Europe’s economic rebound to boost industrial metals demand
Wed, 18 Sep 13:31:00 GMT * Europe is world’s 2nd biggest consumer of base metals * Pent-up demand expected after euro zone exits recession * Buying from Europe could tip market balance in some metals By Eric Onstad LONDON, Sept 18 (Reuters) – Increased demand in Europe as it recovers from recession could tip the market balance for some industrial metals, creating small but price-boosting deficits after years of surplus. Europe’s rebound, while expected to be gradual, may surprise investors used to ignoring the continent in favour of China, the world’s biggest consumer of raw materials. “Market thinking has become conditioned to take Europe as a negative for market demand,” said Duncan Hobbs, senior commodities analyst at Macquarie in London. “In a couple of markets, lead and tin, which look finely balanced at the global level today, European recovery could be the difference that tips these markets into deficit overall.” While not swinging the copper market into deficit, European recovery should help reduce the surplus in the red metal, Hobbs said. Europe is still the world’s No. 2 buyer of industrial metals but its debt crisis and recession have hammered demand for them, with double-digit declines from pre-crisis levels. Copper and steel have posted falls of about a fifth while the steepest decline came in tin, where demand sank by almost 25 percent from 2008 to 2012, Hobbs said. But the euro zone emerged from a 1-1/2-year recession in the second quarter, with growth of 0.3 percent, and German analyst and investor sentiment jumped more than expected in September. [ ID:nL5N0HD1G0 ] “Overall, Europe seems to have reached an important inflection point. The recovery in the euro zone should be sustainable, despite an unimpressive pace and the risk of fresh setbacks,” UBS economist Reinhard Cluse said in a note. PENT-UP DEMAND UBS this week raised its euro zone growth forecast for next year to 1.1 percent from 0.8 percent and expects the area’s industrial output – correlated with base metals performance – to rise 1.9 percent next year after falling 1.0 percent in 2013. Demand for metals may undergo a burst of activity as consumers and businesses become more confident about the future. “You’ll go through a period of pain where you don’t replace anything, but over time these assets depreciate so you’ll need to replace them,” said Nic Brown, head of commodities research at Natixis in London. “If you’re a household, you’ve got things like a house, car, white goods, and similarly on the corporate side, I think there will be pent-up demand to replace plants, machinery and vehicles that have gradually aged.” Europe accounts for about 15 percent of global consumption of most industrial metals, with nickel higher at 20 percent and carbon steel lower at 12 percent.
Varin forecast at the Frankfurt show on Sept. 10 that there will be slightly positive growth in European auto-industry deliveries next year. Registrations in the region slipped 4.9 percent at Turin, Italy-based Fiat. Renault (RNO) , which has its headquarters in the Paris suburb of Boulogne-Billancourt, outperformed other mass-market carmakers. Regional sales at Europes third-largest auto manufacturer gained 5.8 percent in August. Renault CEO Carlos Ghosn said last week that the car market may expand slightly more than 1 percent in 2014. Fords Strategy Ford Motor Co. (F) s European sales decreased 0.9 percent in August. Stephen Odell, head of the Dearborn, Michigan-based carmakers business in the region, said on Sept. 9 that it does feel like were running along the bottom of the auto-market contraction. He outlined plans for Ford, which is forecasting a loss of $1.8 billion in Europe for 2013, to expand model introductions over the next five years to 25 from an earlier projection for 10 new vehicles. Bayerische Motoren Werke AG (BMW) , the worlds biggest luxury-vehicle producer, posted 9.9 percent more registrations in Europe.
Germany votes with Merkel set for third term
Merkel’s coalition only has a razor-thin majority in the polls,” the Sueddeutsche Zeitung daily said, adding that many of the near 62 million voters only make up their minds at the last minute. Merkel boasts her current centre-right coalition has been Germany’s most successful since reunification in 1990, enjoying a robust economy and a jobless rate of less than seven percent. But her stated aim for her conservative Christian Democratic Union (CDU) to stay in power with its junior partners, the pro-business Free Democratic Party (FDP), hinges on the smaller party’s unpredictable fortunes. “The continued governing by this coalition remains uncertain,” Gero Neugebauer, a political scientist from Berlin’s Free University said. If the alliance fails to rally a ruling majority, Merkel could be forced back into the arms of her traditional rivals, the Social Democrats (SPD), with whom she governed in a loveless “grand coalition” during her first term. Under the watchful eye of Germany’s European partners, a new eurosceptic party, the Alternative for Germany (AfD) could also prove a wild card, either by clawing enough support to send MPs into parliament or wooing disgruntled centre-right voters away. “For Chancellor Merkel the eurosceptics are becoming a problem,” Spiegel Online commented on the eve of the vote. “If the protest party manages to jump into the Bundestag (lower house of parliament), that may cost the black-yellow coalition power,” it added, referring to the colour code for Merkel’s current alliance. Three polls in the run-up show the AfD, which advocates ditching the single currency and an “orderly dissolution” of the eurozone, falling below the five-percent hurdle needed to enter parliament. But some analysts and pollsters have not ruled it out amid fresh Greek aid fears, stressing it is hard to assess the fledgling party’s chances because it has no election track record and supporters may not own up to backing it in surveys. Merkel again hammered home Europe’s importance for Germany at a last-chance push for votes in Berlin Saturday, saying her country “can only do well in the long term if all of Europe does well”. “This is why the stabilisation of the euro is not just a good thing for Europe but it is also in Germany’s fundamental interest,” she said, as a band belted out “Angie must save the world”. Supporters of stronger stimulus measures have pinned their hopes on the SPD whose gaffe-prone candidate Peer Steinbrueck, 66, has struggled to score points and still trailed Merkel’s conservatives by 13 points in the last opinion poll. A former finance minister in Merkel’s 2005-2009 grand coalition, Steinbrueck has run into trouble during the campaign, most recently with a surly middle-finger front-page photo of him as a non-verbal reply to a question on his stumbling candidacy.