n° 166 – May 2020

At the time of writing, the USA has seen nearly 1.4 million COVID-19 infections and well over 80,000 deaths. Most of the infections are in the north east of the country, in New York, New Jersey and New England. The USA accounts for nearly a third of all cases worldwide and around a quarter of the deaths. Responses have been regional, with highly-infected areas trying to determine how to minimize the infection rate; other, less-affected areas have already reopened for business with varying approaches. 

Unemployment claims have reached more than 36.5 million people since the onset of the virus. The April unemployment rate went as high as 14.7%, with the expectation that this will climb to more than 20% in May and with some predicting it will peak around 25%. These are levels that the USA has not seen since the Great Depression in the 1930s. The industries most affected have been leisure and hospitality, followed by food and beverage services.  Manufacturing unemployment has dropped, but not to the extent of other industries. The USA is losing three to six million jobs per week, although the rate of losses is slowing. 

Many auto companies are still shut down; some were scheduled to return on May 18 but dates continue to be fluid. Those that are reopening are doing so at very limited volumes. Substantial government bail-out money is being offered to small and medium-sized companies, as well as to other badly-affected businesses (airlines in particular). Government payments are also going to most US citizens at a certain income level. Heating, ventilation, air-conditioning and food packaging seem to be busy, whereas aerospace, truck trailer and building/construction are slow, but not as bad as automotive. 

Domestic demand for secondary aluminium is very slowly coming back to life, with the first auto plants starting up - albeit at a very low level of barely 40% of previous production.  Demand has been so poor that much of the scrap is being piled up or exported. The saving grace for secondary aluminium has been the decent demand out of South Korea.

Secondary ingot prices have held steady in this market but scrap prices have not. While the high-volume 380 ingot price has barely moved in two months, scrap prices have fallen by around 20%. Most mill-grade and billet scrap has seen tighter spreads to the all-in aluminium price (the Midwest premium has dropped more than 5 cents since the previous Mirror report in March). There is a relative shortage of UBCs with most people staying at home and container return states having closed their programmes for fear of contamination. Not a lot of scrap is being generated either via peddlers or with industrial scrap; all activity levels are very low. The balance has tipped more in favour of the seller if they have material. 

As industry and peddler traffic has slowed, copper scrap volumes and spreads have tightened, more so Birch Cliff than the higher purities. The situation is similar for brass scrap, with ingot-makers slower in line with the amount of scrap being generated.