Articles in Category: Macroeconomics

This morning in metals news: job openings and new hires fell in August, the Census Bureau reported; steel producers in the U.K. are warning of an energy-related crisis; and, lastly, Liberty Steel received a £50 million boost that it says will preserve about 660 jobs.

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Job opening, hires slump in August

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Both job openings and hires declined in August, the Census Bureau reported today.

Job openings fell to 10.4 million as of the last business day of August. Meanwhile, hires decreased to 6.3 million.

U.K. steel sector sounds alarm over energy prices

As MetalMiner’s Stuart Burns covered in a series of posts last week, energy prices are a mounting concern all over the world.

The U.K. steel sector is warning that rising energy costs could become a crisis for the industry. Surging costs for natural gas and other commodities threaten the continuity of their operations, they argue.

“These extortionate prices are forcing some UK steelmakers to suspend their operations during periods when the cost of energy is quoted in the thousands per megawatt hour; last year, prices were roughly £50 per megawatt hour,” UK Steel Director General Gareth Stace said last month. “Even with the global steel market as buoyant as it is, these eye-watering prices are making it impossible to profitably make steel at certain times of the day and night.”

Reuters reported UK Steel is asking the British government for help, saying that without aid the consequences for the industry will be “dire.”

Liberty Steel says £50M will preserve 660 jobs

Lastly, sticking with the U.K., embattled steelmaker Liberty Steel says an infusion of £50 million will help preserve 660 jobs at Rotherham, the BBC reported.

The £50 million injection comes as part of parent group GFG Alliance’s restructuring following the collapse of its primary backer, Greensill Capital.

“GFG will inject £50 million of new funding into LIBERTY Steel UK (LSUK) to enable the restart of LSUK’s core Rotherham electric arc furnace,” GFG said in a release. “The provision of funding will set the platform to refinance LSUK operations in full, create a leading long-term GREENSTEEL hub, and support the RTC’s work of creating a profitable, restructured and focused business.”

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The Copper Monthly Metals Index (MMI) fell 1.7%, as the copper demand picture could be set to weaken and the LME three-month and China primary cash prices fell month over month.

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The Fed effect and Congress delays

As the Federal Reserve prepares to scale down its pandemic strategy, copper prices dropped. The Fed reported it would hike rates and pare back the asset purchase program (i.e., quantitative easing).

This news benefited the U.S. dollar, which increased over the past month. This is particularly important to copper. The U.S. dollar and commodities have historically moved in a perfect inverse relationship.

Moreover, Congress’ decisions — or lack of them — could cause market turmoil and impact copper prices. The bipartisan infrastructure deal remains delayed in the House of Representatives.  Congress has not taken action on increasing the debt ceiling, adding to the potential market turmoil, though it does appear that Republicans have agreed to a short-term debt ceiling cover into December.

China looming over prices

Meanwhile, the second-largest economy in the world continues to show signs of volatility.

China is the biggest consumer and producer of refined copper. Its latest issue involves a power crisis that has impacted both copper production and also manufacturing. Both have experienced restrictions.

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Exchange-traded funds, or ETFs, are sometimes punted as an alternative to direct investments on metals exchanges, like the LME or CME.

But in reality, it is a different kind of investor who buys ETFs, even if they are largely buying into the same metal story.

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ETF investors and looking ahead


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ETF investors are often longer-term investors wanting to buy into a trend rather than take a short-term position. More retail or private investors buy ETFs, seeing themselves as investors rather than speculators (if that distinction is a fair one).

But as a recent article in the Financial Times suggests, ETF investors are facing a similar question to trade or hedge fund speculators in estimating how long this run in price rises has to go. Furthermore, they are also facing the question of whether it is part of a much longer-term supercycle or a shorter-term supply chain restocking – pandemic bounce-back recovery.

The supercycle narrative is based on the transition to a new clean energy landscape and the demand that new, low-emission technologies will generate for certain metals like cobalt, nickel, copper and aluminum.

A similar narrative is driving agricultural ETFs. Climate change will create more challenging conditions for farmers and increase the likelihood of poor harvests. In turn, that would usher in decades of higher prices for agricultural products.

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Housing starts fell by 7.0% in July from the previous month, the U.S. Census Bureau reported Wednesday.

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Housing starts slide in July

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According to the Census Bureau, U.S. housing starts reached a seasonally adjusted annual rate of 1,534,000 in July.

However, the July rate picked up by 2.5% from July 2020.

Meanwhile, single‐family housing completions reached a rate of 954,000, or up 3.6% from the June rate of 921,000. The July rate for units in buildings with five units or more reached 426,000.

Contractors face rising prices

Earlier this year, surging lumber prices commanded headlines, impacting construction projects across the country.

While lumber prices did eventually retrace after a torrid May, they remain at historically high levels.

Contractors are grappling with rising prices for all types of construction inputs, not just lumber.

“Extreme price increases continued in July for a wide range of goods and services used in construction, according to an analysis by the Associated General Contractors of America of government data released today,” the Associated General Contractors of America wrote. “Association officials urged President Biden to immediately end tariffs and quotas on steel, aluminum, lumber and other essential construction items to help stave off inflationary pressure in the construction industry.”

The Producer Price Index (PPI) for final demand jumped by 1.0% in July, the Bureau of Labor Statistics reported.

“On an unadjusted basis, the final demand index moved up 7.8 percent for the 12 months ended in July, the largest advance since 12-month data were first calculated in November 2010,” the BLS reported.

Prices have continued to surge for key construction metals, including steel and aluminum. The AGCA noted the PPI for steel mill products more than doubled from July 2020 to July 2021, gaining by 108.6%.

Meanwhile, the association’s officials called for the removal of existing tariffs on steel and aluminum.

