Feb
15

Ulbrich Economic Update - Number 33 (February 2023)

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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.

February 2023 Economic Update Executive Summary

FED Rate Hike Ahead

The Americas

THE FED SLOWED ITS TIGHTENING WITH ¼ POINT BUMP AND SIGNALED MORE HIKES AHEAD. The February 1st decision followed six consecutive larger rate rises. January data showed: U.S. manufacturing contracted again as higher interest rates stifled demand for goods, but factories didn’t lay off workers in large numbers. Nonfarm employment increased by 517,000. Employment in the goods-producing segment grew by 46,000, led by construction and manufacturing. Consumer confidence fell as households continued to worry about the economy's prospects.

December data showed: The leading economic indicators, a gauge of future U.S. economic activity, tumbled for a 10th straight month. Durable goods orders rebounded 5.6% due to a surge in the volatile civilian aircraft category, where orders rocketed 115.5%. Factory orders rebounded in December, increasing 1.8% after dropping 1.9% in November. The U.S. trade deficit for all of 2022 rose 12.2% to $948.1 billion, the widest gap on record. The producer price index fell 0.5% as the costs of energy products and food declined, offering more evidence that inflation was receding. Consumer prices dipped 0.1%, the first decline since May 2020. Gasoline prices tumbled 9.4%. Retail sales plummeted 1.1%, the biggest drop in two years.

IMF

Overseas

THE IMF NOW EXPECTS AN IMPROVEMENT IN THE 2ND HALF OF THE YEAR AND INTO 2024. At the World Economic Forum in Davos, business leaders and top government officials expressed optimism for the global economy as China drops COVID controls, the U.S. launches a green investment boom and Western Europe adjusts to Russia’s war in Ukraine. Germany’s economy grew by 1.9% in 2022. The Chinese economy advanced 3.0% in 2022, the lowest since modern Chinese GDP records began in the 1970s.

Steel Industry Updates

NUCOR AND STEEL DYNAMICS OFFERED UPBEAT OUTLOOKS FOR THE STEEL INDUSTRY that countered the widespread view of a difficult economy in 2023. Nucor expects 1st Qtr earnings to shake off last year's sluggish ending. Steel Dynamics said customer order entry activity remains healthy, steel pricing has firmed and the company believes North American steel consumption will increase in 2023. Stainless steel prices increased for the 2nd consecutive month in January and will rise again in February, pushed up by increases in nickel and ferrous scrap surcharges. LME nickel prices applied to January surcharges rose from $10.89/lb to $12.48/lb.

Electric Air Taxis

Automotive Trends

EV SALES ACHIEVED 10% MARKET SHARE FOR THE FIRST TIME LAST YEAR, driven mainly by strong growth in China and Europe. U.S. auto makers sold 807,180 fully electric vehicles, raising the share of all-electric to 5.8% of total vehicles sold, up from 3.2% in 2021. Electric air taxis are capturing the attention of innovators around the world, including auto manufacturers Toyota, Porsche and Hyundai, looking for new and lucrative ways to adapt as the world moves to greener forms of transportation.

Metals & Commodities

COPPER AND IRON ORE RALLIED IN JANUARY AS CHINA REOPENED ITS VAST ECONOMY, with benchmark copper prices passing $9,000/tonne for the first time since June. Iron ore has risen 50% since its low in June, surging to more than $120/tonne. Molybdenum prices reached their highest level in 17 years at the end of January. Russian-made aluminum is about to be slapped with a 200% tariff by the U.S. to keep pressure on Moscow as the one-year anniversary nears of the invasion of Ukraine.

Solar Panel Manufacturing Facility

Energy Sector News

HANWHA WILL BUILD AN ENTIRE SOLAR-MANUFACTURING SUPPLY CHAIN IN GEORGIA, the biggest solar investment spurred so far by new tax incentives. The South Korean conglomerate’s Qcells unit will build facilities that will manufacture 3.3 gigawatts of solar panels a year, 18% of the estimated U.S. demand in 2022. Air Products and AES Corp, a power company, are planning to build a $4bn renewable-powered hydrogen factory in northern Texas. Japan’s ambitions to reboot its nuclear industry risk being set back by a shortage of engineers and manufacturing capacity that has atrophied in the decade since the Fukushima disaster.

Medical Insights

GENERAL ELECTRIC STARTED 2023 BY SPLITTING OFF ITS HEALTHCARE UNIT, completing a key step in the slow-motion breakup of the industrial giant. GE HealthCare Technologies started trading the first week of 2023. Medical device companies set a positive tone for 2023 at the J.P. Morgan Healthcare Conference. Dexcom and Intuitive shared early results. Dexcom expects its 2023 revenue to increase by as much as 20%. Intuitive forecast a 12% to 16% increase in procedure volumes for the year.

F35 Fighter Jet

Aerospace Developments

CANADA WILL PURCHASE 88 F-35 COMBAT JETS MANUFACTURED BY LOCKHEED MARTIN to refurbish the country’s aging air force. The total cost is budgeted at US$14bn, with deliveries set to start in 2026. SpaceX is pushing to increase its flight rate this year as competitors work to debut new vehicles for the launch market. It is aiming to conduct up to 100 orbital flights in 2023, a 64% jump. Boeing reported a sharp jump in airplane orders and deliveries in 2022 but trailed Airbus for the fourth-straight year. Boeing delivered 480 airplanes and won 774 net new orders, while Airbus delivered 661 jets and won a net total of 820 new orders.

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