I guess it would probably be fair to characterise the dying year of 2018 as pretty mediocre. At the beginning, it looked promising. The advance of electric vehicles and the attendant surge in battery demand was going to drive metal prices, headlined by cobalt, nickel, copper and - although more difficult to track - lithium, resulting in a firm tone to the overall market.
Well, up to a point it worked; metals had a kind of steady first half, without there being any fireworks. Cobalt remained reasonably firm, nickel had a (pretty minor) look at slightly higher numbers, copper flopped around a bit, with initially limited change. The second half of the year, though, has been less than inspiring.
It was always a big ask to expect the EV development to have such an immediate impact. I recall after the 2017 LME Dinner writing a piece suggesting that as all the cobalt traders I knew were telling me it could only go higher, perhaps there were some longs looking for a chance to get out. Likewise, I pointed out that it was unrealistic to expect nickel to rally to any significant degree when the market was staring at such a high level of LME stocks; and, while I absolutely believe internal combustion engined vehicles are on the way out, one has to be realistic about how long that change will take, particularly in terms of the necessary charging network.
Still, the first half wasn’t too bad. But the second half was pretty poor. What changed? Unfortunately, we have to look towards politics rather than economics or markets to see the answer to that question.
For sure, President Trump’s sanctions and tariffs have more political than economic motivation - that seems obvious. Indeed, one could argue that they support short-term political gain absolutely at the expense of long-term economic prosperity; protectionism has never been an adequate answer to pretty much any question.
The UK is paralysed by the seemingly endless Brexit soap opera, France is racked by anti-Macron protests, Germany is struggling to see its way past the departure of Angela Merkel, Italy is - still or again - a basket case. Russia seems to be moving closer and closer to a kleptocratic dictatorship, China is struggling to get to grips with the way it is moving from a manufacturing to a consuming economic base. Wherever you look, pretty much, there is fracture and discontent.
I have no solution to this; but I do have some thoughts for the UK, at any rate. It’s probably a better than even chance that there will be a general election during 2019. On the surface, maybe it’s a difficult choice. The incumbent party looks like the weakest government since Lord North, a bunch of chancers all more interested in self and their shot at the top job than they are in co-operating to resolve the current political mess. Time to give the opposition a chance, then? Well, the problem with that is that the opposition is no longer the slightly left of centre party which has traditionally balanced the slightly right of centre one currently in power. It’s been hollowed out from the inside and is now an extreme hard-left marxist threat. But for those seduced by “Cuddly” Karl, “Gentle” Jeremy and “Jovial” John (although it’s difficult with him to see anything other than “Bombs and Bullets” IRA Johnny McD) here’s a personal little anecdote that shows where that can lead.
Growing up in Germany in the 1920s and 30s, my mother, her brothers and sister had a governess, who stayed with the family even as the children grew into their teens. When they moved to London, though, she stayed in Germany, where she went through the Second World War and the subsequent division of the country. She was a Berliner, and returned there, where she lived in the Soviet Zone, which became the DDR. Each year, at Christmas, my mother sent her a Christmas present. Each year, it didn’t arrive - presumably falling foul of the border guards. So my mother switched to books; same result, of course, since books are anathema to controlling totalitarian states. So she went to a box of chocolates; they arrived, but each one was carefully smashed to pieces, just in case it contained some evil western propaganda, I suppose. Finally, my mother sent just plain bars of chocolate - they were hammered to crumbs as well, although I struggle to understand what message they could have contained that needed such treatment.
A petty issue, I know, but that sort of mindless vindictiveness towards an old lady speaks volumes; it’s the little issues like this that truly demonstrate the difference between freedom and state control. Worth remembering when in the voting booth, if the (expected) election does arise.
Oh, and here’s the New Year Quiz. It’s on the same sort of subject, and the question has two parts:
- How many people were killed attempting to escape from the Marxist Soviet bloc, during its existence, to the evil capitalist west? (All methods count - shot, hung, torn to pieces by guard dogs, electrocuted, beaten to death by border guards, and any I’ve missed.)
- How many people died trying to make the opposite journey, in other words from evil capitalist west to Marxist utopian paradise?
Just as a small clue to the answer to one of the parts, mathematicians and philosophers still debate whether zero is genuinely a number.
Happy New Year to all readers. Back to more metal-relevant thoughts next week.