COVID precautions in the USA are waning even as the latest variant takes hold. Mask mandates are virtually non-existent, with maskless travel resuming weeks ago. Those interested are now getting their second booster jabs.
The USA continues to support the Ukrainian government with funding and military assistance, with the next proposed tranche of US$ 33 billion. The USA has revoked Russia’s most favoured nation trade status, which will ban importation of Russian oil and allow for increased duties on aluminium and other metals. Rusal announced that its American division was being sold to members of the current US executive team, with renaming and rebranding completed.
US GDP contracted by 1.4% in the first quarter, surprising analysts who had expected small but positive growth. The declining growth rate was attributed to an increase in COVID-induced supply chain issues, continued inflation and the effects of the Ukraine conflict. The same factors have added to increased stock market and commodity price volatility. Employment growth for April was surprisingly on the upside as jobs are plentiful, with the unemployment rate holding at 3.5%. The Federal Reserve increased rates for the second time this year, by 0.5% and in line with expectations, as it intensifies its efforts to tame the ramp-up in inflation. This was the largest increase in more than 20 years and clearly communicates its concerns about inflation. The Fed will also continue reducing its portfolio of bonds by around US$ 95 billion per month. There is very real concern surrounding the balancing act of curbing inflation while not throwing the US economy into a recession.
Metal prices topped out in early March, with most markets dropping significantly since then. The US regional premium has dipped slightly since March but is still near historically high levels, reflecting how freight and other supply chain costs remain elevated. Rolling mill and profile scrap spreads to prime have remained stable through the downturn in terminal markets. The demand side is still strong, with spot sales readily available for most items. While all-in primary prices have dropped substantially, secondary ingot prices remain buoyant, with a small increase since our previous Mirror. Metal input, transportation and labour costs are keeping ingot prices high even as auto build rates continue to suffer. As secondary ingot prices climb, the gap to prime is narrowing, allowing secondary smelters to start dipping into lower-grade mill scrap items. All secondary scrap prices have headed higher since March, although some items are less in fashion than others. Most recently, domestic scrap prices have been drifting lower as export markets are very quiet.
Domestic copper spreads have remained stable while terminal prices have decreased. Demand is still strong domestically for copper. Brass ingot makers are busy with all mills aggressively chasing scrap units such that pricing remains strong.
Export business remains complicated, with wide swings in ocean freight costs and ongoing port issues. The dramatic fall in LME prices has put many buyers on the sidelines as Asian ingot prices are slipping.