volume. But the last word has not yet been spoken, since the development in technology continues to ebb and flow.

Indonesia’s nickel balance and downstreaming efforts
Prices for nickel pig iron (NPI) rose remarkably at the end of October after Indonesia announced plans for the regulation of supply and demand for NPI. The Indonesian economy has profited greatly from the production of NPI in the past, and now wants to also further increase its participation in the value chain of downstream nickel products such as batteries and stainless steel.

In a statement to Reuters and other media, the minister for energy and mineral resources, Bahlil Lahadalia said that “the state must be present in order to maintain (author’s note: a balance of) supply and demand. If the supply is big and demand is low, then the price falls”. Without mentioning a specific target price, Bahlil said in the same interview that “the prices and demand of the smelters will be used as a parameter for the calculation of the market equilibrium”.

After the new President Prabowo Subianto took office, Indonesia continued with the policy set by his predecessor Joko Widodo, which made the country one of the most important global nickel suppliers with its ore export ban and NPI investment incentives. This industrialisation supports Indonesia’s goal of reaching the status of a developed nation.

Despite (or perhaps because of) the significant environmental consequences, the country’s nickel industry has considerable cost advantages over western mining companies. With its SIMBARA controlling system, which was reported about here in the August edition, the country is strengthening control and monitoring of this industrial sector.

Downstream investments are also being sought. The South Korean company, Hyundai, announced a battery production in Indonesia this summer, while China does, however, still play a dominate role. Just in October, China’s CNGR, the globally leading manufacturer of highly developed energy materials for lithium-ion batteries, announced plans for a 10 billion dollars battery factory. Indonesia uses its 280 million people market aggressively in order to attract investments and improve its position in the value added chain, as seen in the sales ban of the iPhone 16 because of a lack of Apple’s local investment.

And thus ends the last report of the year. This is, of course, to be continued in the coming year. We hope you have enjoyed our editions. We would be interested in any feedback. We wish all our readers with their families a merry Christmas and all the best for the New Year. Stay healthy and well.