Of particular interest to many Sheffield companies in the steel and metals sector are the recent protectionist moves and volatility worldwide as the trade-war looms. According to recent research, the worldwide metals industry, valued at 2,700 billion USD, is currently a high risk for investors and enterprise following lack of credibility in management of overcapacity (steel), commodity price volatility, and exposure to environmental and sustainability issues. Notable events in sub-sectors include Iron ore price rises late 2017 and early 2018 on the back of demand switch, but Chinese port inventories stand at record highs, global overcapacity but the high level of import taxes protects some specific markets such as US and Canada, and the non-ferrous sector has returned to earnings growth on the back of strong price recovery. The LME Index has risen 17% in 2017.
The key players in the metal markets are China as the world number one producer and the world number 2 consumer, and Germany as the number 2 producer, the number 2 exporter, and the number 1 importer. The market is capital intense, low profit, and fragmented leading capital investors to err on the side of caution.
Strengths include the recovery of the European automotive sector, successful restructuring in the US, and strengthened cash flow generation in the mining sector. Weaknesses continue to be lack of credibility in management of steel overcapacity, commodity price volatility, and exposure to environmental and sustainability issues.
Within the sectors relating to metals other than steel, prices have increased due to strong demand – in particular, copper, nickel, lithium and cobalt (Especially those particularly used in batteries and electronics). Restraint on supply expansion is likely to lead to a continuation of demand growth exceeding incremental supply. Companies like MetaConcept (bismuth ingots suppliers and suppliers of soldering sticks) continuing to do well.
Contrary to popular belief, the precious metals, gold and silver, are not traded on the London Metal Exchange, but on the over-the-counter market usually referred to as the London Bullion Market, by the members of the London Bullion Market Association. Platinum and palladium are traded on the London Platinum and Palladium Market. Both members of the LBMA and LPPM trade the precious metals spot market on. Many companies involved in minor metals are members of the Minor Metal Trade Association. The LME used to provide trade matching and clearing services to the London bullion market and distributes gold, silver, and gold IRS forward rates on behalf of the LBMA.