The latest COVID-19 (coronavirus) news impacting the metals market.
The Latest from the Market
- Airport traffic is beginning to pick up again. Passenger traffic is still down 67% compared to a year ago, but levels in early September show the highest reading since late March and have actually been accelerating to the upside. Read more. (09/04/20)
- Texas factory activity expanded in August for the third month in a row following a record contraction in the spring after the onset of the COVID-19 pandemic, according to business executives responding to the Texas Manufacturing Outlook Survey. Read more. (09/01/20)
- "The August PMI® registered 56 percent, up 1.8 percentage points from the July reading of 54.2 percent. This figure indicates expansion in the overall economy for the fourth month in a row after a contraction in April, which ended a period of 131 consecutive months of growth. Read the full release. (09/01/20)
- President Trump signed the presidential proclamation confirming that starting August 16, US imports of Canadian unwrought unalloyed aluminum (P1020, purity and off-grade) will be no longer exempted from the Section 232 Tariff of 10%, after Canadian aluminum producers failed to keep an agreement not to increase exports in a meaningful way in exchange of the exemption.
However, Section 232 exemptions will remain in place for US imports of Canadian value-add products, also known as alloyed aluminum (billet/slab/foundry), as well as for aluminum semis such as extrusions, coils and wires/cables. These exemptions on value-added products and semis will remain in place as long as Canadian exports abide by the agreement of May 2019 (soft quota). - Harbor Research. (8/7/20)
- According to a study from Deloitte Insights, 47% of US consumers plan to keep their vehicle longer than they expected before the COVID-19 pandemic. What does that mean for a recovery in automotive? Read the report. (8/6/20)
- According to the Institute for Supply Management, the July PMI registered 54.2%, up 1.6 percentage points from the June reading of 52.6%. "In July, manufacturing continued its recovery after the disruption caused by the coronavirus (COVID-19) pandemic. Panel sentiment was generally optimistic (two positive comments for every one cautious comment), continuing a trend from June." Read the full report. (8/6/20)
- A survey of members of the Precision Metalforming Association and National Tooling and Machining Association shows that manufacturers are facing continued economic challenges caused by the COVID-19. Among the highlights:
86% of manufacturers reported revenues lower than pre-COVID levels, including 51% reporting revenues down more than 25%
57% of respondents expect that revenues won’t return to pre-COVID levels for at least six months to one year
47% of those surveyed report that they may be forced to furlough employees if revenues do not improve in the next 90 days
Read the full release. (7/24/20)
- A survey of more than 110 manufacturing and metal fabrication businesses from the Fabricators & Manufacturers Association (FMA) on how the COVID-19 the pandemic is affecting the industry show some optimism. Results show that 47% said their shop is unsure if manufacturing will rebound during the summer, while 30% believe the industry will rebound quickly, and 23% don’t believe it will bounce back in the next few months. For a complete analysis of the report, click here. (7/13/20)
- According to the June 2020 ISM (Institute for Supply Management) Report on Business, economic activity in the manufacturing sector grew in June, with the overall economy notching a second month of growth after one month of contraction. The June PMI (Purchasing Managers' Index) registered 52.6%, up 9.5 percentage points from the May reading of 43.1%. Read the full release. (7/1/20)
One-third of equipment manufacturers responding to a survey from the Association of Equipment Manufacturers said they plan to lower their financial outlook by up to 30% over the next 30 days, while another one in eight respondents indicated they expect to reduce their outlook for the rest of the year by up to 30%. (6/25/20)
Will manufacturers make significant changes at facilities as they adjust to the novel coronavirus (COVID-19)? Consulting firm Deloitte believes so in its latest manufacturing report. (6/24/20)
Oil briefly rose above $40/barrel on June 3 for the first time in nearly three months on reports that Russia and several other OPEC+ members could extend production cuts by one month. But that was short-lived as questions began to arise whether the extension would indeed occur. Still, the rebound in oil from -$40/barrel that occurred in April is encouraging.(6/3/20)
The May PMI (Purchasing Managers’ Index) from the Institute of Supply Management came off an 11-year low, registering at 43.1, up from 41.5 in April. The PMI still indicates a level of manufacturing-sector contraction, but with an improvement in trajectory. Read the full release. (6/1/20)
- Demand for products made from oil, such as fuels, is expected to increase as the majority of states are entering various stages of reopening. The U.S. Energy Information Administration reports petroleum product demand rising to 16.6 million barrels per day (mb/d) the week ending May 15 from a low of 13.8 mb/d the week ending April 10. (5/28/20)
- The U.S. imported a total of 2,773,000 net tons (NT) of steel in April 2020 (up 58.2% from March), including 1,309,000 NT of finished steel (down 13.5% from March). From January through April 2020, total and finished steel imports are 9,185,000 and 5,819,000 NT, down 20.3% and 28.2%, respectively, compared with the same period last year. It is estimated that annualized total and finished steel imports in 2020 would be 27.6 and 17.5 million NT, down 1.4% and 17.1%, respectively, from 2019. Finished steel import market share was an estimated 21% in April and is estimated at 18% over the first four months of 2020. (American Iron & Steel Institute) - 5/27/20
Industrial output fell a record 11.2% in April, pulled down by a record drop in manufacturing.Capacity utilization slumped to a record low 64.9% from 72.7% in March. Read the full release here. (5/15/20)
It’s difficult to predict whether industrial metal prices have found a bottom, but small signs of life appear to be emerging in the market as of late on the back of supply rationalization. Our risk managers highlight some to watch in the May Monthly Market Report. Read the full report here. (5/9/20)
The April PMI (Purchasing Managers’ Index), released by the Institute for Supply Management, registered 41.5%. While this reading was down 7.6 percentage points from the March reading of 49.1%, it was above analyst expectations of 36.9%. (5/1/20)
This week has brought some historical developments on the oil front:
• On April 20, U.S. crude oil futures fell below $0 for the first time in history, ending the trading day at minus $37.63/barrel. Brent crude, the international benchmark, also slumped. However, this contract was not as weak due to the fact that more storage is available worldwide.
