October 20, 2021 – The government in China may be planning to take action on coal prices. SHFE reacts to this with slight price declines. Overall situation unchanged. However, prices will probably rise again. LME hardly reacts to announcement. Eurostat data show that Russia’s gas exports to the EU have increased significantly. Is the EC looking for halo effects in the energy crisis with black swan? And stainless steel scrap more expensive again in the EU.

Stainless Espresso: China announces possible action on coal prices
Stainless Espresso: China announces possible action on coal prices

China announces possible action on coal prices

On 19 October, the Chinese government announced its intention to possibly take measures with regard to the strongly increased coal prices. First of all, the market for coal and coke will be closely monitored. A possible measure is a ceiling on the price of coal.

Decline in some Asian metal values

This has led to a decline in some metal values on the Asian market – especially in energy-intensive aluminium. All in all, however, the price corrections have remained at a low level and apart from some profit-taking and possible expected energy price corrections, little has changed. Especially with regard to aluminium prices, which remain at a high level.

Basic problems in the commodity market remain unchanged

Prices will probably rise again in the coming days, as the basic situation – scarce raw materials, high demand and energy problems – has changed little. This can also be seen in the reaction of the LME. On the SHFE, aluminium went down by about 6%. On the LME, on the other hand, it is currently only down 1.2%. The expectations of Western traders are obviously different.

Simple solutions not always the right ones

The simplest solution for the state to bring some relief in the short term is of course to subsidise energy. And we dare to doubt whether a subsidy is the smartest move in the current political situation with regard to the global trade disputes.

EU energy crisis – is Russia really to blame?

The Russian Federation is the most important energy supplier for the European Union. Even though this is repeatedly criticised by EU politicians, they have done little to find alternatives.

Eurostat: Russia’s gas exports to the EU increased significantly

If we take a closer look at the official figures from Eurostat, the EU statistics authority, it quickly becomes apparent that Russia has already exported significantly more natural gas and other energy products to the EU27 on average in 2021 – approx. 3.6 million tonnes more – than in 2020. Compared to 2019, there is an increase of approx. 1.6 million tonnes and compared to 2018, there is even an increase of more than 4.6 million tonnes of natural gas and related energy products.

Current energy prices with halo effect

Of course, there is also an increase in energy prices compared to 2020. This is even very significant. With a projected 4.5 billion euros more in 2021, this is of course a halo effect. However, if we take 2018 as a comparison, the energy prices per tonne in this category are even 5.5% cheaper than in 2021.

EU desperately searches for culprit with black swan

But a black swan, which is what 2020 was, is a popular means of drawing comparisons and looking for someone to blame, but it is also not a rational means. Which is what not only the European Commission continuously does, but also, for example, the German Green Party’s top candidate Anna-Lena Baerbock, who still has to learn to recognise and understand macroeconomic correlations if she is to become part of a possible traffic light government in Germany.

Qui bono: Who benefits from the energy panic?

And here again we ask ourselves, who benefits from a non-existent energy crisis? At least the EU aluminium and steel producers. This makes it easier to cry out for subsidies.

European stainless steel scrap prices continue to rise

Scrap prices for 304 and 316 stainless steel have continued to rise in the EU. Compared to September, prices have increased between 50 and 100 euros per tonne and grade. Furthermore, some European voices are getting louder that raw materials for stainless steel production are becoming scarce.

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