n° 169 – December 2020

The US Presidential Election was completed more than a month ago, with Joe Biden winning the popular vote and the electoral college vote, but some technicalities remain before all is finalized. Donald Trump has yet to concede defeat, which is standard process; instead, he is fighting in the courts and on his Twitter feed with little or no success. There is a faction that believes improprieties occurred during this election, but at this point the courts have not supported those claims. In the meantime, Mr Biden is assembling his team to transition into office in mid-January to take over as President. The drama and intrigue could well continue up to and beyond his swearing-in. 

While the politics are sorting themselves out, COVID-19 infection and death rates have surpassed previous record levels, with fatalities recently exceeding 2000 per day and with new cases above 200,000 on the worst days. The recent Thanksgiving holiday is likely to lead to further increases. The good news is that highly-effective vaccines have been developed and should be rolled out to front-line employees before the end of the year, with the hopes of vaccinating most of the country by June 2021. 

The unemployment situation is very mixed right now; there are still increases in unemployment claims of a little more than 700,000 per week. There are likely to be more job losses in the service and entertainment sectors as regional shutdowns intensify. Manufacturing activity is still very strong in the USA and many operations are seeing large labour shortages. Again, the picture is mixed: vehicle manufacturing and housing remain very strong whereas the aerospace business is still suboptimal.  

Scrap control has swung very much to the sellers - if they have any metal units. There is a major shortage of aluminium secondary scrap and some rolling mill items amid very strong automotive needs domestically and in Mexico. There is also increased demand out of Asia for both secondary ingot scrap and deoxidation aluminium for the steel mills. Secondary smelter scrap prices have increased more than 20% over the last three months, while standard ingot pricing is up slightly more than 20%. Pricing does not appear to have reached a plateau as both raw material and ingot are in very short supply.   

Scrap is equally scarce on the rolling mill side, with spreads remaining tight to MW primary pricing. This tightening is happening in a rising market when some loosening traditionally occurs. Extrusion scrap provides a similar story, although there are many outages scheduled as the holidays approach and so spreads could loosen a little.

There was a short-lived tightening of spreads on copper scrap as exports to China seemed to open up, but as the terminal markets have risen, those spreads have widened again. Domestic mills and brass ingot-makers seem to be well-supplied and paying enough to allow them to buy the items they need. Domestic demand for copper and brass is not on par with what is being seen with aluminium.