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As Gold Plunges, Chinese Investors Find New Haven in Steel Rods
Bloomberg
Investors in China have found an unlikely new hiding place from the chaos engulfing financial markets.
The price of steel reinforcement bar, the somewhat unglamorous but ubiquitous commodity used to strengthen concrete, has risen almost 5% over the past month in Shanghai. Over the same period, gold — the traditional haven amid turmoil — has dropped more than 5% as investors sell to cover losses in other markets.
Rebar’s unexpected ascent as a financial sanctuary comes as Chinese investors bet that Beijing is going to embark on a massive bout of stimulus to help prop up the country’s economy in the aftermath of the coronavirus, boosting demand for raw materials used in construction.
“We are calling rebar, ‘rebar gold’ these days, as it has became a haven asset during this global crisis,” said Wu Yijie, an analyst at Shanghai Dalu Futures. “We believe the Chinese government will greatly bolster infrastructure spending as they did post-SARS to boost domestic consumption.”
Chinese investors may also be drawn to steel futures because they can only be traded in China, making them more reflective of what’s happening locally and less exposed to the same forces that are ravaging more global markets like copper. China also has greater influence over pricing, Wu said. The country produces and consumes about half the world’s steel.
While the economic outlook for the U.S. and Europe worsens by the day, there’s growing optimism that the slowing rate of new infections in China points to some level of containment and fueling expectations the government will announce a raft of measures to boost growth.
Chinese stimulus has so far included injecting more liquidity into the financial system, but expectations are growing there’ll be infrastructure investment that will aid steel demand.
Record Inventories
Haven demand may explain why steel is managing to defy a deluge of supply that would normally be hammering prices. China produced a record amount in the first two months of this year despite its extended shutdown to get the virus outbreak under control and rebar stockpiles sit at the highest ever…
Link here for the full story
Europe Thinks Like China in Building Its Own Battery Industry – Bloomberg
Article by Bloomberg – July 3rd 2019
- Governments working with industry and banks to spur technology
- At least $113 billion to be invested in battery supply chain
The European Union is starting to act like China when it comes to building the batteries that will drive the next generation of cars and trucks.
In the past few months, government officials led by European Commission Vice President Maros Sefcovic have joined with manufacturers, development banks and commercial lenders on measures that will channel more than 100 billion euros ($113 billion) into a supply chain for the lithium-ion packs that will power electric cars.
Germany and France are prodding for action out of concern that China is racing ahead in new technologies sweeping the auto industry. With 13.8 million jobs representing 6.1% of employment linked to traditional auto manufacturing in the EU, authorities want to ensure that manufacturers can pivot toward supplying electric cars and batteries.
“We are walking the talk,” Sefcovic said in remarks to Bloomberg. “We have overcome an initial resignation that this battle would be a lost one for Europe.”
A number of trends are catalyzing the program, starting with the determination by EU nations to rein in greenhouse gases and fight climate change. They’re increasingly focused on reducing pollution from diesel engines and alarmed at the head start Chinese companies have in greener technologies. French President Emmanuel Macron in February said he “cannot be happy with a situation where 100% of the batteries of my electric vehicles are produced in Asia.”
Drive Trains Go Electric
About 57% of cars will be driven by batteries by 2040, according to BloombergNEF research.
So far, the EU’s program is starting to work and putting Europe on track to wrest market share away from China. By 2025, European companies that currently lack a single large battery maker will rival the U.S. in terms of capacity, according to forecasts from BloombergNEF. Measures that will spur investment include:
- France and Germany are working on measures to channel billions of euros into the battery industry. Sefcovic has said the EC may be able to embrace the state-aid proposal as a special project by the end of October. The two nations are seeking to draw in additional support from Spain, Sweden and Poland.
- The European Investment Bank gave preliminary approval in May to a 350 million-euro loan supporting NorthVolt AB’s bid to build a battery gigafactory in Sweden after the company completed a fund raising.
