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United States

The Federal Reserve has continued with its aggressive monetary tightening to try to slow persistent inflationary pressures. The Fed has announced its third large rate hike for 2022, with additional increases in store through 2023. Inflation is still running above 8%, although the increases are slowing. 

Rising interest rates have slowed the red-hot real estate markets as loan rates are at highs not seen in more than 10 years. New home construction is crumbling under the weight of these higher rates, and the frenzy around home-buying seems to have been tempered. 

The job front remains buoyant in the USA, with the unemployment rate below 4%; labour is still tight and pay rates are continuing to rise. Many of our domestic partners are limited in what they can produce owing to the lack of interested workers.

All of these factors have driven the dollar to previously unseen heights, which should affect import/export dynamics. The Ukraine conflict is continuing to cause energy supply issues, particularly for those in Europe, whereas the USA has thankfully become relatively energy independent. So while Americans will see increased energy costs, they should not be as affected by shortages.

The roll-out of new domestic recycling resources has taken a pause since our previous Mirror report, as we are flush with new projects relating to both aluminium and copper. Plans for one of the larger greenfield aluminium mill ventures have been officially cancelled, with land and start-up funding to be returned. With the on-plan mills, there is still a lingering concern about whether there will be enough recycled content supply to fulfil the needs of all the new projects. There will certainly be some change in trade flows as well as increased requirements for sortation technology to keep the new mills full of recycled content raw material. This is all great news for the domestic recycling industry and the USA will be ripe with opportunities for partnerships. 

Metal prices are continuing their roller-coaster ride, with pricing now rolling down the hill across the non-ferrous realm. The all-in primary aluminium price has dropped close to 20% since July, falling US$ 1 per pound from its February record - quite a sharp descent in little more than six months. There has also been a noticeable fall-off in demand, which had seemed like a summer slowdown but has since persisted.  Demand for aluminium has dropped across the board. All sectors seem to be weaker, with some consumers right-sizing their inventories while others are just slower with diminished needs. Rolling mills and billet cast houses are buying further out into the year, with wider spreads for scrap. 

While the primary aluminium price has been battered, somehow secondary ingot prices remain buoyant, with high-volume die cast alloy dropping by only 5% in the last two months. Secondary aluminium scrap prices have dropped in tandem with the ingot price, with secondary smelters retaining healthy margins. Input costs are coming down for secondaries, which may lead to improved profitability. 

Auto build rates remain low, with non-existent inventory on dealer lots: if you want a new car, you will have to wait and pay sticker price or above. 

On the copper and brass front, lower terminal markets have led to tightening spreads as domestic and export demand remains healthy for most grades.