Economic Affairs Minister Peter Altmaier has said that the German government now expects a GDP increase of 3.5% this year - 0.5 percentage points higher than previously forecast. The latest restrictions on the economy and on social life should be eased gradually to allow for a recovery in the second half of the year.
Demand for investments in the construction sector is being driven by continuing low interest rates and also by increased liquidity. Public investments are continuing to increase to support the domestic economy.
Within a German economy highly influenced by the automotive industry, chip shortages are leading to production stops. The second quarter has already been affected by this shortage and some factories will have to close during the summer holidays. Moreover, the German government has confirmed there will be Euro 3 billion support for the domestic development of battery cells for electric vehicles.
Germany needs to speed up its efforts to reduce carbon emissions to reach the new goals set by the goverment. This push is unfortunately leading to an increasing number of voices saying that raw material exports should be limited or even forbidden. Since the Green Deal was introduced last year, many lobby groups have seen a chance to influence policy-makers by saying that ferrous and non-ferrous metals should stay within Europe. But exports of raw materials from recycling are essential to preserve the competitiveness of the European recycling industry. It is evident in the current market that there are not enough domestic outlets.
As copper reached new highs, there has been more activity within the red metal market. Demand for copper is good but, owing to the fast-rising market, many recycling companies have faced a big margin call for hedged positions, leading to less liquidity and more financing pressure. As European mills were well supplied, it was not easy for small and medium-sized companies to have additional access for supply in order to cash the copper scrap. Some market participants were reporting that they have received many new offers with the request to pay out faster than usual. Copper and ferrous prices at such high levels are a challenge for our industry.
On the aluminium side, the positive trend is not over and international demand for scrap is very healthy. Some primary and secondary smelters have reported full order books until the next quarter. The only threat is the above-mentioned shortage of chips which might lead to a bigger automotive shutdown than expected. After several weeks of lower official ingot prices, early May brought an increase in 226 ingot levels. Major infrastrucure investment programmes in Germany as well as huge expenditure in China and the USA will ensure that metals such as aluminium will be needed.