It is of no surprise that the global economy is being negatively impacted by the pandemic. Analysts have generally agreed that recovery will be “U” shaped, rather than the initially-thought “V” shape. Below are a few of the stories Leeco Trading’s team is closely following.
According to a story published by the BBC, the world is experiencing a sharp deterioration in economic performance, due to the continuing coronavirus pandemic. Many developing countries are being hit hard economically, by way of declining imports demand, less international investment and increases in foreign debt.
Manufacturing.net reported that pressure is growing both domestically and from the United States for Mexico to re-open manufacturing activities, something President Andrés Manuel López Obrador says could happen by May 17 in areas of the country that haven’t been hit hard by the virus. Mexico has lost about 500,000 jobs because of the pandemic lockdown. Mexico has said it is working on a joint plan with the U.S. and Canada to reopen factories, especially auto plants.
The Eurozone economy shrank at the sharpest pace on record in the first quarter as the Covid-19 pandemic forced countries into lockdown. The BBC reported this story, citing a first estimate of GDP between January and March showed a contraction of 3.8%, worse than during the financial crisis. European Central Bank (ECB) President Christine Lagarde said that a sharp downturn in eurozone economic activity in April “suggests that the impact [of the pandemic] is likely to be even more severe in the second quarter.”
According to figures published by Trading Economics, car production in Brazil slumped 99% over a month earlier to a record low of 1.8 thousand units in April 2020, amid business closures due to the coronavirus pandemic. Output dropped for light vehicles (-99.4% to 1.05 thousand); trucks (-95.2% to 0.4 thousand) and buses (-80.1% to 0.4 thousand). Year-on-year, auto production shrank 99.3%.
Mexico’s auto exports tumbled 90.2% over a year earlier to 27.9 thousand units in April 2020, as the coronavirus outbreak forced many businesses to close and people to stay at home. Among major exporters, shipments dropped from General Motors (-92.3%), FCA Mexico (-81.4%), Nissan (-99.7%), Ford Motor (-98.4%), KIA (-66.5%), Audi (-97.7%), Honda (-97.8%), Toyota (-100.0%), Mazda (-97.7%) and Volkswagen (-89.1%). On the other hand, exports from BMW Group jumped 1232.3% to 1.7 thousand from near zero last year.
Below are excerpts taken from an article from Barron’s. Read the full article here.
Covid-19 has hit many industries in obvious and some not so obvious ways. The steel sector, for one, is reeling from falling demand. Falling demand because cars aren’t being produced and construction projects are halted is an obvious impact from the pandemic. But there is also another problem for steel producers no one saw coming: rising raw material prices.
Commodities aren’t supposed to rise when demand is falling, but scrap steel prices are up about 13% year to date and up almost 40% from March lows. That’s a problem for steel producers because scrap is a key raw material.
Steel is the most recycled material on earth. It is put back into steel making furnaces and turned into brand new products. Steel producers, such as Nucor, still want scrap, but there is simply less scrap to be had with the global economies moribund.
Higher scrap prices, relative to steel prices, means lower profit margins unless demand improves and prices can rise.
Very little, after all, about 2020 has been predictable. Scrap steel price movements are just one more example of that idea.