Ulbrich Economic Update - Number 7 (March 2020)

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PLEASE NOTE THAT THE IMPACT OF COVID-19 EPIDEMIC HAS PROMPTED US TO SHORTEN THIS MONTH'S ISSUE. We recognize that there is considerable turmoil in everyone's business, as managers work to reposition production and delivery schedules, expedite material shipments, rearrange travel schedules and deal with a myriad of issues. There is less time for reading when there is so much to be done. Read our CEO's official update here.

Click here to download the 11 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.

March 2020 // Economic Update Executive Summary


CHINA'S CORONAVIRUS OUTBREAK WILL LIKELY DAMPEN U.S. GDP IN THE 1ST QTR. The monthly WSJ survey of economists found 83% of participants expected the coronavirus outbreak will have small impact on U.S. GDP from January to March, less than 0.5%. U.S. consumer confidence edged higher is February, but the cutoff date for the survey was before the outbreak of the COVID-19 spread beyond China to South Korea, Iran, and Italy. Durable goods orders dipped 0.2% in January, pulled down by decreased demand for cars, auto parts and military aircraft. The ISM index of U.S. national factory activity fell to a reading of 50.1 in February from 50.9 in January. The ISM said global supply chains are impacting most, if not all, of the manufacturing industry sectors.


EUROZONE MANUFACTURING PICKED UP IN FEBRUARY FROM A DEEP SLUMP. Despite disruption from the new coronavirus, the IHS Markit PMI index expanded in February at its fastest rate in six months as services grew and trouble in manufacturing eased. The latest OECD best case scenario forecast the global economy would grow by 2.4%, weaker than the 2.9% expansion projected before the viral outbreak. That lost growth is roughly equivalent to $400 billion.

Steel Industry Update

NUCOR, U.S. STEEL AND ARCELORMITTAL RAISED CARBON STEEL SHEET PRICES BY $40 PER TON. The increase follows tentative signs that the global manufacturing slump may have started to ease at the beginning of the year. Mill outages in April may benefit prices going forward. Allegheny Technologies reported 4th Qtr 2019 results. The stainless steel producer secured several key long-term contract renewals in 2019, including a $2.5 billion agreement with GE Aviation. U.S. Steel will fully acquire the joint venture UPI by the end of the 1st Qtr when USS acquires South Korean steelmaker POSCO's 50% stake.

Metals & Commodities Market Update

IRON ORE FUTURES RISE AS CHINA KEEPS CHURNING OUT STEEL THAT NO ONE WANTS. The collapse in economic activity amid China's unprecedented measures to contain the coronavirus outbreak means there are few buyers of steel, which has sent prices tumbling and put margins under intense pressure. Iron Ore decreased 8.15% since the beginning of 2020.

Latest Medical Market Developments

MEDICAL EQUIPMENT AND SUPPLIES PRODUCTION IN 2019 ROSE 4.0% FROM THE YEAR-AGO LEVEL. Production is expected to peak imminently before declining through the remainder of 2020 and the first half of 2021. To commercialize its patented system for continuous Atomic Layer Deposition (ALD), Argonne National Labs signed an exclusive license with Forge Nano to use Argonne's patent for ALD. Forge Nano recently expanded its coating capacity ten-fold by opening a new production plant.

Automotive Industry Economic Trends

THE MARKET FOR AI IN CARS WILL GROW 1200% IN NEXT SIX YEARS - A GMI PREDICTION. The market for artificial intelligence in the automotive industry will go from $1 billion today to $12 billion by 2026, according to a report from Global Market Insights. U.S. light-vehicle sales were expected to rise in February, helped by two extra selling days, an additional weekend and higher incentives. It's unclear how much of an impact the spread of the coronavirus will have on deliveries going forward, though several automakers warned new-vehicle suppliers will likely be disrupted by manufacturing and supply chain bottlenecks, mostly in China.

Aerospace Updates

THE SOLAR ORBITER SPACECRAFT SET OFF ON A 10 YEAR JOURNEY TO THE SUN. The mission is expected to yield insight into how solar radiant energy affects Earth. Airbus is ramping up production of its bestselling single-aisle jet, moving to fill a hole in the market created by the prolonged grounding of rival Boeing's 737 MAX. Airbus reported a loss for 2019 after taking a substantial charge to settle U.S., U.K. and French allegations of bribery. Lockheed Martin's Sikorsky unit was awarded a U.S. Navy contract to build six VH-92A helicopters for the presidential helicopter replacement program.

Energy Sector Trends

CARBON EMISSIONS FROM ENERGY FLATTENED LAST YEAR AT 33 GIGATONS. This follows two years of increases, even as the world economy expanded by 2.9%. The U.S. recorded the largest emissions decline on a country basis, falling 140 million tons (2.9%) and is now down by nearly one gigaton from its 2000 peak. GE Hitachi Nuclear Energy and Terrapower are jointly pursuing an opportunity to design and build the Dept. of Energy's Versatile Test Reactor (VTR), an experimental fast neutron nuclear reactor that could start up by 2026. There is currently no fast neuron testing capability in the U.S.

March Innovation

THE WORLD NEEDS BETTER BATTERIES AND AMPRIUS TECHNOLOGIES PROVIDES THEM. Researchers at Sanford University discovered a solution to the problem associated with silicon in batteries. Using new techniques in nanotechnology, they were able to store lithium in tiny silicon nanowires. Amprius Technologies was formed to bring this revolutionary battery technology to the world.

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