vk.com/id446425943	Week Endnotes
Russia
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	Around the Globe
	In focus
	Brexit in ‘the endgame’, while the game is far from over. Monday’s headline was
	the UK Prime Minister Theresa May saying the Brexit talks were “in the endgame”. On
	Tuesday, UK and EU negotiators did indeed hammer out a 585-page draft withdrawal
	agreement. The following day, May seemed to have managed to secure cabinet
	approval after a contentious five-hour meeting. On Thursday, however, everything
	started unravelling. The day started with Brexit Secretary Dominic Raab’s resignation,
	shortly followed by Work and Pensions Secretary Esther McVey, which sent the
	pound and gilt yields into a tailspin. Later on, Brexiteers’ informal leader, Jacob Rees-
	Mogg, submitted a letter of no-confidence, calling into question May’s premiership. A
	leadership challenge is triggered if 48 Conservatives submit such letters, after which
	158 out of 315 Tory MPs’ votes are required to topple the current PM. So far, aside
	from Rees-Mogg, some 20 MPs have publicly submitted letters, while more might
	have done so privately. May has vowed to carry on and see the country through Brexit
	in an orderly way. However, these developments cast doubt over her ability to get
	Parliament’s support for the Brexit deal and even to remain as the UK’s leader.
	Brexiteers are voicing their discontent over the deal, arguing that it threatens the
	integrity as well as sovereignty of the UK. The draft deal sets out a deeper regulatory
	divide between Northern Ireland and mainland Britain, which breaches the Democratic
	Union Party’s ‘red lines’ on identical treatment for Northern Ireland. The agreement
	might potentially trap the UK in a customs union with the EU indefinitely, as there is no
	unilateral exit clause for the country within the text.
	Italy versus the EU. The Italian coalition government stuck to its plans for a 2.4%
	budget deficit to GDP ratio after the deadline for submitting its draft budget to the
	European Commission was met on Tuesday. The decision comes on the back of
	stalling GDP growth to kickstart the economy, which is lagging behind the rest of the
	EU. The European Commission now has to decide whether to launch a financial
	sanctions procedure, which could lead to several billion of euros in fines for Italy. The
	commission, however, find itself in a tricky situation, as the European Parliament
	elections are coming up in May, which could sway its leadership towards populists.
	Therefore, the EU has a choice to make between taking a hard line with Italy, ensuring
	that any nation within the EU has to uphold its rules, or make concessions to remain in
	power and calm down the populist forces in Europe.
	US-China trade dialogue resumes. On Tuesday, the US President’s top economic
	advisor, Larry Kudlow, was quoted as saying that the US and China were talking “at
	all levels” on trade, while China’s Premier Le Keqiang said that his government was
	“willing to negotiate with the US”. Chinese Vice Premier Liu He is planning to visit
	Washington for a meeting with US Treasury Steven Mnuchin ahead of a meeting
	between the presidents of the two countries at the G20 summit at the end of this
	month. On Thursday, several reports appeared of Chinese officials outlining potential
	trade concessions to the US. Moreover Trump’s administration is said to delay
	imposing new car tariffs for now. All of this is positive news for markets. However,
	yesterday US Commerce Secretary Wilbur Ross announced that the US still planned
	on raising tariffs on Chinese imports from 10% to 25% in January and that a meeting
	between Trump and Xi later this month will at most yield just a “framework” for further
	talks. He added that it was “impossible” to reach a full formal deal before January.
	Also in the news
Morning Miner - 16 November, by	A German administrative court has ruled that the western state of North Rhine-
Dmitry Glushakov at al	Westphalia must ban older diesel vehicles from certain areas, reports Reuters. The
	ban affects Gelsenkirchen and Essen, including part of the A40 motorway, which are
	located in the Ruhr region. This follows a similar ruling for several other German cities,
	further improving the outlook on PGM demand, as we believe older diesel vehicles
	might be replaced or given additional hardware to reduce emissions, both of which
	imply higher PGM loading per car. This also accelerates the switch to petrol, which
	mostly uses palladium for autocatalysts, instead of platinum.

16 November 2018

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vk.com/id446425943	Week Endnotes
Russia
Equities

Morning Miner - 15 November, by Dmitry Glushakov at al

Morning Miner - 15 November, by Dmitry Glushakov at al

Only 37% of new ICE passenger car registrations in EU were diesel cars in 3Q18, with the rest being petrol, according to ACEA. The proportion further declined from 39% in 2Q18 and is significantly below our estimates, indicating that the switch to petrol in EU is more rapid than we thought it would be. This further supports our estimates of a large deficit in palladium, which is mostly used in petrol engine autocatalysts.

HRC FOB China fell USD 15-20/t WoW, to USD 523/t, writes Metal Expert. The seaborne steelmaking margin, as such, dropped to USD 269/t, coming close to our mid-cycle estimated value. The premium to HRC FOB Black Sea has also normalised, from USD 30-50/t in the last three months. US and EU prices are yet to follow the trend, though we do not rule out that the regions might also see steel prices decline in the short term. Overall, this is in line with our estimate, though prices might find shortterm support as winter capacity cuts in China commence and coal falls under import restrictions.

16 November 2018

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