• According to the U.S. Energy Information Administration, energy exports from the U.S. reached 23.6 quadrillion British thermal units in 2019. This is an all-time high and marks the first time in 67 years that annual U.S. gross energy exports exceeded U.S. gross energy imports. More info here (4/20/20)
March data coming out of China shows strong demand conditions for key metals, according to Deutsche Bank. Among the highlights are:
• Demand for copper rose 25% year-over-year in March, versus a 10% year-over-year contraction in Jan-Feb.
• Steel experienced a more moderate rebound with demand falling 4% year-over-year in March compared to a 16% year-over-year contraction in Feb. (4/14/20)
Regarding supply-side constraints, the extension of nationwide shutdown policies in key mining locations has been the main development this month, according to Deutsche Bank. It notes, however, that this current phase of extensions saw some policies adjust to lighten constraints on the mining sector (for example Quebec province in Canada). (4/14/20)
The OPEC+ group agreed to collectively cut production in May and June by 9.7 MM barrels/day and has committed to a series of cuts through April 2022. This cut, along with expected declines and shut-ins to occur throughout the globe in the coming months, could remove up to 14 MM barrels/day in May and June. (IHS Markit, 4/14/20) - More info here
Saudi Arabia and Russia will reduce output to 8.5 MM barrels/day each, from an agreed common baseline of 11 MM barrels/day. According to IHS Markit, “On a global basis, these cuts remove the specter of an aggressive price war and lowers the likelihood that global tank tops will be breached but does not solve the distress physical markets are likely to face in May and June.”
According to DHL, ocean freight services, with limited instances of equipment shortages and overbooking, are moving mainly as scheduled with minimal delays. This could change based on the transition of shipments from air freight to ocean freight transportation, although it is impossible to predict the volume or impact at this time. (4/6/20)
DHL recently published its Ocean Freight Market Update on March 31 and provided a snapshot of the outlook by region (chart courtesy of DHL Ocean Freight Market Update)
In the week ending on March 28, 2020, domestic raw steel production was down week-over-week to 1,670,000 net tons down 9.8% from 1,852,000 net tons, while the capability utilization rate fell to 71.6%. compared to 79.4% the previous week. Further, compared to the year-ago period of 1,913,000 net tons and a capability utilization rate of 82.2%, the current week production represents a 12.7% decrease from year-ago period.
Adjusted year-to-date production through March 28, 2020 was 23,653,000 net tons, at a capability utilization rate of 80.7%. That is down 1.0% from the 23,881,000 net tons during the same year-ago period when the capability utilization rate was 81.6%. All data courtesy of the American Iron and Steel Institute. (4/6/20)
The Federal Reserve Bank of Dallas' general business activity index for manufacturing in Texas dropped to -70 in March from 1.2 in the previous month. This is the lowest reading since June 2004, with the production index, a key measure of state manufacturing conditions, dropping to -35.3 from 16.4. This could suggest a notable contraction in output. In addition to COVID-19 impacts, the Texas market is also particularly vulnerable to the downturn in the oil market. Read more here. (3/31/20)
Western Canada crude oil, which was above $40/barrel at the beginning of 2020, is currently trading at $4/barrel. Could this lead to prices entering negative territory due to the cost to store and transport oil? This will be a trend to monitor. (3/31/20)
After exceeding the 200,000 metric ton mark earlier in the year, LME Nickel inventories appears to be leveling off. Some market analysts are estimating that 60% of nickel miners and 50% of aluminum smelters are unprofitable at current price levels. (3/31/20)
As U.S. automakers continue to announce closures, steel mills that supply this market are beginning to feel the impact. For instance, steelmaker AK Steel announced it will shut down its Dearborn Works (Detroit), which makes flat rolled products for the U.S. automotive industry. (3/31/20)
The price of U.S. crude oil continues to move downward. Market prices closed on March 30 at an 18-year low of $20.09/barrel. In fact, the price dipped as low as $19.27/barrel during trading, the weakest intraday price since February 2002. Fears of reduced consumption amid social-distancing throughout the world while Saudi Arabia and Russia are flooding the world with excess oil are contributing to the decline. (3/30/20)
Which countries are most vulnerable to COVID-19? A new COVID-19 Country Vulnerability Index, launched by IHS Markit, takes both a near-term and long-term look at countries’ capacity to deal with the virus outbreak.
