Raw materials, metal prices to stabilize
These are turbulent times for the metalworking field. Although we are in a phase of global economic upswing, two main factors threaten the recovery: the cost of raw materials and their availability. To describe the current and near-future scenario of raw materials, the Italian mechanical engineering association ANIMA Confindustria held a webinar dedicated to the companies operating in the mechanical supply chain on Friday, July 23, 2021.
The Study Center of Confindustria Brescia has conducted a survey on the impact of raw material price increases on a sample of 132 companies in multiple sectors (food, chemical-rubber-plastics, engineering, fashion, and others). Achille Fornasini, Professor of Technical Analysis of Financial Markets at the University of Brescia, presented the results of the study, that confirmed the current general feeling of the industry, i.e. the difficulty in supplying raw materials and/or semi-finished products as well as the increase in average prices of sea freight. The industrial margin is thus in danger of being compromised, as there is no certainty of being able to charge the price increases onto the customers. The trend of the US dollar, which is inversely proportional to prices, is interesting: this suggests a progressive weakening of the euro in the future. Other costs have skyrocketed as well, although current trends suggest a gradual settling (and a possible decrease). This is the case of polymers such as polyethylene and polypropylene, natural rubber, and cardboard for packaging. There has been a general stabilization for both ferrous and non-ferrous metals, except of course for tin, up by +117.4% with a stock down by -64%. Therefore, the semiconductor crisis seems to be far from over.
Mr. Alberto Xodo, VP Sales at the London Metal Exchange, also presented an in-depth analysis of the trend of LME and S&P 500 prices (rebased to January 2, 2020). The trend is similar to the results of the Confindustria survey, i.e. an overall correction in metal prices, except for tin, up 82%. Also noteworthy is the gradual release of metals into the market by the Chinese State Reserve Bureau. The first release of copper, zinc, and aluminum took place on July 5, while the second is scheduled for July 29. Although these volumes are very small compared to daily consumption, they indicate the attitude of the Chinese government to slow down and, if possible, reverse commodities trends.
The event concluded with a look at hot-rolled coil prices in the European Union: after hitting all-time highs from 2019, we are finally experiencing a slowdown, with the first significant price drop occurring between June and July 2021.
Towards the end of the year, we hope to see a better overall picture and a further deceleration of commodity prices.
Image credits: worldsteel / Shawn Koh