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United States

The well-laid rate plans of the Federal Reserve are having the desired effect of a soft economic landing. Previous rate increases have slowed inflation to around 3% without damaging the labour market, which remains in particularly good shape. The likelihood of rate decreases in 2024 is being pushed out until later in the year, so there are some levers to pull if the economy takes a downturn. GDP numbers for the fourth quarter surprised to the upside again, with the 3.3% growth rate well above expectations; annual GDP growth was 2.5%, another piece of unexpected good news.  

The stock markets are enjoying the prospect of rate decreases, with most of the indexes at or near record levels.

The US presidential primaries are just beginning and the early indications are that we will have a repeat of the choices available in 2020 - a prospect greeted with widespread disappointment.

Manufacturing activity remains in contraction, where it has been for more than a year. Auto/light truck sales came in at 15.6 million units for last year, up nearly 2 million from 2022. Expectations are that 2024 will produce slight growth to around 16 million units as the auto industry claws its way back to pre-COVID sales levels amid fewer supply chain issues. There has been steady growth in uptake of electric vehicles (EVs), accounting for around 7% of light vehicle sales, but the USA remains slow in adapting to the EV trend. 2024 is likely to bring another round of government incentives to encourage EV ownership. In the meantime, manufacturers and dealers are backing off the push towards EVs as inventories remain long.  

The housing market is still suffering a shortage of available inventory, which is keeping pricing relatively high. Higher loan rates and elevated prices are putting the “American Dream” of middle-class home ownership in jeopardy for the near term.

On the metals front, it was a slow end to last year for most consumer operations as they worked their inventories down to very low levels. Demand from billet producers is still poor, with expectations that conditions may not improve until the second half of this year. Billet premiums have dropped significantly for 2024 and extrusion demand is equally poor. The rolling mill side saw demand spike at the turn of the year, with some mills apparently short and a significant number of weather-related issues given that we are seeing the first real winter conditions in a couple of years. 

We are anticipating the entry of several new greenfield mills into the scrap chase towards the middle of the year, which should drive spreads tighter. Secondary scrap prices seem high relative to stagnant ingot pricing at present. Melting operations may be looking to replace very costly shredded scrap with other items, bringing shortages and higher prices for the likes of turnings and briquettes. Pricing for both secondary ingot and primary aluminium continues to be very range-bound while the regional premium is relatively flat, with little movement over the last three months.

Brass mills are slow, with orders being pushed out until they need the metal. Spreads on copper are a little wider than previously but demand is healthy from domestic and export outlets.