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United States

Omicron infections in the USA have peaked at more than 825,000 cases per day during January, with hospitals and healthcare providers pushed to the brink again. The Federal government has implemented programmes to provide testing to the public while local governments continue to adopt varying approaches to tempering the spread of the virus. A significant proportion of people are still reluctant to take the vaccines.

It appears that the initial version of President Biden’s Build Back Better programme is dead in the water as a small handful of Democrats will not subscribe to some parts of the bill. The hope now is for a small set of programmes on which there can be some consensus within the majority party.

Inflation is now at a 40-year high and the Federal Reserve is on record as setting expectations for at least three rate increases in 2022, with the first coming in March. This has pushed stock markets into correction mode, with losses approaching 10% from last year’s highs. The good news on the economic front is that the unemployment rate is back below 4%.

The metal markets continue to be volatile, with aluminium and nickel rising and falling rapidly. The commodity markets are responding to the current uncertainty around Russia’s intentions in Ukraine, supply chain issues and ongoing inflationary pressures around the world. The all-in aluminium price is fast approaching the record highs of 2021, with the regional premium back up to US$ 750 per tonne. At the time of my December 2021 report, US primary and secondary aluminium prices were at parity; now the primary price is nearly 20% higher than that for high-volume secondary 380 ingot as most secondary alloy prices have not moved much in recent months.

Mills are widening most scrap spreads with the increase in terminal market pricing; this is the case for items that were previously in high demand. Billet cast houses seem well supplied and are working off inventories from the holiday shutdowns. Most rolling mills are in the market for prompt shipments. Secondary aluminium scrap prices have moved up slightly in the last few weeks in an uninteresting, flat market.

There have been several more expansions announced in the domestic aluminium industry over the past month, with the focus on production utilizing recycled content. There does not seem to be much help with chip supply for the automotive industry, with a recent government report showing inventory levels at US manufacturers of five days. Vehicle production remains low, with prices remarkably high in a squeezed market.

Copper spreads remain tight with these higher markets, amid good demand across the board domestically and for export.

Although export demand is good and metal is readily available, logistics challenges are continuing to cause difficulties. Drayage trucking represents the latest bottleneck as truckers are turning away from export-related freight to more lucrative domestic movements.