Negative Interest Rates And Toyota
MetalMiner | Feb 05, 2016 05:33AM ET
This week, the Bank of Japan introduced negative interest rates in the latest attempt to goose the Pacific nation’s stalled economy.
Essentially penalizing people for saving money seems like a curious thing to do to try to turn around a struggling economy, but it’s not the first time banks have gotten a push to force them to lend. The European Union has done it, too, in recent memory.
Boy does Toyota Motor Corp. (N:TM) ever wish it had a bigger supply chain this week. Source: Adobe Stock/cacaroot.
My colleague and metal price analyst Raul de Frutos wrote that, “negative interest rates mean that depositors must pay regularly to keep their money in the bank. This measure encourages people and businesses to spend, invest and lend money rather than pay a fee to save it and keep it safe.”
Let’s extend this argument to the bearish metals markets. In the spirit of negative reinforcement, why not some negative storage rates from warehouse operators and other metal owners just sitting on low-value stock hoping they can one day sell it for what they paid for it?
Many of our commenters, particularly in the scrap markets, have shared stories about sitting on their metal until things improve.
What about penalties for storing metal and not selling it? Such as the penalties the Bank of Japan is imposing on depositors? What’s good for the goose… Source: iStock
“Small, very small recycler. Storing my supply in a pole barn that is getting very full. Won’t take it in until at least a $100 a ton. Right now in Kansas City (it’s) about $40 a ton,” wrote MetalMiner commenter Patrick Cooney in December.
It, somehow, seems to me that punishing the small recyclers and, in the case of Japan, smaller depositors just trying to save won’t have the desired effect, but we’ll leave this to the experts. If rumors are to be believed, even the Federal Reserve is interested in negative rates.
h2 The Fabled Commodities Turnaround/h2There might be some good news for metal producers and surplus owners later this year, anyway, as Reuters is predicting most metals will hit bottom this year.
My colleague and MetalMiner Co-Founder Stuart Burns wrote, “Indeed, the median view is copper prices could fall further in the first quarter with an average of $4,512.50 per mt with recovery only coming later in the year and into next. Others such as nickel, zinc and tin have more upside and could start to move by the second quarter, but Reuters was at pains to point out that it’s generally going to be a long, hard grind and consumers are not in danger of a sudden and dramatic market rebound.”
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Hmmm, long and hard grind. Maybe that’s not such good news, after all.
h2 Toyota Could Use Some Supply/h2But if metals, particularly high-grade steel, are so oversupplied then why is it entirely possible that the world’s best-selling automaker, Toyota Motor Corp., could conceivably run out of the stuff after an explosion at one of its suppliers’ plants earlier this week?
Isn’t steel just sitting around waiting for the taking? Does Toyota know about Patrick? Can we make some introductions?
MetalMiner Co-Founder and Executive Editor, Lisa Reisman and Spendmatters Chief Research Officer Pierre Mitchell wrote that Toyota’s revered production system, “does help drive out waste and improve product quality. Yet it’s “necessary but not sufficient” in running an end-to-end supply chain.”
There are also 5 good lessons to learn from Toyota’s troubles in that SpendMatters post. Lessons about managing your own supply chain.
So, after another chaotic week we caution metal buyers to remember that the sky isn’t falling. No matter what the Fed does. Toyota might have some supply-chain problems, but cars and trucks will eventually get built. Japan will keep throwing growth-spurring ideas at the wall until something finally sticks.
by Jeff Yoders
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