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Aluminum prices in London reached their highest in two years as the industrial metals rebound theme continued, driven by a combination of supply constraints and the prospect of increased demand in China and the US.

The latest driver for the silvery-white, lightweight metal, used in everything from vehicles to aircraft to window frames to soda cans, comes as China, the world’s top producer, signaled overnight aggressive emission-cutting targets for smelters, in return, tighter metal capacity.

In a further boost for the bulls, China’s State Council pledged to strengthen capacity limits in industries from steel to alumina in a work plan for energy conservation and carbon reduction in 2024-25. The move to constrain additional supply comes at a time when the transition to greener energy is boosting demand for copper and aluminum.

The country will strictly control new capacity for copper smelters and alumina output, and take a reasonable approach in allocating fresh capacity for silicon, lithium and magnesium, the government said late Wednesday.

The government also reiterated strict implementation of the “aluminum swap scheme,” or the requirement for any new smelter to be matched by closure of an existing one. New capacity for aluminum, alumina, polysilicon and lithium batteries must meet advanced levels of energy efficiency, it added. –Bloomberg

With the US economy chugging along with the US government spending $1 trillion every 100 days, i.e., stealth stimulus, demand for metals and other commodities has increased. Easing in China has also boosted the prospect of demand increases for industrial metals. However, Chaos Ternary Research Institute wrote in a note that a near-term pullback in aluminum prices is quite possibly because of inventories in China and deliveries to the London Metal Exchange, which remain elevated.

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“Global Trade War Looms, But It’s Not Just Trade War To Fear”

May 28, 2024

“Global Trade War Looms, But It’s Not Just Trade War To Fear”

History, Humility, and Wishful Thinking

The UK election and the “I will protect you, but forgot my umbrella” Tory campaign have both been shaken up by its pledge to bring back conscription for 18-year-olds. This is seen as a desperate gamble and sad joke by many commentators, and even ex-military leaders say it’s silly to enroll unskilled, unwilling young adults when the armed forces need more equipment of all sorts, which the recent 2.5% of GDP defense spending pledge falls very far short of. Yet the joke must also be on those laughing when the global backdrop is so very serious.

Stop thinking about Friday’s US PCE deflator data for a moment and look at the bigger picture. The main Bloomberg headline today is the G7 warning China over its trade practices. They want “balanced and reciprocal collaboration,” and will “consider taking steps to ensure a level playing field.” The US is already going to let tariff exclusions on hundreds of Chinese items expire, and the EU may be leaning towards a high tariff on Chinese EVs. Elsewhere, China is asking South Korea to maintain stable supply chains, as it moves closer to the US, and even Brazil, Chile, and Mexico have recently raised tariffs on Chinese steel.

In short, global trade war looms, and as Bastiat noted, “If goods don’t cross borders, soldiers will.” The problematic inverse is that even Adam Smith implied if some goods cross borders, soldiers don’t need to, and others won’t be able to when needed.

It’s not just trade war to fear. China just finished a huge military exercise that clearly rehearsed a blockade of Taiwan and says it will no longer accept US congressional delegations to Taipei: one including the CEO of Nvidia just opted to visit anyway…

…click on the above link to read the rest of the article…

Hoot of the Day: No One Wants Green Energy if It’s Too Cheap

May 22, 2024

Hoot of the Day: No One Wants Green Energy if It’s Too Cheap

Treasury Secretary Janet Yellen wants the EU to hike tariffs on China just as the US did.

Curbs on Cheap Chinese Exports

The Guardian reports Janet Yellen urges EU to join US in curbs on cheap Chinese exports

Janet Yellen, the US treasury secretary, has urged the EU to intervene urgently to dampen the growing export levels of Chinese cut-price green technology including solar panels and wind turbines, pushing European leaders to move to a full-scale trade war.

At the same time she urged German bank executives on Tuesday to step up efforts to comply with sanctions against Russia and shut down efforts to circumvent them to avoid potential penalties themselves that could see the US cut them off from dollar access.

Her remarks, in Frankfurt, come just hours after the European Commission president, Ursula von der Leyen, gave her strongest hint yet that the EU would join the US and impose tariffs on Chinese electric vehicles after a soon-to-be completed investigation into alleged state subsidies into the automotive industry in China.

Wind turbine manufacturers in the EU have protested that Chinese rivals are undercutting them by 50% in a move that is appealing to cash-strapped state and regional authorities facing targets in reductions of greenhouse gases.

China has signaled it will retaliate against any tariffs with potential duties on French brandy, EU wine and dairy products.

Von der Leyen said Europe would take a different approach to the US. While an increase in tariffs is expected, they are unlikely to match the rate imposed by the US.

