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March 2022 Economic Update Executive Summary
RUSSIA’S WAR IN UKRAINE HAS IGNITED AN UNPRECEDENTED INCREASE IN THE PRICE OF NICKEL, a key metal used in stainless steel and electric vehicle batteries. The information contained in this month’s Economic Update has yet to fully capture the wild nickel price volatility that occurred after the first week of March. For example, the London Metal Exchange (LME) was forced to halt nickel trading and cancel trades after prices doubled on March 8 to more than $100,000/tonne (over $45 per lb) in a surge attributed to short covering by one of the world's top producers. The LME said trading could be closed for several days, giving market participants time to find cash to pay margin requirements. In the April issue, we will report more extensively on the rapid escalation of nickel prices and the prospects for the industries dependent on nickel and other metals caught up in the European conflict.
U.S. EMPLOYERS ADDED 678,000 WORKERS TO PAYROLLS IN FEBRUARY, the strongest gain since last July. The jobless rate fell to 3.8% from 4.0% a month earlier. Retail sales surged 3.8% in January, the largest rise since last March and their highest level since the government started tracking the series in 1992. Receipts at auto dealerships snapped back 5.7% after dropping 1.6% in December. Factory production increased 0.2%, while overall industrial output expanded 1.4%. Utilities production soared 9.9%, the biggest gain in the index's history. Durable goods orders advanced 1.6%, boosted by a 3.4% increase for transportation equipment. Inflation accelerated to a 7.5% annual rate, led by soaring costs for rents, electricity and food. Electricity prices jumped 4.2%, offsetting a 0.8% decline in the cost of gasoline and a 0.5% drop in natural gas. A new supply-blockages measure developed by economists at the Federal Reserve Bank showed a record level of strain in November, but a decline in December, January and February. From a peak of 4.5 in December, it has fallen over three consecutive months and hit 3.3 in February, with zero representing the index's long-term average.
CHINA’S FACTORY ACTIVITY UNEXPECTEDLY EXPANDED IN FEBRUARY as new orders improved, pointing to some resilience in the world’s second-largest economy. Japan’s GDP rose an annualized 5.4% during the fourth quarter of 2021. For the whole of 2021, Japan’s GDP rose 1.7%, turning positive for the first time in three years. The European Commission unveiled a €43 billion investment plan to promote research and production of higher tech chips used in computers, smart-phones and vehicles.
Steel Industry Updates
STAINLESS STEEL SHEET CUSTOMERS ENDURED ANOTHER MONTH OF STRONG DEMAND, customer tonnage allocations and long lead times in February. The stainless mills fully implemented the January base price increase and higher raw material surcharges, resulting in higher transaction prices and inventory valuation. Tariffs on Japanese steel imported into the U.S. will be eliminated under a new deal reached in February. The agreement will allow Japan to ship up to an annual 1.25 million tonnes of steel to the U.S. duty free. U.S ferrous scrap prices are poised to increase sharply in the wake of Russia’s invasion of Ukraine.
Metals & Commodities
STOCKPILES OF IMPORTANT COMMODITIES are at historically low levels, especially metals. For example, copper stocks at major commodity exchanges were just over 400k/tonnes in late February, less than a week of global consumption.
A DEFENSE DEPARTMENT REPORT DETAILED THE POST-COLD WAR SURGE IN MERGERS which has shrunk the number of American defense prime contractors from 51 in 1990 to 5 today, leaving the U.S. military less well-equipped. The report is aimed at reversing the consolidation trend. Airbus expects to deliver 720 commercial jets this year, an 18% YOY increase.
Energy Sector News
CHINA'S TOKAMAK FACILITY HELD 120MN C° PLASMA FOR 1,056 SECONDS, a new record for holding superheated plasma. The work is dedicated to the development of fusion as a power source that could replace coal-fired power plants and other non-renewable resources. Rising energy costs are one immediate consequence of the confrontation between Russia and Western powers over Ukraine. With Russia being a major energy supplier, sanctions against the country have affected energy prices.
SCIENTISTS DEVELOPED A NOVEL CANCER THERAPY called minimally invasive image-guided ablation, which comprises a ferromagnetic thermoseed navigated to a tumor using magnetic propulsion gradients generated by an MRI scanner, before being remotely heated to kill nearby cancer cells. Moderna expects the pandemic to end this year (“an 80% chance”, said CEO Bancel).
EIGHT CARMAKERS ANNOUNCED FACTORY CLOSURES OR FROZE SALES TO RUSSIA as the industrial fallout from the country’s invasion of Ukraine spread. Ford, Renault and BMW have already closed Russian plants. Analysts say the initial impact of the war on some car makers could lower global vehicle production by 1.5 million vehicles this year. Ford Motors announced a major restructuring, separating its legacy ICE (internal combustion engine) business from its electric vehicle division.
A POLYMER THAT HAS TWICE THE YIELD STRENGTH OF STEEL, but only a sixth of the density, has been created by a team from MIT. The plastic could have a range of uses, from bridges to automobile manufacturing. German startup Magment developed a magnetizable concrete technology for road surfaces, which can be used to wirelessly charge electric vehicles while driving.
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