Finimize - 📉 The ruble rumble

What’s going on here?

US Steel Corporation rejected a takeover bid from rival firm Cleveland-Cliffs.

What does this mean?

After snapping up AK Steel and the US arm of European steel giant ArcelorMittal in recent years, Cleveland-Cliffs has cemented its position in the lucrative steel-for-autos sector in the US. And it seems the firm’s not content to rest on those laurels: Cleveland-Cliffs just made a bold move for US Steel too, with a tempting offer valued at $7.25 billion – a hefty 43% above US Steel’s pre-offer market value. But the firm wasn’t easily swayed: US Steel ultimately said, “Thanks, but no thanks,” and announced it’s launching a formal process to weigh up its options instead.

Why should I care?

Zooming in: Steeling a march on competitors.

The story might still have some chapters left. See, US Steel’s recent allure has attracted multiple bids, suggesting the firm’s a sought-after asset in the industry. And while Cleveland-Cliffs’ initial overture was rebuffed, it might be gearing up for another attempt. After all, a successful merger would create a formidable entity to challenge global frontrunners in the steel industry. Plus, with control over a significant chunk of US iron ore reserves, the firm would be well-positioned to capitalize on the government’s green infrastructure and manufacturing initiatives. Mind you, though, that very dominance could prove a sticking point in the eyes of US competition watchdogs…

The bigger picture: Painless steel.

The polluting steel world’s feeling the heat to go green, and US Steel’s been making strides in that direction. The firm’s been pushing investment to more eco-friendly “electric arc furnaces” – efficient plants that remelt scrap and turn it into steel. Cleveland-Cliffs, on the other hand, has been a tad old-school with its methods to date. And that means that US Steel might be the firm’s ticket not just to market muscle – but to greener and cleaner steel too.

What’s going on here?

Russia’s currency has dipped to a 16-month low against the US dollar.

What does this mean?

Ever since Russia invaded Ukraine, the ruble has been on a bumpy ride. First, it took a dramatic plunge, bottoming out at record lows against the dollar. But then the tables turned – and booming energy revenues helped lift it to a short-lived seven-year peak. Now, though, a bunch of factors are weighing the currency down again: two biggies are the government’s lavish defense spending and dwindling export revenues as Europe shifts away from Russian energy. And then there’s the fact that international sanctions mean no one wants to hold rubles – not even Russians, who’ve been racing to convert their cash into foreign currencies. Plus, while the central bank’s aggressive rate cuts (from 20% to 7.5%) might’ve seemed savvy last year, they’ve only added to the currency’s troubles. The outcome: the ruble’s taken a 25% hit this year, and was left languishing at a 16-month low against the US dollar on Monday.

Why should I care?

For markets: Interesting times.

While there’s a laundry list of reasons for the ruble’s recent tumble, fingers are mostly pointing at the central bank. The emerging consensus: it needs to hike interest rates, and fast, to give the currency a leg up. But that move’s no silver bullet, and it could backfire on Russia’s broader economy. Think stunted growth and pricier loans for companies and the government – especially troubling given Russia’s hefty military bills.

The bigger picture: Only fuels Russian.

Still, there’s some hope for Russia. A recent uptick in oil prices has helped its all-important oil and gas export revenue begin to rebound. And this sunny spell might stick around: Goldman’s crystal ball predicts oil prices will hover around their current mark this year, and nudge up to $93 a barrel by mid-2024.