Ulbrich Economic Update - Number 18 (November 2021)
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Click here to download the 16 page Economic Update for the full details of recent economic trends impacting the steel and commodities markets, as well as the associated industries across the globe. Continue reading below for the Executive Summary.
November 2021 Economic Update Executive Summary
U.S. GDP GREW BY AN ANNUALIZED 2.0% IN THE 3RD QTR, a marked slowdown from earlier this year. It was the weakest quarter of growth since the recovery began in mid-2020. Consumer confidence rose in October as high inflation concerns were offset by improving labor market prospects. Consumer prices accelerated at the fastest pace in 30 years in September, while workers saw their biggest compensation boosts in 20 years. U.S. manufacturing activity slowed in October, with all industries reporting record-long lead times for raw materials. Durable goods orders fell 0.4% in September, as manufacturers continued to confront higher material costs and parts and labor shortages. There were gains in orders for primary metals and fabricated metals products. Orders for motor vehicles and parts fell. The economy added 531,000 jobs in October, and the unemployment rate fell to 4.6%. Existing home sales increased 7.0% in September, the largest increase in a year, while confidence among homebuilders in October rose by the most in nearly a year.
EUROZONE BUSINESS ACTIVITY GREW AT ITS SLOWEST PACE FOR SIX MONTHS IN OCTOBER. Further worsening of the global supply chain problems is causing huge factory order backlogs, growing port congestion and widespread shortages. A shortage of magnesium may force European carmakers and other users of aluminum to shut down production within weeks unless China restarts its smelters. China’s economy grew 4.9% in the 3rd Qtr from a year earlier, slowing sharply from the previous quarter’s 7.9% rate. China’s factory sector is hamstrung by widespread power outages across the country as coal prices have soared.
Steel Industry News
THE CLASH WITH THE EU OVER U.S. TARIFFS ON STEEL AND ALUMINUM IMPORTS WAS EASED by a deal reached at the G20 meeting. The European Union will be allowed to ship 3.3 million tonnes of steel annually into the U.S. duty-free; any volume above that would be subject to a 25% tariff. The EU will drop retaliatory tariffs in return. Nucor is launching a line of net zero carbon steel products called Econiq. General Motors will be the first to use the product early next year. Stainless mills lifted base prices for CR commodity grades and alloy surcharges for nickel, manganese and molybdenum, more than offsetting the decline in scrap prices.
Metals & Commodities
METALS PRICES HAVE SURGED TO MULTIYEAR HIGHS after smelters, facing soaring energy bills and pressure to cut their carbon emissions, curtailed production. A price rally for uranium pushed the price of yellowcake to its highest level since 2012 at $50/lb. October LME zinc prices jumped to $3,533/tonne after Nyrstar, a major producer, said it was reducing output by half at three of its European plants. Aluminum hit a three-month low of $2,510 in early November, 20% below its peak in October.
Automotive Industry Trends
SALES AT AUTO DEALERSHIPS ROSE 0.5% IN SEPTEMBER AFTER DROPPING 3.3% IN AUGUST. With unit sales declining, the increase in receipts likely reflected higher prices amid severe shortages. The average price of a new motor vehicle topped $45,000 for the first time ever. General Motors will install 40,000 electric-vehicle charging stations in the U.S. and Canada, part of the automaker's $750 million commitment to bolster its presence in the sector. Fast 5G cellular networks are rolling out and automakers have teamed up with telecom carriers to build small, local 5G networks to try out the technology as they develop new car models.
JOHNSON & JOHNSON’S REVENUES CLIMBED 11% IN THE 3RD QTR COMPARED TO A YEAR AGO. Medical device sales grew 7.6% amid a higher level of surgical procedures. New techniques offer the possibility of introducing them to pathogens not yet evolved, but which are likely to do so in the future. Due to a combination of high-throughput DNA-sequencing technologies and modern machine-learning, it is now possible to observe which variants of a virus are circulating and suggest how they are likely to change.
Latest Aerospace Developments
THE PRICE OF JET FUEL HAS DOUBLED TO ALMOST $750/TONNE OVER THE PAST YEAR, threatening the airline industry’s slow recovery from the coronavirus crisis. Lockheed Martin dramatically cut its sales expectations for this year and 2022, as the COVID-19 pandemic severely hobbled the top U.S. defense contractor's supply chain. U.S. airlines are buoyed by the administration's decision to reopen to fully vaccinated air travelers from 33 countries, including most of Europe, in November.
Energy Sector Updates
FRANCE WILL INVEST €1 BILLION IN NUCLEAR POWER BY THE END OF THIS DECADE as Europe’s energy crisis spurs renewed interest in that source of power. A plan to develop large-scale wind farms along nearly the entire coastline of the U.S. was announced by the administration. U.S. power usage will rise about 3% this year as the economy recovers. Natural gas' share of power generation will slide from 39% last year to 36% this year and 35% in 2022 as gas prices rise. Renewables will hold at 20% this year.
A SWEDISH START UP HAS DEVELOPED A NEW PROCESS FOR DESIGN AND MANUFACTURE using an innovative steel-forming technique developed by Outokumpu. Stilride AB has carried out further development covering the whole value chain from digital design of tools to production, ultimately developing a new “industrial oragami” for designing and manufacturing. Northwestern University engineers added a new capability to electronic microchips: flight. About the size of a grain of sand, the new “microflier” catches flight on the wind, like a maple tree’s propeller seed, and spins like a helicopter through the air toward the ground.
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