This report is being written on January 20, the day on which new US President Joe Biden is inaugurated. This is typically a ceremonial day when the outgoing President passes the torch to his successor but President Trump broke with tradition and did not attend the inauguration. The week before, we witnessed a sad day for our democracy when the Capitol was stormed by rioters who refused to accept the vote of the people and attempted to overturn the election. But in the end, calmer heads prevailed and the legislative branch was able to carry out its duties of verifying the election results.
President Biden is to quickly impose executive orders regarding immigration, COVID safety mandates and climate policies. COVID infection rates are still high, with the US death toll recently exceeding 400,000. Vaccines are now being administered and federal guidelines dictate who gets priority, but the roll-out appears very disjointed.
As we navigate through these political and health issues, the economy is equally fragmented. The unemployment picture is still bleak while manufacturing is booming. Manufacturing activity as measured by HIS Markit is still in expansion mode, being held back by labour shortages and headwinds regarding worker health and safety. At the same time, unemployment is stubbornly stuck at 6.7%, with the leisure and hospitality sectors still mired in COVID-related depression. The Biden administration is expected to work quickly to boost the economy with more direct stimulus payments, more unemployment aid, support for vaccine funding, another round of small business protection measures and many other initiatives.
On the metals side, the tightening market has become even more challenging for consumers as supply continues to dwindle and prices continue to rise. Other than aerospace, most sectors within manufacturing remain strong, with steady automotive production and good building/construction and transportation numbers. The secondary 380 ingot price continues to rise and is around 10% higher than a month ago, in parity with primary Midwest transaction pricing. This could allow secondary smelters to start to dip into rolling mill scrap if necessary.
Secondary scrap aluminium prices are climbing in tandem with ingot prices - up around 10%, with some grades gaining even more. While secondary ingot prices are on the rise, all-in prime pricing has been stable since early December, although the price of wrought scrap has climbed across the board. Spreads for prime scrap have tightened substantially, with some grades at discounts smaller than those seen for several years, while terminal prices are very high.
Domestic copper scrap spreads and demand are largely as before, with no great changes as domestic mills have all the scrap they need.
Exports of non-ferrous are suffering slightly from the global problem of container supply. Prompt bookings can be challenging and ocean rates are climbing. High-grade copper is flowing to China where demand is strong. Birch Cliff is still moving to South Korea, Japan and Europe. Most aluminium exports are heading to India and South East Asia, although we are hearing of softening export prices owing to lower ingot values.
Shapiro Metals (USA), Board Member of the BIR Non-Ferrous Metals Division