I write regularly for Finimize, a startup looking to make finance accessible to millennials. Here are three stories I wrote for their daily newsletter that goes out to 300,000+ people.
Structural Support
What’s Going On Here?
British Steel asked the UK government for another emergency loan on Tuesday – but a breakdown in talks ended in the country’s second-biggest steelmaker collapsing into insolvency on Wednesday.
What Does It Mean?
British Steel says Brexit is partly to blame: orders from European customers have rusted up in the face of uncertainty, and the falling value of the pound since the Brexit referendum has made raw materials from overseas more expensive.
With the company now bankrupt, 25,000 British jobs are at risk. British Steel may no longer be commercially competitive: China has produced more steel in the past two years than the UK has ever (tweet this). The UK government had already forged British Steel a separate $153 million emergency loan just three weeks ago to cover a Brexit-related emissions bill.
Why Should I Care?
For markets: Even steel can’t withstand politics.
The impact of political decisions on business goes beyond just stock prices. British Steel is a private company without public shareholders to appease, but Brexit has still hit it hard. In the US, meanwhile, 173 footwear companies including Nike, Adidas, and Under Armour are trying to steal a march on politics, penning an open letter to the president on Monday urging him to reconsider further increasing tariffs on Chinese-made goods. The footwear firms (which already pay among the highest duties in the US) warned that higher tariffs could be catastrophic for the industry – and for American tootsies.
Zooming out: From steelmakers to steel users.
Auto firms around the world are stalling: weak consumer spending has hit sales in the US, tariffs have aggravated slowing demand in China, and European automakers are getting caught in the trade war crossfire. On Monday, Ford followed a round of European job cuts in January with 7,000 more, this time targeting white-collar workers. And Tesla’s stock fell on Monday after an influential analyst flagged the checkered chances of the electric automaker hitting its 2019 profit targets.
See it published here.
The Midas Touch
What’s Going On Here?
American gold miner Newmont Mining said on Monday that it would buy Canadian rival Goldcorp, creating the biggest gold producer in the world.
What Does It Mean?
The $10 billion deal outshines the golden handshake back in September that saw major Canadian competitor Barrick Gold acquire African-mining Randgold. But the thinking is the same: after a decade of cutting back on exploration, gold diggers are looking to kickstart growth again.
In what’s known as a stock-swap merger, Newmont’s offering Goldcorp investors around a third of a share in the new combined company for each Goldcorp share they currently own. The snappily named Newmont Goldcorp will have have the largest gold reserves in the game, expecting to produce between six and seven million ounces of gold annually – more than Barrick 2.0. That’s over 30 African elephants’ worth, in case you were wondering…
Why Should I Care?
For markets: Smelting a win.
With gold reserves dwindling and extraction costs growing, mining companies are digging deep for ways to save money. The new company should save about $100 million thanks to the removal of duplicate costs, and Newmont also plans to generate cash by flogging over $1 billion worth of less important mines. Newmont’s offer values Goldcorp 18% higher than its share price on Friday, but that may be a bargain – the stock has lost a third of its value in the last two years. Newmont’s shares nevertheless fell 5% on Monday, likely as investors fretted over the risk the treasure hunt doesn’t pan out as planned.
The bigger picture: All that glitters is gold.
After a steady decline for much of 2018, gold’s price has crept back up to a six-month high. Gold typically comes into vogue during times of economic uncertainty; people think of it as a safe haven for storing value. And the price of gold is quoted in US dollars – so when the dollar is down, gold starts looking cheaper to international buyers.
See it published here.
BP Boards The Green Train
What’s Going On Here?
Oil behemoth BP announced on Thursday that it’s buying the UK’s largest electric vehicle (EV) charging company, Chargemaster. Go green or go home.
What Does It Mean?
BP used to be called British Petroleum for a reason: fossil fuels like oil used to be its key business. But the world’s changing and BP doesn’t want to be left behind. Although it might seem odd for a major oil company to invest in clean energy (remember when Amazon disrupted its book-selling business by launching the Kindle?), BP wants to power up its position in the car-fueling market – whatever your fuel of choice.
Why Should I Care?
For markets: Green is the new black.
Investors seem to think BP’s doing something right: its stock rose slightly on the news. Although it’s early doors for EVs (they’re less than 1% of the US car market), they’re expected to get popular, quickly. BP’s paying just $170 million for Chargemaster – peanuts for an oil titan. Getting into EV charging early could help BP avoid going the way of the Walkman and becoming irrelevant. This deal echoes Shell’s 2017 purchase of an EV charging company – both may be in response to mounting pressure on oil companies to fight climate change.
The bigger picture: All roads lead to electric.
While electric cars aren’t common yet, BP’s predicting there’ll be as many as 300 million of them zipping around by 2040 – and all these EV drivers will need somewhere to e-fuel up. BP plans to roll out ultra-fast chargers over the next year, capable of giving 100 miles of juice in just 10 minutes. About half of BP’s profit comes from other things people buy at gas stations, so BP needs to make sure that it keeps those customers rolling in – no matter what they’re driving. All of this will make it much easier for you to own an electric car – if you choose to own a car at all…
See it published here.
