A commodity is a concrete asset grouped into three major categories. These three categories consist of agriculture, energy and metals, which can be traded in the open market. A metal is a “solid material that is typically hard, shiny, malleable, fusible, and ductile, with good electrical and thermal conductivity”. Within this economic indicator category lie different types of metals, base metals and precious metals, with differentiating prices. Base metals are widely used in commercial and industrial construction and manufacturing, and they are called base metals because these metals are “nonferrous”, which means it contains no iron. These kinds of metals, such as iron ore, aluminum, copper, lead, nickel, tin and zinc, are far less expensive than other precious metals such as silver, gold, platinum and palladium, which in turn contain high economic value. In previous years, these metals, like gold and silver, would be used as currency, but currently are now used as major commodities as well as for investment purposes.
Presently, gold sells trades for a price of 1328.40 USD/OZT being the highest of all metals followed by platinum for 928.55 USD/OZT, Silver for 16.68 USD/OZT, and copper for 3.14 USD/LB. The “Commodities of Metal” tell us a lot about the trends and direction that the economy is moving in. Gold prices directly correlate with the economic environment. (How does it impact the economic environment) Investors observe these trends in the price of gold, and other precious and base metals, to gage potential inflation and weakness in such economies. When there is an extremely high demand for certain base metals, such as copper, companies begin to feel as though the economy is moving in a positive direction. The price of precious metals also exemplifies the direction the economic environment is moving; this shows whether it is declining due to low precious metal prices or vice versa. Consumers purchase precious metals, predominantly gold, from an investment standpoint to gain revenue as these prices rise. Companies, such as alphabet, follows these trends to see how the economic environment is thriving in terms of these metal prices.
As of January 2018, the U.S. announced a 30% tariff on imported solar panels. Come February 2018, Commerce Department proposed tariffs on steel (24% of imports) and aluminum (7.7% of imports), which most of “Corporate America” was in doubt and thought that this idea would backfire and ignite a trade war. As of early March, President Donald J. Trump placed a tariff on imported steel and aluminum from every country excluding Canada and Mexico. “A strong steel and aluminum industry are vital to our national security, absolutely vital,” Trump said. “Steel is steel. You don’t have steel, you don’t have a country.” He placed a 25% tariff and a 10% levy on aluminum imports. However, “Canada is the leading supplier of imported steel and aluminum to the U.S., accounting for 16 percent of imported steel and 41 percent of imported aluminum”, as CNBC has reported. The commerce noted, “employment in the domestic steel industry has shrunk by 35 percent in the past two decades, while the aluminum industry shed nearly 60 percent of its jobs between 2013 and 2016.” These tariffs placed lead to a drop of 1% on the Dow, S&P 500 and the Nasdaq on March 1, 2018. On March 22, 2018, the S&P 500 shed 2.5% and another 2.1% on March 23rd. This directly shows the impact these steel and aluminum tariffs have on the U.S. economy. However, the steel tariff is designed to save jobs in the U.S., strengthen such industries and potentially lead to growth of the U.S. economy. About 2.5 million U.S. jobs depend on steel and aluminum imports, and in turn, would place the U.S. automotive industry at a competitive disadvantage. As these steel and aluminum tariffs increase jobs in certain areas such as Ohio, it also has lead to a decrease in jobs in areas that are construction heavy, such as upstate New York. This led to a net loss of 164,000 jobs. However, several industrial companies say that this tariff is a bad idea due to the U.S. being the biggest importer of steel, according to the U.S. Commerce Department. These tariffs placed are an extreme risk for the United States and an easy outlet to lead to a trade war between outside countries.
https://www.npr.org/2018/03/08/591744195/trump-expected-to-formally-order-tariffs-on-steel-aluminum-imports
Alphabet uses these metal commodities to create their products. Therefore, Alphabet has an increasing demand for these metals (Copper, Gold, Silver, Platinum, and Palladium). Alphabet also has increased sales in Other Bets, and most of these are electronic products, such as speakers, smartphones, Nest smart home products, Google home, and several other electronic devices. This creates a high demand from Alphabet for base and precious metals to create their innovative products. The company undergoes production of their electronic products in China, as most electronic companies conduct their manufacturing outside the country mainly in China. Economic growth in India and China are directly connected to industrial metals (copper and steel). Several top mining companies worldwide are mainly owned in India, or China.
After reviewing this economic indicator, I feel as though the economic indicator I am studying will rise in price tremendously, and be in a slight decline as a resource in the future. I believe there will be an upcoming product, or technology that will come into play and shift production away from the use of a natural resource. Mining companies have to follow specific environmental regulations, and I believe these “Going-Green” regulations will become sterner in the future. Taxes placed on these materials will lead to companies reducing production and shifting to materials that will create a greater profit margin for their corporation. However, the future of these metals is unclear and does not have a definitive path of increase or decrease.