Von der Leyen told the Financial Times that China had “massive overcapacity” that was “flooding” the EU market with “artificially cheap products”.

She said she expected the investigation into alleged Chinese state subsidies launched last September and due to be finished by 5 June, to conclude there were “excessive production subsidies”.

Wind Power

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China Shock II Is Coming, the EU Will Be Hit Hard, Then the US

May 22, 2024

China Shock II Is Coming, the EU Will Be Hit Hard, Then the US

China Shock

Eurointelligence discusses China shock in its article Technology Is Why We Are Losing.

We are not sure that the effect of high tariffs on Chinese electric cars will work quite as intended. We are also skeptical of hydraulic theories of global trade flows – of Chinese goods suddenly starting to swamp European markets.

The much bigger problem at least for German industry has nothing to do with trade policy, but with China crowding in on previously monopolistic and oligopolistic markets dominated by German firms.

Handelsblatt alerts to research just published by the economics team of Allianz that in our view comes much closer to explaining the current dynamics. Previously, the partnership between Germany and China was complementary. The Germans built the factories and the Chinese made the consumer products. Or the Germans specialized in fuel-driven cars, and the Chinese in electric cars. China is now challenging Germany in areas Germany dominated previously. These are the largest parts of the German industrial economy: machines, chemical and electrical engineering. The study says that in many segments of the market, the Chinese are more successful than the Germans. Ludovic Subran, the Allianz chief economist, predicts that the China boom will be followed by a China shock.

We see this similarly. In our own research on the shifting nature of German competitiveness, we find that the most important issue is not trade, but technology. Digital technologies are encroaching on classic engineering. Apple’s latest commercial of a large steel press crushing a whole bunch of analogue devices caused a lot of criticism. Apple apologized, but the commercial is a good visualization of what is currently happening to parts of the German economy…

…click on the above link to read the rest of the article…

Can China Dethrone the US Dollar as Global Reserve

December 24, 2019

Can China Dethrone the US Dollar as Global Reserve

As a result of this ‘trade war’ China has let the yuan slide versus the USD which is a warning to Trump, specifically Mnuchin.

On the US dollar as reserve currency, that is a tough thing to break especially for China since the yuan is not freely convertible. China has renminbi and yuan; one they peg to the dollar and the other is circulated in China. Try converting USD to yuan in Paypal for example? The option is not there. Payments from the west to china sellers by Paypal (for example) are only in dollars.

It is a complex subject since China is the only foreign nation with a direct link into the US Treasury for purchase of US debt instruments, bypassing the Fed’s crooked relationship with its crooked primary dealers. This is done to manage China’s global trade relationships via the value of its currency which is somewhat pegged to the dollar (even if China and Trump claim otherwise) thus evading Federal Reserve gamesmanship. That’s why Trump messing with China is so dangerous, even if China has few options right now.

As a result of this ‘trade war’ China has let the yuan slide versus the USD which is a warning to Trump, specifically Mnuchin, popularly known as one of the most slippery dealers (IndyMAC and One West) to ever walk the earth (and China knows that). China is hoping that a lower yuan will offset tariffs just as the US has ‘weaponized’ the dollar and has imposed sanctions and tariffs on China. Because the sums are so vast with China holding so much US debt, and because China depends on exports to the west, China is somewhat boxed in.

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The Masses Are Being Conditioned to Ignore the Economic Bubble

December 5, 2019

The Masses Are Being Conditioned to Ignore the Economic Bubble

In the second week of October, after the “partial” U.S.-China trade deal was announced to much fanfare, I made this prediction:

US and Chinese officials rarely waste an opportunity to use trade talk headlines to head-fake markets with false hope. Rumors of a “partial” or tentative trade deal are circulating today, with MORE trade talks in a month or two. In other words, “more trade talks” means there is no deal of any substance and there’s plenty of time for the whole thing to fall apart once again. I give it less than a month. In the meantime, there will be plenty of other distractions for the general public, including the impeachment circus, tariffs against Europe, tensions in Syria, the Brexit mess, etc, etc.

My estimate was incorrect; it took a little over one month for the whole thing to fall apart. That said, I think the primary point remains the same. The trade war is not going to end anytime soon and there is a very good reason why this is the case: It serves the globalist agenda as a perfect distraction for the collapse of the “Everything Bubble” and the launch of the global economic reset into a what the elites call a “new world order”.

But let’s go back for a moment to understand what just happened. A month ago, the trade deal was treated as essentially done. China had partially folded on most of Trump’s demands and Trump was going to pull off a major economic victory just in time for the 2020 election season. The Dow was going to rocket past 30,000 and Trump’s second term was now assured. This was the narrative in the majority of the alternative media, and I have to say, it is sad to see so many otherwise intelligent analysts make such a huge blunder.

