The USA has just emerged from a weekend of consternation following the failure of two banks - the larger one specializing in funding the technology industry and the other, a New York-based bank, heavily involved with cryptocurrency. The ensuing week brought concerns over spill-over effects, with many regional and overseas banks coming under scrutiny. The relevant government financial institutions are working hard to sell off the damaged banks and backstop deposits. Some experts are now expecting the Federal Reserve to temper its rate hikes while the damage is assessed.
Inflation is still at an annualized rate of 6%, much above the Federal Reserve’s target. Given that inflation isn’t slowing enough to please the Fed, there are expectations of another larger rate increase this month; however, that is now in flux while it unwinds the current banking situation. Meanwhile, labour market conditions remain healthy in the USA with the current unemployment rate at 3.6%, as payroll employment continues to surprise on the upside.
Demand at domestic aluminium mills has not improved since the end of last year, with many still sitting on the sidelines and not buying much prompt scrap. There are many factors that seem to be tempering demand. Business has slowed for some product lines, as can sheet and profile demand is poor, and we are also seeing inventory drawdowns at several mills. Spot buys are now being pushed out to April or beyond. This contrasts with what we are seeing in the secondary ingot business where demand seems reasonable, with ingot prices remaining flat.
Recently, secondary scrap aluminium prices have been rising as export demand has been strong. All-in pricing for primary aluminium is down around 10% since January while the regional premium is relatively unchanged, so most of the drop is LME-related. On the other hand, secondary ingot prices are unchanged and haven’t moved in quite a while.
Domestic and export demand is strong for copper grades, with stable to improved spreads. Brass ingot items domestically are a little backed up as we work through an outage at one of the larger ingot-makers.