- The EIB along with the European Bank for Reconstruction & Development are working on a “raw materials investment facility” that will help to build a supply chain for rare Earth metals needed for batteries, according to Sefcovic who says he hopes the program will be launched by the end of the year.
- The EU in May started a 100 million-euro Breakthrough Energy Ventures fund with Microsoft Corp. founder Bill Gates and other investors to advance the energy transition, which is likely to include batteries.
- The EC has gathered at least 260 industrial companies including Peugeot SA, Total SA and Siemens AG in an alliance aimed at building capacity to make the energy storage devices in Europe.
“A year or two ago, everyone was under the impression that it was already too late for Europe,” said James Frith, an energy storage analyst at BloombergNEF in London. “But they’ve made a commitment, and Europe is in a strong position now.”
By 2025, Europe may control 11% of global battery cell manufacturing capacity, up from 4% now, according to Frith. That will pare back China’s market share and rival the U.S. command of the industry. The EC estimates the battery market may be worth 250 billion euros a year by then. It estimates at least 100 billion euros already has been committed to battery factories or their suppliers in Europe.
Europe’s market share in battery making is set to grow to 11% by 2025 from 4% this year. Source: BloombergNEF
The goal is to build enterprises in Europe that could supply the region’s automakers without requiring imports from the major battery manufacturing centers in Asia. Currently, Contemporary Amperex Technology Co., or CATL, and BYD Co. dominate production in China. Elon Musk’s Tesla Inc. is also building battery gigafactories in the U.S.
So far, Europe has no established battery supply chain, though it has drawn investment in local factories from Korean firms including LG Chem Ltd. and Samsung SDI Co.as well as CATL.
The new ambition of the commission is to stimulate companies big enough to supply the likes of BMW AG and Volkswagen AG, which plan a massive increase in electric car production. Across the industry, the outlook is for a rising portion of cars to run on batteries in the coming years.
No single company will get the lion’s share of the investment or aid. Instead, dozens will benefit in addition to Peugeot and Total, which are building a cell plant in Kaiserslautern, Germany. Funds will also trickle into suppliers of parts or raw materials including Siemens, Umicore SA, Solvay SA and Manz AG.
Scarred by losing control of the solar industry in the last decade, Germany is leading the push. The nation was the biggest producer of solar cells in the early 2000s before Chinese companies backed by government loans took the lead.
When it comes to batteries, Economy and Energy Minister Peter Altmaier is focused on the 800,000 jobs in Germany tied directly to car manufacturing. Batteries account for about a third of the value of an electric car, and without facilities to make those in Europe, more jobs will go to Asia, Altmaier has said.
“There’s going to be huge demand in Europe for battery cells,” Altmaier said on ARD Television in June. “We must have the ambition to build the best battery cells in the world in Europe and Germany.”
Sefcovic envisions 10 or 20 “gigafactories” making battery cells across Europe and with his support the European Battery Alliance is seeking to coordinate research that will be the foundation of the plan. NorthVolt intends to be one of the major battery makers, feeding BMW and other major automakers.
“If we want to be one of the major manufacturers in Europe by 2030 we need to build about 150 gigawatt-hours of capacity,’’ said NorthVolt Chief Executive Officer Peter Carlsson. “The customer demand is so strong that we are accelerating our plans. We have taken a huge step on the way to create a new Swedish industry that will have a big impact in cutting our dependence of fossil fuels.’’
Zak Mir: Small Cap Highlight ECR Minerals #ECR – Gold back in the spotlight as slowing global economic growth spikes renewed appetite
By Zak Mir, Financial Journalist
- Positive forecast for gold prices
- Australia Gold production ramp-up
- MicroCap Australian Gold explorer focus
Positive forecast for gold prices
Sharp declines in global stock markets over the past few weeks saw Gold hit a three month high as political uncertainty continues to grow across the world.
In August prices for the precious metal fell below $1,200 per troy ounce mark for the first time in more than two and a half years’, down 12% since April. The turn largely caused by the US Dollars unexpected performance and aggressive monetary policy marked it’s worst losing streak since 2013.