…click on the above link to read the rest of the article…

America’s trade policy will end up destroying the dollar

December 1, 2019

America’s trade policy will end up destroying the dollar

America’s tariffs against China are already showing signs of undermining the global economy and will create a funding crisis for the Federal Government when it leads to foreigners no longer buying US Treasury debt and selling down their existing dollar holdings. A subversive attempt by America to divert global portfolio investment from China by destabilising Hong Kong will force China into a Plan B to fund its infrastructure plans, which could involve actively selling down her dollar reserves and hastening the introduction of a new crypto-based trade settlement currency.

The US budget deficit will then be financed entirely by monetary inflation. Furthermore, the turn of the credit cycle, made more destructive by trade tariffs, is driving the global and US economy into a slump, further accelerating all indebted governments’ dependency on inflationary financing. The end result is America’s trade policies have been instrumental in hastening the end of the dollar as the world’s reserve currency, ultimately leading to its destruction.

Introduction

For almost two years President Trump has imposed various tariffs on imported Chinese goods. He advertised his tactics as hardball from a tough president who knows the art of the deal, taking his business acumen and applying it to foreign affairs. He even proudly described himself as a tariff man.

His opening gambit was to impose tariffs on some goods to get leverage over the Chinese, with the threat that if they didn’t cooperate, then further tariffs would be introduced. The Chinese declined to be cowed by threats, introducing tariffs themselves on US imports, particularly agricultural products, to bring pressure to bear in turn on President Trump.

…click on the above link to read the rest of the article…

Central Bankers Are Starting To Lose Control

November 20, 2019

Central Bankers Are Starting To Lose Control

All is good. The trade war between China and the United States comes to an end, the global economy has weathered the worst, and central banks are making sure that markets continue to go up. This is the scenario currently shaping the consensus.

Kevin Duffy is a battle-proven veteran in the risky business of short selling. He co-founded Bearing Asset Management in 2002. He and his partner were vocal critics of the 2007 credit bubble, successfully shorting many of its most aggressive players including Countrywide Financial and Bear Stearns. Prior to Bearing, Kevin co-founded Lighthouse Capital Management and served as Director of Research from 1988 to 1999. He chronicled the excesses of the Japan and technology bubbles of the late 1980s and the late 1990s. Kevin Duffy bought his first stock at the age of 13. He has a passion for Austrian economics and is the author of the popular Notable and Quotable blog.

Kevin Duffy remains skeptical. The experienced short seller warns that the super easy monetary policy is getting less and less effective. «This year, we’ve had this big sea change in terms of the central banks going back to easing and being more accommodative. Yet, the bond market is basically saying: no more! Easy monetary policy is not having the same stimulative effect as it had in the past», says Duffy.

Although it’s been a brutal year for short sellers, Duffy is convinced his time will come soon. In this in-depth conversation with The Market, he explains why he’s betting against stocks like BlackRock and MSCI – and which names are on his buy list.

Mr. Duffy, investors are in «risk on» mood again: concerns about a global recession are waning, the S&P 500 is at record levels. What’s your take on financial markets?

…click on the above link to read the rest of the article…

Global Supply Chains Imploding As Quarter Of German Firms Plan To Leave China

November 14, 2019

Global Supply Chains Imploding As Quarter Of German Firms Plan To Leave China

The Bussiness Confidence Survey 2019/20 published by the German Chamber of Commerce in China, in cooperation with KPMG in Germany, finds that almost a quarter of German companies operating in China are preparing to relocate production facilities.

The survey was conducted from late July through mid-September and had 526 member companies out of 2300 respond. Out of the 526 member companies, 23% of the respondents said their factories will be transferred out of China or are contemplating the move.

Among the German companies leaving or actively planning to leave China, about 71% blame increasing labor costs; 33% cited unfavorable policy environment; 25% said the US-China trade war, and 22% said market access barriers.

Of the respondents who’ve resorted to relocation, 52% have chosen Southeast Asia, 25% India, 19% Central/Eastern Europe, and 17% Western Europe. Only 5% of respondents said they were going to move operations to the US, contrary to President Trump’s claim that companies exiting China will be rushing to the US.

Respondents said the US-China trade war had created a toxic and “gloomy” business outlook that has contributed to the global synchronized slowdown.

About 83% of German companies said the trade war has directly or indirectly affected their operations. “Business expectations have dropped to their lowest level in years with only 27% of surveyed German companies expecting to reach or exceed their business targets in 2019,” the survey warned.

