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Stainless Espresso: Energy, commodities and robust profits
Stainless Espresso: Energy, commodities and robust profits

17 January 2022 – Energy prices continue to have a significant impact on commodity market performance as the week begins. Emerging market companies are expected to see revenue and earnings growth of at least 20% in Q4 2021. And is the European Union only distracting from its internal problems with its sabre-rattling against Russia?

Base Metals with quiet start to the week, strong oil price

After last week’s increases in prices, especially for aluminium and nickel, Base Metals started the week a little more cautiously. However, there have been no intensive movements and the values are holding at a high level. Small upward and downward swings are more likely due to movements in the dollar.

Energy prices have a decisive influence at the moment. Oil in particular has risen due to high demand. And extremely low temperatures were already reported from the United States last week, which are also driving up prices.

Nickel and aluminium in the weekly outlook

Nickel stocks low

Nickel rose to just under $23,000 per tonne on the LME last week. The highest level since 2011. And rather small increases in nickel stocks are also expected from China this week. In addition, demand from nickel sulphate and stainless steel producers is still high ahead of the spring holidays. This should continue to support nickel values overall.

Energy costs keep aluminium prices up

Even though aluminium production has increased slightly in some Chinese provinces, availability remains tight. The Chinese New Year and production cuts outside China should also support aluminium prices this week.

Reporting season: Robust earnings growth expected for emerging markets

According to market estimates, companies in emerging markets expect a robust increase in sales and profits of around 20%. The fourth quarter of 2021 is likely to be particularly good for energy and commodity suppliers. Here, companies trading in fossil fuels (gas, oil) are expected to see increases of even up to 100%. In Asia, suppliers of chips and electronics are likely to see the strongest swings. Deutsche Bank sees industrial, financial and IT stocks as being of particular interest to investors in the coming months.

Is EU sabre-rattling only a distraction from internal problems?

The Europeans and Nato have once again rattled their sabres in view of the poorly conducted talks with the Russian government on Ukraine. And there are renewed fears of a possible new conflict between Ukraine and Russia.

In the meantime, there are more and more voices saying that a conflict could be unnecessarily started here, which on the one hand is covered by ever new Corona reports and on the other hand is meant to distract from the internal problems of the European Union and its member states.

EU alienates its most important energy supplier

Russia is the EU’s most important energy supplier. Germany, an industrialised country, is particularly dependent on gas imports from there. Even though there are efforts to change this, a short-term solution to Europe’s energy problems is not in sight. This is also shown by the efforts of the European Commission at the instigation of some member states to declare nuclear power and natural gas as sustainable technologies.

In the long run, a continuing European threatening attitude towards Russia, also with possible new economic sanctions, can only lead to new buyers for Russian raw materials being found here – e.g. China and India. Perhaps the Europeans and Nato should finally think about Russian membership in the defence alliance.

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