n° 160 – April/May 2019

US GDP growth rates for the first quarter of 2019 came in strong at 3.2%, which is far better than expectations of mid 2% growth. It has been estimated that the government shutdown removed around 0.3% of growth from the Q1 number.

Although the headline figure is very encouraging, some concerns surround the data for the first quarter of 2019. Auto sales slipped more than 3% in that period and current expectations are for a 2019 total of around 16.7 million cars, down from 17.27 million in 2018. In addition, a larger-than-expected part of the reported growth came from inventory builds by manufacturers. On the flip side, new home sales continue to grow, buoyed by stable, low interest rates; however, sales prices of new homes dropped precipitously in March.  

Trade talks remain in the spotlight. President Xi Jinping has announced that China will make some changes to eliminate forced intellectual property transfers and that his country will no longer use currency valuation for national gain. These are among the issues at the forefront of US-China trade negotiations. There is hope that Presidents Xi and Trump may meet in June to sign a trade deal.   

Meanwhile, not much progress is being reported in US trade negotiations with the EU.  

Scrap values on the US secondary side are not far off what they were at the time of the previous Mirror, with most cast, sheet and turnings items within a penny or so of those levels whereas shred prices are up a few percent. Offshore interest in all of these items is preventing most prices from falling further. As raw material prices hold steady on secondary, ingot prices are falling more quickly, with the large amount of downside pressure due to lower LME secondary prices and the increase in imported ingot from Europe and China. Published ingot prices have dropped much less than actual prices being traded in the marketplace.  Rolling mill scrap is being well supplied and prices are at similar spreads, but there is some variability in extrusion scrap items, with spreads widening quite a lot. Several billet makers are slowing while others are having production issues. At the same time, there has recently been an increase in billet imports.  

Most copper and brass consumers are busy, and most prices are stable. Copper spreads have widened as uncertainty continues to surround China’s scrap import licences and restrictions, and terminal markets are relatively high.  

Export business continues to regain ground as more copper and copper-bearing material seems to be going to South East Asia and Hong Kong, most of which is processed and then sent to China to be consumed. A reasonable amount of secondary aluminium scrap is going to Mexico, India and South East Asia. The big unknown is how the Chinese scrap import rules will play out over the next few months, so stay tuned.