Eastern Europe

May has started slowly for the metals sector owing to holidays in Europe and to Golden Week in Asia. Since the previous Mirror, expectations for metal demand out of China following the lifting of the country’s zero-COVID policy have turned out to be grander than the reality. Higher interest rates, a tightening of companies’ cash flow and a weaker US dollar are further negatives for our markets.

At the time of writing, the Polish zloty is trading at 4.18 to the US dollar versus 4.40 in mid-March; metal merchants in Poland are therefore resisting movements of metal purchased when the LME was higher and the zloty weaker. The same applies to Ukrainian market participants, with the especially low number of export contracts over the past two weeks explained mostly by a weaker LME.

Poland’s manufacturing PMI fell to 46.6 in April from 48.3 in March, according to S&P. Both production and new orders have declined since March and producers have continued to cut jobs and reduce activity levels, mostly in response to weak export orders because of the worsening economic situation elsewhere in Europe.

Poland has recently announced significant changes to its renewable energy consumption regulations, allowing enterprises generating green energy to consume it themselves first whereas previously they were obliged to submit it to the grid and to consume it from the “general mix”. This allows companies committed to reducing their emissions correctly to report the use of green energy sources in their processes.

In Russia, the same situation with currency applies. The stronger rouble - which is attributable to low demand for foreign currency because of weak imports and exports rather than to the economy performing well - is slowing export activity. Bank sanctions targeting US dollar payments are pushing companies to consider alternative currencies such as the RMB.