The corona pandemic has brought structural problems to light. Those onboarding the first time and changing jobs had difficulties with a virtual working environment. Catch phrase: Great Resignation. People are social beings.

Measures have to be subject to an independent and multidisciplinary review. This is not easy. Media plays an important role. Learn from mistakes for the future and making good things even better.

Many problems were already there at the outset. Administration instead of organisation. The future has been sometimes neglected. No one is responsible. It is not too late. Where are the wake-up speeches?

Russia enforces unintentionally the energy change. The end justifies the means and necessity is the mother of invention. Some still see a nickel deficit. Indonesia would like to set up a global cartel for nickel.

Where have all the workers gone?
Based on the song by Pete Seeger “Where have all the flowers gone”, today from a business point of view, the words should be changed to “Where have all the workers gone, long time passing.” After the corona measures were lifted it seemed as if people had been swallowed up and disappeared from the face of the earth. Regardless of which sector, there is a lack of employees, especially in sectors such as gastronomy and the event industry of course, but also in the hotel and tourist industry it is hard to find people. What has happened? Let’s make a search for possible causes.

Already during the corona crisis, there was an interesting change to be seen in the personnel sector or HR (Human Resources). Working from home for employees in administration and such professions where the desk is the main place of work, became the new norm for quite a long time. And some were actually able to enjoy this, since they were no longer stuck in traffic, nor did they have to use public transport, mornings and evenings. The supervisor did also not suddenly appear at the desk.

“The Great Resignation”
On the other hand, however, this digital way of working presented a huge problem. For when it came to recruiting, or introducing and training new personnel and young employees, the lack of personal contact presented an extraordinary hurdle, as the whole procedure was now just a virtual one. Managers and colleagues, and also customers and suppliers, could only be seen and met on the screen, otherwise, professionally, people were left to their own devices at home.

This was also especially true for service providers, such as accountants and management consultants. Previously visits were first and foremost made to clients, but now the examination of accounts and receipts had to be performed under new conditions, and, depending on the living circumstances, could be at the kitchen table. To a great considerable extent there was a reaction, which has been named in North America as “The Great Resignation”. The young newly employed left companies in droves after just a short time, whether this was because of a bumpy training period having an impact on content overload and mental health, or a lack of learning curve, and a lack of company culture and social contact. Within their own four walls, people began to think more about what they wanted to do and who they wanted to work for.

Collateral damage from the corona pandemic
But also in those sectors which were especially effected by the covid measures, such as gastronomy, people were looking for other means of employment, because, of course, their economic existence and perspective were being impacted. Mail-order and internet trade boomed in every aspect and, therefore, many found a new job with the post or parcel service providers, for example. The fact that they are now missing in the other jobs is logical, and perhaps even permanent, since regulated working hours and earnings were a completely new positive experience for some workers, more accustomed to late and weekend hours, also in regard to existing social security contributions and provision for later life.

These effects can also be understood as collateral damage of the covid-19 measures which were imposed at different levels in different countries. China, with its Zero Covid policy, knows full well the meaning of this as its growth has never reached the levels of before the start of the corona virus. In this respect, all measures have to be valued objectively against a background of future pandemics. This is, however, not easy at all, for the numerous, even negative “side effects” have been accepted and also ignored by the great majority. This mainstream, of course, will not predominantly be the resolute explanation. Even if the media is often criticised for going whichever way the wind blows, journalists should now understand this to be a real assignment, for a tremendous amount could be learned during the last two to three years.

Structural problems are becoming more apparent
But let us go back to the disappearing workforce. Looking at it in more detail, it can be confirmed that the labour market is characterised to a large extent by demography and immigration, and the current labour shortage is a consequence of political and social development, or lack of, for the last 20 to 30 years. Unfortunately, the companies, with their influence as well as politics with its organisational function, has not set the right course strategically and with foresight in this area. Warnings about this development have been there for many years.

In many professions there have been, and still are, considerable recruitment problems, for example in skilled trades and amongst truck drivers. Unfortunately, a certain arrogance of academics and the glorification of school graduation and studies have given our society the wrong incentives in regard to the value and social recognition of some professions. And so, what we are seeing now, is the sad result. Immigration can help, but also only then, when there is a clear strategy regarding the qualifications sought. This is not about the guaranteed institution of asylum. Corona has not caused these failings, but it has mercilessly brought them to the fore.

