Hi everyone! Welcome to the first commercial news update for July. Happy reading! Commercial News Update: 3rd July 2019 Topics covered this week are: 1. The bid for British Steel and problems facing the Steel Industry (@bugsy malone) 2. US-China Trade Truce at the G-20 Summit (@Jaysen) 3. Rise in Gold Investment (@Sairah) 1. The bid for British Steel and problems facing the Steel Industry (by: @bugsy malone) The Story: On Sunday evening the deadline for bids to purchase British Steel past. The company collapsed in May after its owner, Greybull Capital, failed to secure a government loan of £75 million. If a buyer is not found then the company will be wound up. Although, an official announcement of the bids is yet to be released, newspapers have mentioned companies such as Liberty Steel, India’s JSW and China’s HeSteel group are interested in purchasing the entire company. Whilst others are interested in purchasing parts of the company. For example, Network Rail have confirmed an offer for the rail section (as most of the steel used on UK railways is made by British Steel (97%) and they buy around 100,000 tons per year). Although, Network Rail said “our overwhelming preference is that a purchaser for the entire business is found”. Impact on Businesses and Law Firms: For the long term future of British Steel, bidders’ investment intentions and what the government is going to do in terms of helping that investment (e.g. business rates) will be important. As the steel sector is massively capital intensive, companies have to make a lot of investment year in year out. The UK steel industry faces much higher costs than other European competitors such as France and Germany whose electricity prices are 50% less than the UK. Also, there is massive global over capacity. For example, in 2018 China made 100 million tons more steel than they needed, in turn we have seen an increase in exports, which could flood the UK market in the future. Although, Brexit uncertainty has been spoken of as massive for the steel industry, this does not seem to be putting off foreign buyers as the products British Steel makes for rail and construction have seen growing demand. 2. US-China Trade Truce at the G-20 Summit (by: @Jaysen) The Story: Last Friday and Saturday, world leaders met to discuss pressing global economic and financial issues at the annual G20 summit. The summit ended with the US postponing further tariffs on Chinese goods and lifting some restrictions on Huawei. In return, China agreed to buy more US agricultural products. Impact on Businesses and Law Firms: The markets are happy. Stock markets around the world rose sharply, with the S&P 500 closing at an all-time high. They had feared Donald Trump would keep to his word and impose tariffs on the $300bn in goods that aren’t already covered by existing US tariffs. With the ban lifted on Huawei, US tech stocks rallied; they can now get back to selling high-tech equipment to the company provided there’s no national security risk. The trade truce is a positive sign, at least in the short term. The US-trade war has caused global organisations, such as the IMF and the World Bank, to cut global growth forecasts. It has caused investors to move to safe haven assets and likely exacerbated China’s slowdown. China’s growth has made it a crucial player in the world stage, which is why a fall in demand from China impacts everything from European shoe giants to Australian mining companies. Is it worth it? Perhaps. You might argue it’s a necessary cost to tackle China’s lack of market access, discrimination against foreign companies and technology transfers. Alternatively, you might suspect Trump is trying to sabotage China’s attempts at competing on the global stage. What we do know is Trump’s re-election campaign is underway. In the first Democratic primary debate, four of the 10 candidates identified China as the biggest threat facing the US. If Trump secures a weak deal, it will be used against him. In other words, the market should be wary of celebrating too quickly.