Steel, Aluminum, Copper, Stainless, Rare Earth, Metal Prices, Forecasting | MetalMiner

No-Brainer: A Tata-ThyssenKrupp Merger Would Be Good for European Steel

The combination of rising Chinese steel exports and weak demand has led to an unsustainable situation for steel producers that are losing money day after day. The issue is particularly bad in the U.K., where its steel industry is not enjoying the same protectionism that the U.S. is.

Free Sample Report: Our April Metal Buying Outlook

Last week, India’s Tata Steel announced its intentions to close its business in the U.K. if it cannot find a buyer. Tata Steel‘s giant Port Talbot, Wales, steel plant would be shuttered if it cannot find a buyer and that would all but bring steel production in Britain to an end.

Consolidation Factor

Tata will only produce steel in the Netherlands once it sells/closes its U.K. business. The announcement has increased expectations of Tata merging with Germany’s ThyssenKrupp. ThyssenKrupp is one of the world’s largest steelmakers and the company also provides components and systems for the automotive industry, elevators, escalators, material trading and industrial services.

ThyssenKrupp’s Steel Europe unit is profitable and so are Tata Steel’s Netherlands operations. Both companies have held talks about combining their operations before. If an agreement materializes, it would help both companies achieve scale and cost savings. Also, a reduction of its steel exposure would help ThyssenKrupp focus on its engineering business. The move would likely please investors, at least that seemed to be the case as ThyssenKrupp’s shares jumped to their highest level this year on the news of the possible merger.

How to Save European Steel

The consolidation of the steel sector in Europe makes a lot of sense. Indeed, the industry has waited too long to close or merge underperforming operations, and that has led to a crisis where many business are now cash flow-negative. If European steelmakers knew prices were going to get this low they would have probably reacted earlier. Shutting down capacity is always an undesirable option as companies are unwilling to let their competitors win market share.

ArcelorMittal’s stock price (in black) lagging that of U.S. Steel Corp. (in red). Source: MetalMiner analysis of @StockCharts.com data.

Combining Tata Steel’s Dutch plant with Thyssenkrupp’s operations would create Europe’s biggest steelmaker after Luxembourg-based ArcelorMittal, which is no stranger to the steel crisis in Europe, itself. (more…)

Silver Keeps the Global Precious MMI Rally Going

In March and February, gold prices — whether U.S., Indian or Chinese — were the standout performers, with some even nearly doubling in value as investors stocked up on the hard currency as a haven from a falling U.S. dollar and other global economic turmoil.

Compare Prices With The March 2016 MMI Report

But that’s not the case this month. Gold lost value in all the markets we track, a predictable pullback from its runaway performance during most of the first quarter. The precious metal that’s pacing the globe and keeping our sub-index positive is silver, helping the sub-index achieve a 1.2% increase.

Sure, the platinum group metals were predictably positive, too, but silver’s unique position as both an investment and industrial metal allowed it to gain in all the markets we track and its future potential is stronger as safe haven status doesn’t make up such a huge part of its value as with its cousin, gold.

Secondary Mining, Primary Industrial Usage

Silver is mined alongside just about every industrial metal in the world and selling it has been padding the profits of base metal miners during the first quarter. U.S.-based primary silver producer Coeur Mining reported Q1 production of 3.4 million ounces of silver and slightly more than 78,000 ounces of gold. That was in line with expectations, as the company transitions to lower-tonnage, higher-grade, higher-margin underground operations from two ore sources, Guadalupe and Independencia in Mexico.

The electronics uses of silver are pushing miners to bet their future on the metal as its still the world’s best conductor of electrical current and heat. Electronics in automobiles such as Tesla Motors‘ new Model 3 “affordable” electric car will require more silver than any automobile on the road today. And electronics are already invading the comfort of our conveyances more than ever before.

Free Sample Report: Our April Metal Buying Outlook

When you add electrical transmission and use in renewables to silver’s demand side equation it’s easy to understand why its global prices could easily keep rising independently of its performance as an investment.

What This Means for Metal Buyers

Continue to expect silver and PGMs to experience strong demand independent of investment potential. Gold could still gain back its losses but its prospects, long-term, are not as strong.

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