Jens Hildebrandt, Executive Director of the German Chamber of Commerce in China, said: “2020 is likely to be characterized by uncertainty, stemming from an unresolved US-China trade dispute related with a decelerating Chinese and global economy.”

German firms also said market access barriers and regulatory hurdles stunted their growth in China, with 66% of firms saying they’ve encountered either direct or indirect market access restrictions.

…click on the above link to read the rest of the article…

U.S.-China Relations in the Years Ahead: The Trade War Is a Sideshow

October 30, 2019

U.S.-China Relations in the Years Ahead: The Trade War Is a Sideshow

As President Trump has said many times, we rebuilt China over the past 25 years. No truer words were spoken, but those days are over.

The United States now recognizes China as a strategic and economic rival.

– Vice President Mike Pence during a speech last week at the Woodrow Wilson International Center for Scholars

The truth is that China is a strategic competitor at best that uses coercion and corruption as its tools of statecraft. (Applause.)

We’ve reconvened “the Quad” – the security talks between Japan, Australia, India and the Untied States that had been dormant for nine years. This will prove very important in the efforts ahead, ensuring that China retains only its proper place in the world.

– Secretary of State Mike Pompeo in a speech last week to the Heritage Foundation

I don’t take the U.S.-China trade war seriously, because I don’t expect a transformative deal to come of it. Specifically, I see the current trade charade as little more than a warmup to a far more serious, unpredictable and dangerous conflict between the U.S. and China in the years ahead.

Last December, in a piece titled Is U.S. Geopolitical Strategy Experiencing a Monumental Shift?, I explained how the U.S. was repositioning its foreign policy to focus on China, and how this would set off a long-lasting and enormously consequential feud between the dominant empire and the emerging power. The post concluded with the following thought:

I’ve now seen enough to seriously consider that we may be entering an entirely new geopolitical environment dominated by vastly increased tensions between the U.S. and China. If so, it will likely last a lot longer than you think as leaders in both China in the U.S. will be looking for a scapegoat as their crony, financialized economies struggle under unpayable debt and unimaginable levels of corruption.

…click on the above link to read the rest of the article…

Here’s How the New U.S.-China Trade Talks May End

October 10, 2019

Here’s How the New U.S.-China Trade Talks May End

With the U.S. and China in the midst of a new round of high level trade talks, this Thursday marks 22 months since tariffs were launched and the trade war began. Far from being “easy to win”, the trade war has lasted far longer than most analysts in the mainstream and alternative media predicted. In past articles, I have warned that the trade war itself is probably not meant to be won at all; rather, it is a massive distraction and a convenient scapegoat as global banks set the implosion of the Everything Bubble in motion. I continue to stand by this assessment, which is why I think it is unlikely that the current talks with China will accomplish much of anything.

This conclusion runs in stark contrast to all the hype we heard in the investment community in September. The way stock markets levitated, one would have thought a deal was assured. Never underestimate the power of blind optimism, I suppose. I believe there are a very limited number of end games to the meeting, none of which will result in an actual “deal”. However, it’s important to understand the dynamics at play here.

First and foremost, if we are to approach the trade war from a mere surface examination, there is really no incentive for China to capitulate to Trump’s demands. There is only one year left until the 2020 elections, and while BOTH economies are certainly seeing a downward plunge, China is hardly crippled by tariffs on exports to the U.S. China can simply bide its time, waiting to see how the U.S. election unfolds. The more unstable the U.S. economy is in 2020, the less likely it will be that Trump will win a second term.

…click on the above link to read the rest of the article…

Geopolitical Signals Of Global Economic Crisis Abound

October 10, 2019

Geopolitical Signals Of Global Economic Crisis Abound

As I write this, news feeds are buzzing with questions and confusion over the October US/China trade talks. In September there was a massive propaganda campaign within the mainstream media to push the notion that a deal with China was imminent, which boosted markets otherwise on the verge of a plunge due to a hailstorm of bad financial news. This media campaign also indicated to me that there would be no deal in October – best case, there will be an announcement of “progress” and a temporary pause in tariffs, which will fall apart once again in a month’s time. Worst case scenario, the talks will falter before they ever really begin. Either way, the trade war will continue well into next year.