“These tariffs and quotas are artificially inflating the cost of many key materials and doing more damage to the economy than help,” CEO Stephen E. Sandherr said. “Leaving these measures in place will undermine the broader benefits of the bipartisan new infrastructure measure the House should be passing.”

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This morning in metals news: U.S. steel capacity utilization reached 85.0% for the week ending July 31; meanwhile, U.S. energy intensity has dropped by about half since 1983; and, lastly, compensation costs for U.S. civilian workers rose by 0.7% from March to June.

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Steel capacity utilization continues to rise

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The U.S. steel capacity utilization rate continues to rise, reaching 85.0% for the week ending July 31, the American Iron and Steel Institute (AISI) reported Monday.

Production during the week totaled 1.88 million net tons. Meanwhile, output rose by 0.4% from the previous week, when the rate touched 84.6%.

For the year to date, output totaled 54.6 million net tons, up 19.1% year over year.

US energy intensity down by half since 1983

U.S. energy intensity has declined by half since 1983, the Energy Information Administration reported.

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This morning in metals news: the union representing workers at the Escondida copper mine rejected BHP’s latest contract offer; meanwhile, U.S. construction spending ticked up in June; and, lastly, productivity increased in a majority of wholesale and retail trade industries last year.

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Escondida workers reject contract offer


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Union workers at BHP’s Escondida copper mine in Chile, the world’s largest copper mine, rejected the latest contract offer from BHP over the weekend, Reuters reported.

Workers at the mine engaged in a 44-day strike in 2017.

Copper prices cooled after surging to an all-time high May 10. However, if the union and BHP cannot reach a deal, the copper price will receive additional support.

US construction spending up in June

U.S. construction spending reached a seasonally adjusted annual rate of $1,215.2 billion in June, the Census Bureau reported today.

The June rate marked an increase of 0.1% from the previous month. Meanwhile, the June rate increased by 8.2% from June 2020.

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This morning in metals news: China opted to increase export tariffs on some steel products; meanwhile, Glencore released its first-half production results; and, lastly, U.S. personal income increased slightly in June.

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China boosts steel export tariffs

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China has raised export tariffs for some steel products and will remove export tax rebates for 23 steel products, effective Aug. 1, Reuters reported.

Reuters cited the country’s Ministry of Finance, which said it aims to promote the “upgrade and high-quality development” of the country’s steel sector.

The move also comes as China aims to meet climate targets and reduce emissions (of which the sector is a major producer). China’s steel production in June fell by 5.6% from the previous month, according to World Steel Association data.

Glencore releases half-year production results

Miner Glencore reported first-half production gains in copper, cobalt and zinc.

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This morning in metals news: according to the Bureau of Economic Analysis, U.S. gross domestic product rose by an estimated 6.5% in the second quarter; meanwhile, the American Iron and Steel Institute (AISI) commented on the Biden administration’s infrastructure deal; and, lastly, copper prices have found some support this week.

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US GDP rises by 6.5% in Q2


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The Bureau of Economic Analysis released its advanced estimate for U.S. GDP this morning, reporting a jump of 6.5% in Q2 2021.

U.S. GDP had jumped by 6.3% in Q1 2021.

“The increase in second quarter GDP reflected the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic,” the BEA reported. “In the second quarter, government assistance payments in the form of loans to businesses and grants to state and local governments increased, while social benefits to households, such as the direct economic impact payments, declined.”

In addition, the price index for gross domestic purchases rose by 5.7% in Q2. Meanwhile, current-dollar personal income decreased by $1.32 trillion in Q2, or 22%.

AISI applauds infrastructure deal

The American Iron and Steel Institute (AISI) yesterday applauded the news of the Biden administration’s infrastructure deal with a bipartisan group of senators.

“This is a key development in the process to fix America’s deteriorating roads and bridges – and to use American steel to do so,” AISI President and CEO Kevin Dempsey said. “We also applaud the bill’s provisions to ensure that the steel products for water infrastructure projects be made in the U.S. This package ensures that American steel —which is the cleanest in the world — will be used to build back America. We urge the Congress to pass this critical legislation as soon as possible.”

Copper price gets support

After retracing from an all-time high May 10 and then trending sideways for several weeks, the LME copper price has shown some strength this week.

The LME three-month copper price closed Wednesday at $9,719 per metric ton. The price had fallen to $9,245 per metric ton a week ago.

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For those keeping an eye on monetary policy, for now the Federal Reserve is maintaining the status quo vis-á-vis federal funds rates.

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Federal Reserve holds funds rate at 0-0.25%

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As the U.S. continues its long-running recovery after last year’s COVID-fueled recession, the Federal Reserve indicated the economy is getting stronger.

In a statement Wednesday, the Federal Reserve said “indicators of economic activity and employment have continued to strengthen.”

“The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered,” the Fed said. “Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”

As parts of the country face rising numbers of cases of the Delta variant, the Fed said the path of the economic recovery depends on the course of the virus.

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Buyers sourcing product from Europe know that the manufacturing sector there has faced unprecedented levels of disruption and cost increases.

The fact that European producers are facing major constraints to production, to supply chains and raising costs that are being passed along the supply chain is probably a widespread experience for U.S. consumers.

But hopes that the situation would ease after the initial pandemic bounce-back are looking increasingly forlorn.

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European manufacturing sector struggles

E.U. flag

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According to IHS Markit, the European manufacturing sector reported a 13th successive month of output growth in June. However, the rate of expansion slipped to its lowest since February.

In many cases, notably in Germany, shortages of inputs constrained output. Supplier delivery times continued to lengthen at one of the sharpest rates ever recorded by the eurozone PMI survey.

Not surprisingly, in such a constrained market supply chain delays have pushed up costs. Those have then fed through into another near-record increase in average selling prices for goods and services.

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