And as many companies are struggling for survival because of corona, it is really first and foremost, and with few exceptions, those companies which already had structural problems to begin with. And these problems centres are, in Germany, unfortunately to be seen all too often which says a lot about the quality of the work of the political class in recent decades. The central banks’ policy of cheap money is currently taking its toll, migration and the sufficient energy supply, taking emissions into account, and also the education emergency and health care are big pressing issues which have not yet been adequately dealt with.

This does not present a rosy situation, but there is also no reason to bury one’s head in the sand, it is time for rolling up sleeves. What is missing is surely not just wake-up speeches, but even for any type of upbeat talk, an upbeat Chancellor and an upbeat German President are missing.

Russia enforces energy transition
Who would have thought just a while ago that Russia would contribute more to energy transition than all European states combined, both inside and outside of the EU. Unfortunately the influence is from the outset not necessarily positive, but could, however, in the medium term be proven as very helpful. It is obvious that people everywhere only start to act and rethink when confronted by a crisis and no other course is available. Then, however, it does depend on resilience to deal with the changed circumstances quickly and successfully. This resilience is distinctly different among different peoples and nations.

For example, the war in the Ukraine and the cut off of gas supply by Russia has ensured that there are enormous problems in the European gas market which have spilled over into other markets to also include electricity supply (electricity produced by gas power stations). Here it is not ultimately just about the price, but also about the security of supply and the availability of electricity and above all gas. It has to be said though, that the problems in electricity have not so much only resulted from the gas supply shortage, but also because of the dilapidated state of nuclear power stations in France as well as low river water levels which played and still play a part in the cooling of reactors. In addition, the ambitious but also very hasty transition in energy supply in Germany from fossil fuel and nuclear energy to renewable energy also plays a role – which, however, make no contribution when there is no wind or it is dark and in addition is hindered by transmission and grid problems (how does wind power come from the North Sea down to Bavaria).

For those responsible, and without doubt they do exist, it is of course now the most comfortable alternative to point the finger ad hoc at Russia, the war and the sabotaged pipelines. And also the conversion of state taxes and borrowing into dividends for shareholders of outdated fossil and other energy producers (or former monopolists in supposedly liberalised markets) is just depressing. But after a phase of uncertainty, there will be progress, of that this writer is sure. Who would have ever thought that a German government with Green participation would bring coal fired power plants back into the grid, torpedoing carbon targets and prolonging on the other hand the lifetime of the last existing nuclear power plants. Also the purchase of liquid gas from Qatar would hardly have been otherwise in the spotlight.

Lack of alternatives
But ultimately, the end justifies the means and necessity is the mother of invention, or does not leave alternatives in such a short timeframe. In the medium term, however, the near-death experience will (hopefully) ensure that for such a strategically important factor for citizens and economy such as gas and electricity, then the procurement, as could be read by the way in all pertinent pieces of economic literature, should not have to rely on possibly unreliable suppliers in dictatorial countries, but if at all, then at least when certain alternatives are available. As a result, and this time very much in the interest of Green politicians, the expansion of renewable energies all over Europe and also in Africa (the continent which is blessed with plenty of sunlight) will be vigorously accelerated. This also applies to photovoltaic in the private and corporate sector.

The primary objective must be, without doubt, to make sustainable and, above all, also affordable energy available to industry for their existential continuance. Otherwise there will be extensive migrations to where energy can be afforded. On nuclear energy the Green parties of Europe, who are divided on this issue, will, therefore, definitely have to find common constructive ground taking into account the question of permanent disposal of nuclear fuel waste, for it is now clear that the blanket rejection of nuclear power is not a Green viewpoint per se.

All these developments will ensure that, after successful implementation, producers of fossil fuels will have to watch out as the future will quite surely not belong to them. Also for Russia, as an (energy) raw material nation this presents a true horror scenario which it has enforced upon itself by its own actions. This, therefore, is what a forward looking energy policy looks like in regard to achieving energy transition. We would all, however, have preferred to have done without the war, turning off the gas tap was and is painful, but therapeutic.

Minor opinions to nickel
The legendary LME (London Metal Exchange) week was not only about wound licking and coming to terms with developments on the nickel market since March of this year, but also about the assessment of further macroeconomic and fundamental expectations. In this context the Australian Commodity and Investment Bank Macquarie, on the occasion of its summit held in London carried out its usual traditional survey on industrial metals. It is not very surprising that most expectations are more pessimistic than in the previous year, whereby a mild recession is expected for 2023. Almost in analogue, there is also an expectation for lower prices, like at the height of the Chinese-American trade war in 2019. In nickel a supply increase especially from Indonesia is seen as a threat. Therefore, the INSG (International Nickel Study Group) is expecting a supply surplus in primary nickel of 144,000 tons in this year and 171,000 tons in the next year.