As I predicted in my article ‘The Ugly Truth About The Trade War’ in September:

“…Every couple of months the trade war deal hype is recycled and every couple of months the markets are hit with renewed disappointment. The latest trade talks are set for Octoberand if they happen at all, it is unlikely they will result in anything of significance. At most, they will be heralded as the “start of a great deal” and both sides will claim “progress was made”, and then, once again, nothing will happen and the conflict will accelerate. You would think people would have figured it out by now, but the investment world learns very slowly and functions solely on blind hope. At the very least, economic analysts are starting to realize that no deal is coming and that the situation is only going to get more tense. In fact, it is designed to get more tense…”

…click on the above link to read the rest of the article…

The Ugly Truth About The Trade War

September 5, 2019

The Ugly Truth About The Trade War

This past week was an interesting exercise in false expectations and assumptions. Once again, trade war theatrics were used to stall a stock market plunge as insinuations of a possible “deal” were made by Donald Trump, followed by China’s claim that maybe, just maybe, they would not immediately issue a new round of tariffs right now, but possibly tomorrow, or in a month…

Then, all hell broke loose again when only a few days later both sides jumped into a new round of tariffs leaving markets confused and algo trading computers bewildered, so much so that sometimes they even buy on bad news thinking it’s good news. This is the problem with the Pavlovian response mechanism – You train a dog to salivate at the sound of a bell because he thinks he’s going to get a treat, but then what if you change the bell, or the treat, or the entire dynamic of the process? The dog’s whole world is turned upside down and he curls up in a ball in the corner of the room to make the mental anguish stop.

This is exactly the kind of reaction the globalists are looking for, hence the stop/start insanity of trade discussions, not to mention the dove/hawk behavior of the Federal Reserve. Everything people once thought predictable is being deliberately discombobulated.

Ultimately the circus and the confusion are only products of peoples biases. They want to believe they will get a treat if they act a certain way when certain indicators signal. They want to believe the trade war can be won, or at least that Trump is trying to win. They want to believe that the Fed will save them with a surge of QE.

…click on the above link to read the rest of the article…

US Slaps New Tariffs On China; One Minute Later China Retaliates

September 2, 2019

US Slaps New Tariffs On China; One Minute Later China Retaliates

The biggest reason for last week’s torrid stock market rally was rekindled “optimism” that the escalating trade war between the US and China may be on the verge of another ceasefire following phone conversations, fake as they may have been, between the US and Chinese side. This translated into speculation that a new round of tariffs increases slated for this weekend may not take place or be delayed.

However, that did not happen, and with no trade deal in sight, at 12:00am on Sunday, the Trump administration slapped tariffs on $112 billion in Chinese imports, the latest escalation in a trade war that’s ground the global economy to a halt, sent Germany into a recession, and given the market an alibi to keep rising because, wait for it, “a trade deal is imminent.”

Only, it isn’t, and 1 minute later, at 12:01am EDT, China retaliated with higher tariffs being rolled out in stages on a total of about $75 billion of U.S. goods. The target list strikes at the heart of Trump’s political support – factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down.

The 15% U.S. duty hit consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch. A separate batch of about $160 billion in Chinese goods – including laptops and cellphones – will be hit with 15% tariffs on Dec. 15. China, meanwhile, began applying tariffs of 5 to 10% on U.S. goods ranging from frozen sweet corn and pork liver to bicycle tires on Sunday.

…click on the above link to read the rest of the article…

Tumbling Yuan Sends Ripples Through Petrochemical Market

August 27, 2019

Tumbling Yuan Sends Ripples Through Petrochemical Market

The trade war between China and the United States has triggered a global economic slowdown thanks to far-reaching tensions between the world’s two biggest economies. Last Friday China lobbed their most recent retaliation back at the United States by announcing tariffs on an additional $75 billion worth of goods. This is just the most recent counterattack in a now yearlong tit-for-tat spat that has seen both countries confront each other again and again with hard-hitting tariffs (you can see a detailed timeline here) and even culminated in Beijing allowing the Yuan reach its lowest value in years, making Chinese goods cheaper to export and, conversely, making U.S. goods more expensive and therefore less desirable in Chinese markets.

Because of the far-reaching economic implications of the trade dispute, United States president Donald Trump has been put under a great deal of pressure from global leaders to de-escalate tensions with China. In response, Trump has announced that he will soon begin trade talks with Beijing in order to reach an accord and end the trade war, but the reality is not so simple, especially as the U.S. president seems to be talking out of both sides of his mouth. In a report titled “Trump sends mixed signals on China trade war as pressure mounts to de-escalate” the UK’s Independent points out that, “on Sunday, [President Trump] seemed to express regret over escalating the trade dispute, but the White House later said his only regret was that he didn’t impose even higher tariffs on China.”

Even if Trump does follow through on his public promises to make peace with China, in many sectors of the economy the damage is already done. One of the most recent casualties of the trade war is the Asian petrochemical market, which just hit its lowest profit margin in months.

…click on the above link to read the rest of the article…

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