n° 167 – July 2020

The USA has seen more than 3.5 million COVID-19 infections and nearly 140,000 deaths. There has been a shift in the demographics of the patients and the geography of the spread: whereas the initial wave was mostly in the Northeast and some larger cities, the current spread is in Southern states such as Texas, Florida and Arizona where local governments reopened early and with fewer precautions. The USA is also seeing a wider spread among young people who seem to be flaunting the advice of medical professionals and gathering in large groups without proper precautions. As the infection rate continues to rise, the death rate is rising more slowly. Many of the hardest-hit states are now retreating to previous levels of quarantine to try and get the spread back under control. 

Beyond COVID, the USA is also in the middle of the presidential election season, with the vote taking place in early November. Joe Biden is leading President Trump in most national polls by wide margins, and in states that are considered “toss-ups”. The situation could change if we see movement on the economy, on COVID relief or on the unrest in many major cities related to policing.

On the economic front, the USA is still losing more than 1 million jobs per week, although this is well down from the beginning of the pandemic when the weekly figure was 6 million. The unemployment rate for June was 11.1%, down from May’s 13.3%. It appears that, as the economy has reopened, people in the service industries (retail stores, leisure and hospitality) are going back to work. There was also positive news regarding the US manufacturing index for June, which showed manufacturing activity being back in expansion mode for the first time since February.

Scrap demand has quickly rebounded as the lack of industrial production and very little peddler traffic have depleted inventories at yards. Whereas industrial volumes into yards were down 40-75% in April and May, many are now only 25% below their normal level. Secondary aluminium ingot prices are rising, but at a slower rate than scrap, so the secondaries are in their typical margin squeeze. There is also very active overseas buying for some items, which is removing scrap from the US markets. On the rolling mill side, the can sheet manufacturers worked hard to fill their scrap needs as UBCs dried up early in the second quarter; mills resorted to replacing these with higher-priced metal units. Other rolling mills tightened their spreads early in the quarter but have recently widened again as the terminal markets have shown signs of life. Billet makes are still hit-and-miss depending on the industries they serve; most billet makers are seeing rebounding order books and scrap is in short supply, keeping spreads tight.

Copper scrap is very tight. Birch Cliff spreads have tightened dramatically even as terminal markets are at recent highs. Higher grades have also tightened, but not to the extent of Birch Cliff. Brass ingot makers are in a similar position of scrap shortage as their business levels have increased.