In regard to opportunities on the upside, above all a stronger growth in China is seen (cf. rumours about a softening of the Zero Covid strategy). There was no agreement about an actual significant risk on the downside. Certainly all (!) risks on the downside which had been mentioned in the previous year were realised in the course of 2022, albeit in different manifestations, as Macquarie reports. The fact that in light of these statements nickel is currently trading around USD 27,500.00/mt is a little surprising.

The nickel market, which is unfortunately still very thin, is not really keeping much to consensus, as can be seen. For this reason it is worth mentioning that the Japanese nickel refiner Sumitomo Metal Mining expects a deficit of 63,000 tons for 2023, but still a reduction of the deficit of 108,000 tons which Sumitomo expects this year. The Japanese are aware that they are part of a minority with this view. Yet the analysis is certainly well founded, for the conversion of 200,000 tons nickel in nickel pig iron (NPI) into nickel matte and then nickel sulphate for battery production is named as a reason, just as the expectation that Indonesian producers would have no interest in producing a surplus in an uncontrolled expansion of production (as in the following paragraph).

Indonesia examines the introduction of a nickel cartel
Indonesia, the largest Southeast Asian economy and the world’s largest nickel producer is considering the introduction of a cartel for nickel and other important battery metals, similar to the Organisation of Petroleum Exporting Countries (OPEC). The Indonesian Investment Minister Bahlil Lahadalia spoke about this in a recent interview with the British Financial Times. According to the Indonesian politician, OPEC has the advantage that oil trade can be controlled so that there is predictability for potential investors and consumers.

However, Mr Lahadalia did admit in the interview that no concrete plans have been made so far and talks with potential participants have yet to be made. The chances for such a cartel being introduced cannot really be very high. Indonesia is, after all, dependent on foreign companies such as the Brazilian group Vale or the Chinese stainless steel manufacturer Tsingshan for its production. State owned companies dominate oil production in OPEC countries, such as Saudi Arabia.

An even bigger problem would be the different goals of many commodity rich countries, and that they are sometimes in competition with one another. For example, the Canadian government, a few days ago, ordered Chinese companies to sell their stakes in three Canadian mining companies, which want to further lithium mining. Overall Canada, which also has its own large nickel deposits, has taken a tougher stance against foreign investment in critical minerals. This means that it is not just the Chinese state which is put under such special scrutiny, but also those private companies which have ties to foreign governments.

Last June already, the Canadian Minister for Natural Resources, Jonathan Wilkinson, in an interview with the Canadian national newspaper The Globe and Mail, said that Canada “is protecting itself in an area which is clearly strategic, and ensuring that those supply chains will be robust for our allies”. Therefore, as stated, the chances are not so very great that such a metal cartel can be introduced.

Furthermore, the attempt by the Indonesian Investment Minister is extremely surprising, especially in view of his country’s curious relationship with OPEC. In 1962 the then oil rich country joined OPEC. By the mid 1990’s Indonesia had reached its peak oil production and after 2008 even became once more a net importer of oil. Finally Indonesia announced in the same year its exit from OPEC, as its price expectations would be a heavier burden on the Indonesian market than could be made up for in expensive exports.

In 2016 Indonesia reactivated its membership, if only for a short time, as it then came to another dispute. At the end of 2016, OPEC suggested that Indonesia cut its oil production by about 5 percent, which would have further affected the already declining revenues in Southeast Asia’s largest economy. The Indonesian government did not want to accept this, as government revenues were firmly planned in the 2017 budget.

LME (London Metal Exchange)

LME Official Close (3 month)
November 14, 2022
  Nickel (Ni) Copper (Cu) Aluminium (Al)  
Official Close
3 Mon.Ask
LME stocks in mt
  October 12, 2022 November 14, 2022 Delta in mt Delta in %
Nickel (Ni) 52,728 50,172 – 2,556 – 4.85
Copper (Cu) 145,525 86,800 – 58,725 – 40.35
Aluminium (Al) 336,275 544,025 + 207,750 + 61.78

Oryx Commodity News

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