Morris R. Beschloss 2017-11-15 02:08:49
What does the metals surge mean? While formerly not anticipating a multiyear lag in the overall industrial metals surge since the 2012 end of the five-year financial crisis, few expected the metals surge comeback in the current year. With U.S. manufacturing and exports suffering from an expected continued downturn, no one predicted the return of such industrial metals as copper, palladium and zinc, which now have actively hit multi-year highs as a moderate U.S. economic comeback distinguished itself this year. In fact, the subsequent multiyear comeback has been attributed to a weakening dollar, supply cutting of less-active mining companies, China’s concentration on greater non-Co² production and overall export demand. According to this year’s overall industrial metal usage volume, the aforementioned metals volume has jumped to an overall increase of 22% by midyear 2017 after a 19% increase in 2016. This is its highest level since the end of 2013. What is particularly impressive in such unexpected increases is that a downturn had been expected this year after a reasonable uptick in 2016. Due to the sensitivity of industrial metals, which are considered a major indicator of industrial manufacturing as a whole, there were no previous indications that such critical metals as copper, zinc and palladium would have the great year that they now are enjoying. In attempting to project a climb of overall U.S. manufacturing, the congressionally-passed initiatives, signed off by President Trump, will play a major role in the GOP’s forthcoming midterm electoral success. Also helping Trump’s 2018 political rebound success will be the GOP administration’s ability to further accelerate the production level of American factories, the return of previously divested facilities offshore and the incentives offered to bring hundreds of billions of dollars of funds back to the U.S., through tax and infrastructure-improvement incentives. As the turbulent year 2017 comes to an end, the combination of continued low interest rates, a weak dollar and a comeback in industrial/commercial construction such as housing, office buildings and a continuance in transportation equipment, as well as pipeline expansion will play a heavy role in the economy’s upward direction. If these developments occur simultaneously, such positive economic expansion will play a decisive role in the GOP’s potential midterm election success as well as a major economic recovery. U.S. ENERGY EXPORTS TAKE OFF SUBSTANTIALLY When President Barack Obama lifted the 1975 U.S. export oil embargo to gain the GOP votes needed to pass the fiscal 2017 annual budget in early October 2016, he did this despite his desire to further curb an already fading oil production in favor of renewables. It also opened the door to a dramatic oil and natural gas rebound, which the outgoing president felt would be negated by an expected Hillary Clinton presidency only a month later. Oil prices have continued to be stuck near $50 a barrel, one-half the WTI price before the great financial recession of 2008-11. But with drilling rig costs and various associated supplies greatly decreased, this has opened the door to already substantial oil exports (1.2 million barrels per day), as well as a surge in exports of liquid natural gas, primarily to Southeast Asia, but also lately to Europe. These have provided a meaningful upward surge in overall U.S. exports. While both world-leading 10-million barrels-per-day producers — Saudi Arabia and Russia — have been unsuccessful in getting prices up due to the United States’ vastly increased “shale production,” they have kept world prices from rising. U.S. shipments are spreading to other parts of the world, putting an even greater lid on competitive oil and natural-gas pricing. This could signal greater price-cutting in the future since worldwide demand in the near future will not match the heavily increased fossil fuels now reaching world markets. With U.S. gasoline demand hanging in at around 20 million gal., per day, less than half is provided by light Texas-based domestic production. The other half has been provided by Saudi Arabia and Venezuela import-based oil usage. This is due to foreign owned U.S. refineries that have been controlled for years by the Saudis and Venezuelans. However, it is expected that this will be partially offset by a dramatic reduction in Venezuelan activity due to the latter’s serious internal economic crackup, putting U.S. refineries back into play most recently. When projecting into 2018 and beyond, the totality of America’s oil and natural-gas production is expected to reach a 50% increase as the calendar flips over to the 2020s. Such developments are considered a near certainty. Metals volume jumped to a 22% increase by midyear 2017. While a Hillary Clinton presidency likely would have increased the 10% proportion of ethanol to each gallon of gasoline, plus the shutting down of the remaining U.S. coal mines despite its need for using thermal coal for steel production. The Trump presidency has said it is totally committed to the coalmines rebound in West Virginia, Virginia, Kentucky, eastern Ohio and eastern Pennsylvania. Only New York has put a lid on coal mining in a state that is dramatically opposed to all initiatives stemming from the conservative Trump administration’s economic growth initiatives. The changes that will be occurring early in 2018, impacting the return of U.S-based production and manufacturing activity, likely will assure the administration a major political plus prior to the early November 2018 midterm senatorial and congressional elections. MORRIS BESCHLOSS is a global economic analyst, award-winning long-term top business executive, and avid blogger for all aspects of worldwide fi nancial, geo-political, and economic happenings
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