00:00Tell us about the market for you right now, because there are certainly obvious reactions to what happened over the
00:05weekend.
00:06There are fundamental things at play, right?
00:08China is always important when we think about metals.
00:11So tell us how you're trying to kind of weed through the market and what really matters longer term in
00:16terms of the trade.
00:17Sure. So the short-term response is kind of this gut check, right, which is just what if we are
00:21entering a World War III and demand falls across the board, right?
00:25So you're seeing a lot of our coverage fall off on the equity side.
00:28You're seeing uncertainty the market doesn't like, you know, so that's been the gut visceral initial reaction.
00:34But if you really parse it down a little further, you see that, to your point, I think aluminum is
00:38probably the most interesting to discuss of our coverage.
00:41We don't really do gold, but it's been interesting to see that actually hasn't gone up like one would expect
00:46in a period of uncertainty because the U.S. dollar has strengthened.
00:50And that's another factor, right?
00:51Stronger dollar is usually not good for commodities, so that's an overarching theme as well.
00:56But within aluminum, 9% of the world's aluminum supply comes from the Middle East.
01:00And not so much Iran.
01:02It's actually about, I want to say, 18% of U.S. supply indeed comes from Bahrain and UAE.
01:08And I don't think I had any idea about that.
01:11No, I didn't either.
01:12Yeah.
01:13No, and, you know, ultimately the market could be as efficient.
01:16It could come from elsewhere.
01:18Right.
01:19But that's been the pattern.
01:20And if you look at the very latest that happened just a couple hours ago is the Gutter smelter, which
01:29was about 650,000 tons.
01:31The Norse Kedro smelter announced that they were going to be idling capacity over the period of March.
01:36And they said it would take 6 to 12 months to restart once they decide they can restart.
01:40So that amount is almost 1% of the global aluminum market.
01:44And, you know, it's not huge, but on the margins, it certainly moves the needle, right, when the market's already
01:49fairly tight.
01:50So that's the latest, and that's what's most compelling, I think, for the trade now.
01:53So if I look at aluminum futures up about 1.7% yesterday, up another 2% today, how much
02:01of that, is that all of that factored in, that concern, the shutting down of the smelter?
02:05Like, how much of that, like, what does that price reflect?
02:09Is it just nervousness?
02:11Is it the reality that this could be a longer war?
02:15Like, what do you see in those numbers?
02:16Well, again, when you compare it with copper and copper being down, I think if you were to, if it
02:20weren't for the fact that the proportion of aluminum coming from the Middle East is so high, aluminum might otherwise
02:25have been down, right, because of the stronger dollar and because of the concerns about demand, right?
02:30And, actually, higher energy prices hurt aluminum, hurts all miners, right, but particularly hurts aluminum to the extent that aluminum
02:37historically has been correlated with oil prices, more importantly, electricity prices, because smelter costs, about a third of them, come
02:44from electricity.
02:45So if it weren't for the disruption, aluminum would be down.
02:48So it's a pretty important swing factor.
02:50And, again, it's not like this is short-lived, right?
02:52It's going to take 6 to 12 months to restart, and you do it in an orderly fashion, and it's
02:57less disruptive.
02:58But there could be more, right?
02:59There could be Middle East also could see Saudi closures.
03:03You could see Bahrain closures.
03:04You could see UAE.
03:05So if that's the view of aluminum, what about steel, copper, and iron ore out of the region?
03:10What are you seeing there?
03:11You know, Iran isn't huge in terms of steel, and so the Middle Eastern component for steel is not as
03:17material.
03:18I think on the margin there's more concerns about costs and demand that balance off any concern over on the
03:24supply side.
03:26On copper, you know, it's been weaker, like I mentioned, and I think it also has its own demand and
03:31supply issues.
03:33I think, you know, if you consider freight prices going up, that would be marginally inflationary.
03:37But if you consider the broader U.S. dollar weakness, et cetera, that's an offset.
03:41I think copper's got its own dynamics of relatively short market, you know, tight market conditions.
03:46But it tends to trade with gold in the U.S. dollar pretty closely.
03:51I want to go to iron ore if we can because we kind of started the year off pretty strong,
03:54and I think a lot of folks were kind of scratching their heads considering kind of a mismatch between market
04:00pricing
04:01and also conditions on the ground.
04:02And I think about China.
04:04I just want to look at some numbers here.
04:05Iron ore imports, you know, hit a record last year.
04:07Steel output in 2025 was on course for a seven-year low.
04:12Is that right, that number?
04:13Yeah.
04:14I'm not sure if that's right.
04:15Yeah, that's roughly, yeah.
04:16Yeah, so where are we now in the China dynamic in all of this?
04:19So in terms of Chinese steel, the exports last year were another record high.
04:23Yeah.
04:23Even as the domestic consumption seems to be weaker.
04:26If you think about the critical components of steel consumption in China,
04:29you've got infrastructure, which is government-driven.
04:31Right.
04:32But you've got the property sector, which makes zero sense.
04:34Right.
04:34We've been saying for a while the property sector is no business growing at all.
04:38The population is shrinking.
04:39They're closing kindergartens.
04:40Why would you need more?