(source IHS Markit)
The index weighs demographics, economic vulnerability, health care capacity, and state preparedness data. It also takes into account a country’s prior experience with pandemics. The index indicates that the vulnerability may be the highest in countries not yet affected by the outbreak. Read more here. (3/30/20)
In a letter to Mark Morgan, acting Commissioner of the U.S. Customs and Border Protection (CBP), five of our leading steel industry associations expressed concern about a recent CBP notification that importers may be granted additional days for payment of estimated duties, taxes and other fees, in connection with the COVID-19 pandemic.
The group’s concerns center on the idea that the CBP should “not allow this crisis to encourage bad actors from taking advantage of an at-risk system during this crisis period,” potentially exposing domestic producers to the “adverse impact of unfairly-traded steel imports, as the effects of this pandemic are uneven worldwide and certain major steel-producing nations continue producing steel despite softening demand that occurred before the pandemic even began.” Read more here. (3/29/20)
One of the largest steel producers in the world, U.S. Steel announced a series of “aggressive and meaningful actions.” U.S. Steel will, among others, immediately idle two of its blast furnaces, plans to idle most or all of its tubular operations in late May, and significantly reduce 2020 capital spending to preserve cash and liquidity in an attempt to blunt the impacts from COVID-19 and the significant changes in global oil and gas markets. Read more here.(3/29/20)
Ryerson continues to take steps to protect customers and drivers. Effective immediately, Ryerson has temporarily suspended required customer signatures on delivery receipts or e-signature pads. Drivers, upon delivery of material, will ask for the name(s) of receiving personnel and may take photos to confirm delivery. (3/25/20)
A recent poll of 600 supply chain managers by the Institute of Supply Chain Management finds that nearly 75% of companies report supply chain disruptions in some capacity due to coronavirus-related transportation restrictions, and more than 80% believe that their organization will experience some impact because of COVID-19 disruptions. Read more here. (3/23/20)
For manufacturers, the National Association of Manufacturers recently published expanded NAM COVID-19 Policy Action Recommendations. (3/22/20)
According to the American Iron and Steel Institute, "The coronavirus epidemic is exacerbating the global glut in steel production and threatens to unleash a new surge in imports into the United States, which would be devastating to the American steel industry and our national security." AISI has sent a letter to Congress to support steel tariffs during this time. (3/20/20)
The Aluminum Association released a framework for policymakers developing economic stimulus and other programs in response to the COVID-19 pandemic. The document – “American Aluminum Jobs: Essential to the Nation” – underscores the essential nature of U.S. aluminum production, fabrication, and recycling and calls for a number of measures to support the industry during the ongoing public health crisis. (3/20/20)
The price of crude oil dipped below $30 on March 16, impacted by both the demand and supply side. A softer demand for crude comes as people cut back on travel, for example, while a breakdown in OPEC talks could lead to an excess in supply. For more on the current situation in the global oil market, read this joint letter from Executive Director of the International Energy Agency (IEA), Dr Fatih Birol, and the Secretary General of the Organization of the Petroleum Exporting Countries (OPEC), Mohammad Sanusi Barkindo. (3/16/20)
- Spot market freight volume has remained healthy, according to monthly updates from DAT. In February, truckers experienced the lowest rates since May. Comparing against the year-ago period, van spot rates were down 5.2%, flatbed spot rates were down 7.8%, and reefer spot rates were down 5.1%. However, load-to-truck ratios trended up, meaning rates could thaw soon, despite a reduction in import cargo volumes due to the coronavirus.
On the contract rate side, The Cass Transportation Index Report January 2020 shows shipment volumes dropped 9.4% in January compared with the year-ago period. This was the lowest reading in roughly three years and the steepest decline since 2009.
According to Cass, weakness in the U.S. transportation market is due partially to elevated inventories. Depending on the severity of the plant shutdowns and trade volumes in China, inventories could dip even further with the potential of a required restocking period to occur. (3/16/20)
- The latest report on worldwide PMI surveys from IHS Markit showed the pace of expansion slowed to the weakest level since May 2009. The slowdown was linked primarily to businesses across both manufacturing and services being affected by the coronavirus outbreak, in particular China, where a record fall in output occurred.
The 50.1% reading for the U.S. PMI in February technically remained in expansion territory, but at a weaker level than the previous month (50.9) and below analyst expectations (roughly 50.8)
The next set of global PMI reports are due out in early April. (3/16/20)