The UK not only has a new Prime Minister, Liz Truss, but also a new monarch, King Charles III, following the death of Queen Elizabeth II on September 8 after 70 years of exemplary service.
The new Prime Minister began her tenure by limiting energy bill rises for all households for two years through capping the price set per kilowatt hour. Businesses will also get help in the form of a price cap for six months - a shorter period of protection than many had hoped for.
This was followed by an emergency mini-Budget on September 23, during which newly-appointed Chancellor of the Exchequer Kwasi Kwarteng delivered his Growth Plan 2022. Key announcements included: cancellation of the planned increase in the corporation tax rate to 25% from April 1 next year; and significant changes to rates of income tax, including removal of the 45% top rate for 2023-24 onwards. This had an immediate impact on markets, which saw sharp rises in interest rates and a precipitous fall in the value of sterling.
The government has subsequently reversed course and will not now scrap the 45% rate. This news has been welcomed by the financial markets, but the new government’s credibility has been damaged.
The UK non-ferrous metals markets have been subjected to currency fluctuations as well as the continuing volatility of LME prices. Merchants are reporting that they are still seeing the same number of suppliers but a reduction in the volumes they are bringing in. Traders are saying supply of physical material is patchy and are questioning whether this is down to a lack of supply or whether merchants are holding stock; I personally think it is the former. The market is tight and quiet for all grades. It would be usual for prices to widen in this volatile market but material is not flowing sufficiently and consumers need to maintain supply.
European aluminium smelters are being severely affected by the extreme hikes in energy prices as their operations are highly energy intensive. Thus, European demand is declining as some smelters are choosing to use up their stocks while others are mothballing production lines. That said, traders are reporting that there is still strong demand for UK aluminium from Asia.
Copper is still in good demand despite the fact that European smelters are also struggling with the rising energy prices. One EU smelter has stated that just the process of turning anode to cathode is costing an additional Euro 100 per tonne. Discounts are still keen both in Europe and the Far East.
Lead is still enjoying strong demand both in the UK and from the Far East. This is true for brass too, with Asia keeping up with the prices being offered by China. Supply remains steady.