However, October has seen a marked turnaround in the Gold price: the yellow metal grew by 3.3% in October, and continuing into November saw $1,233 per ounce as investors and hedge funds continue selling off global equities in search of reduced risk amidst geopolitical and economic uncertainty. Safe haven demand for gold has been driven by ongoing fears of a trade war between the US and China, growth concerns in China and the ongoing Brexit saga amongst a number of other issues.
Observers have been universal in their support. Mark O’Byrne, research director at Dublin-based GoldCore said: “Safe-haven gold is again acting as a hedge and safe-haven asset, exactly when investors need one.” “Throughout its history, Gold has served as a stable, safe haven investment during times of economic slowdown and following the International Monetary Fund (IMF) downward revision of the global economic growth for next year we might see more investors buying up the commodity.”
Others have noted how the nature of intra-year seasonal cycles may are likely to lead to increase in the price of gold. The Street says “massive washouts like the one we’re experiencing in gold right now are the fathers of subsequent rallies”.
Speaking on the Bloomberg Markets podcast Ruth Crowell CEO of the London Bullion Market Association discussed how the groups Annual Gathering this year predicted the most bullish forecast since 2012 with a forecast of $1,585 per ounce for next October. Ruth explains that this years price is reflected by ‘the macroeconomic outlook, ultimately talking about a lot of concerns’. Meanwhile a poll conducted by Reuters this month they found that of the 39 analysts and traders polled they expected gold prices to average $1,300 an ounce in 2019.
Australia Production Ramp Up
On the supply front, according to Bloomberg the world’s largest miners look set to increase spending for the first time since 2013 while the value of sector M&A activity has hit the highest levels in six years.
As a result, Gold production looks to set for further ramp ups through the end of 2018 and into 2019.
In particular production in Australia, the world’s second-largest Gold producer, may rise to a record this year and next as a stream of new projects come on line. Comments from Australian mining consultancy Surbiton Associates in the Sydney Morning Herald highlighted how Australian gold miners, among the lowest cost globally, have enjoyed high margins in recent years, with output boosted by the strengthening US dollar, which has in turn ‘supercharged’ Australian dollar prices.
MicroCap Australian Gold explorer focus – ECR Minerals
While the giants such as Newcrest Mining, AngloGold, Newmont Mining and Barrick Gold Corp tend to dominate the headlines, this upturn in sector activity has seen a marked increase in funding for small and microcap Gold exploration companies. Following a strategic financing round in July 2018, microcap Gold exploration company ECR Minerals has delivered a steady stream of exploration news updates, which has resonated among institutional and retail investors during Q3. ECR are conducting exploration activities across their numerous projects in Victoria, which is by far the most accessible and productive area of gold in Australia. In the 70 or so years from the 1850’s until the 1920’s, approximately 2,100 tons of officially recorded gold was recovered from Victoria and today it continues to be a favourite area for metal detector prospecting.
Listed on London’s AIM market, ECR’s exploration projects underway include Avoca, Bailieston, Moormbool and Timor gold projects in Central Victoria.
In mid September, ECR announced that it had ‘identified eight principle targets within the Company’s five exploration licence areas’ and had developed an exploration programme ‘designed to test surface gold mineralisation across the licence areas.’
At the end of September the Company confirmed gold mineralisation, with 22 samples from 76 containing gold grades ranging from 0.5 g/t to 67.4 g/t (2.17 ounces per ton). Their second assay results proved positive too, with 29 samples delivering gold mineralisation ranging from 0.56 g/t Au to 22.9 g/t Au;
ECR’s next rock chip sampling results will come from the Creswick area, where prior mapping has revealed a large gold system. Sounds promising.
So whether you’re buying bullion, investing into Gold majors as a proxy for the yellow metal or speculating on Microcap Gold explorers, the shiny near term outlook for Gold, and in particular Gold explorers operating in Australia looks unlikely to be tarnished