04:42You know, people already have multiple homes.
04:43Why do you need more, right?
04:44And the property values have been going down.
04:46So that's been a big headwind.
04:47So how do you cross those that we saw kind of a movement higher?
04:51So China's production has been slowly falling, but it's very difficult because over the last
04:56several decades, 80% of the capacity has been built.
04:59And, you know, you don't invest billions to build these new steel mills and not run them.
05:05So really there's not so much that's obsolete that could arguably shut.
05:08So that's the challenge.
05:09But you have seen on the margin a bit come off the lower quality obsolete steel mills, but it is
05:15really tricky.
05:16And so China, instead, they can't consume it.
05:18They've been exporting.
05:19And you've seen increasingly over the last 18 months or so, Brazil, India, Vietnam, Turkey,
05:24all these countries that never stood up to China and put barriers on are kind of taking small steps, right?
05:30The U.S., big step, 50% tariff.
05:33The U.S. big step between CBAM and Steel Action Plan in the middle of the year.
05:37These other countries kind of have to or they're going to become the new dumping ground.
05:41Are those tariffs here to stay?
05:43I mean, obviously, with this administration, they are.
05:46So what we've been saying is that the longer that there is no steel taco, the more likely there is
05:51no steel taco.
05:52And I think that the fact is on the steel side, it seems like you can defend the domestic industry
05:57is capable of supplying the market without much import.
06:00So it's defensible.
06:01Aluminum is tougher.
06:02Did the story with steel change with U.S. Steel and Nippon Steel's agreement?
06:08I think the bigger issue for steel is that there's been a flood of capacity.
06:13We called it Steelmageddon a couple of years ago of new capacity coming to the market, right?
06:17And so that capacity now is sufficient.
06:19And the premise of Section 232 was to ensure that there was enough supply domestically for national security purposes.
06:27So the steel industry answered that call, not because of the tariffs necessarily, but, you know, it's here.
06:31The aluminum industry hasn't, but we don't have cheap electricity or bauxite alumina.
06:36Like, it doesn't really make sense.
06:37So if anybody were to take a step back and evaluate the success of the tariffs, like the next president,
06:44perhaps, it would be harder to defend Section 232 for aluminum.
06:47But there's a new smelter that's pledged to construct, you know, $5 billion worth of new capacity.
06:54If you pull the rug out from underneath them, that would be kind of unfair.
06:58We're talking with Timna Tanner.
06:59She's Managing Director of Equity Research at Wells Fargo here at Bloomberg Invest.
07:03I feel like, though, these areas, and again, it's an interesting week because of what happened over the weekend, can
07:09tell us a lot about the global economy.
07:11What is the read-through off of what these markets are doing and what it does tell you about the
07:16global economy?
07:17Do you get, like, some visibility, if you will?
07:19I mean, if we're talking about demand, I think that the European market...
07:23Because a lot of this goes into construction and building, and it can, but yeah.
07:25So if we think about the key components of steel demand in particular, we're talking about construction and auto.
07:30And Europe has been, like, every year worse for the last three or four years.
07:34Every year it seems like it can't get worse, and it does.
07:37And the auto market is in trouble because it's been allowing in Chinese EVs, and that's, like, destroyed or hurt
07:44the European EV market or European auto market.
07:47And the U.S. auto market has been holding up a lot better than expected, a little steadier.
07:52The construction side is very leveraged to interest rates.
07:55Our channel checks in the U.S. do suggest that 2026 for steel demand should be a little better than
07:59last year,
08:00partly because last year was a pretty tough year, and a big component of that was uncertainty, right?
08:05Uncertainty around tariffs, uncertainty, et cetera.
08:07So now it seems like it's bouncing off of a bottom in the U.S., maybe Europe as well.
08:11China's, um, I don't know exactly if China is going to be stable and a little better,
08:17but certainly they've been lowering their growth forecasts.
08:19Right.
08:20Still growing, but less.
08:21What changes your view on China?
08:24Uh, I mean, the demographic story is not changing.
08:27Right, yeah.
08:28So, and the growth story.
08:29Right.
08:30Isn't necessarily changing.
08:31But, I don't know.
08:33I mean, the story has evolved a lot in the last five years.
08:36Look, I think the copper demand story seems pretty solid, right?
08:39That's supported by electrification.
08:40That's necessary.
08:41If they're going to win the data center war, the electrification war,
08:44they're going to need a lot of build out of their grid, and that's really, um, that's happening, right?
08:48So, the copper demand story in China seems supportable.
08:51I think it just, if you think about the evolution of that economy, they're exiting their iron age,
08:55and they're moving into a more modern era where they just don't need as much steel.
08:58So, I think it's still pretty supportive for, uh, copper and aluminum,
09:01but I think it's tougher to make a bull case for steel and therefore iron ore.
09:05Tim, I just got about 20 seconds.
09:07What are you watching in terms of what will impact these markets?
09:09Data points or anything?
09:11Or is it geopolitical?
09:12Is it White House?
09:14All of the above.
09:14Yeah, all of the above, but, um, yeah, I'd say certainly, um, demand,
09:19certainly how, how much, you know, individual countries and assets are affected
09:23are going to be critical as well.
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