Ulbrich Economic Update - Number 10 (March 2021)

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March 2021 Economic Update Executive Summary

The Americas

THE U.S. ECONOMIC RECOVERY CONTINUED AT A MODEST PACE over the first weeks of 2021, with businesses optimistic about the months to come, according to the Federal Reserve. Factory orders rose 2.6% in January as manufacturers continued to lead the way for the U.S. economic recovery. Industrial production surged 0.9% in January (the most recent monthly figures available), led by manufacturing output gains of 1.0% and a 2.3% jump in mining. It was the ninth straight monthly advance in factory production.

Employers added 379,000 jobs to payrolls and the unemployment rate ticked down to 6.2%. Most of the job gains occurred in the leisure and hospitality sector. Household income jumped 10% and consumer spending rose 2.4%, priming the economy for a burst in growth this year. Retail sales boomed in January, rising an unexpected 5.3%, the first increase in four months. Consumer confidence improved in January and February. The housing market remains one of the strongest segments of the economy. Existing home sales in January surged 23.7% on a year-on-year basis. Producer prices jumped 1.3% in January and have accelerated 1.7% over the past 12 months. Higher inflation is anticipated by the spring as price declines early in the coronavirus crisis wash out of the calculations.

Overseas

SURGING DEMAND FOR GOODS AND A SHORTAGE OF EMPTY CONTAINERS AT ASIAN PORTS have sent container-shipping costs skyrocketing. The price of shipping goods from North America to Asia has doubled. Demand for manufactured goods drove extended growth in factories across Europe and Asia in February, but a slowdown in China underscored the challenges to achieve a sustainable recovery from the pandemic. The final global PMI index improved to a three-year high in February.

Steel Industry Update

A FRESH ROUND OF DISRUPTION IN THE U.S. STEEL INDUSTRY is driving up costs and squeezing profits at steel-consuming manufacturers. Steel is in short supply and prices are surging. Unfilled orders for steel in the last quarter were at the highest level in five years with inventories at a 3.5-year low. The benchmark price for hot-rolled steel in February was at its highest level in 13 years. U.S. steel prices are 68% higher than the global market price. Steel mill capacity utilization is well below the level of last February.

Energy Sector News

JEFF BEZOS IS BACKING AN ‘ANCIENT’ KIND OF NUCLEAR FUSION. Magnetized target fusion (MTF) dates back to the 1970s when the U.S. Naval Research Lab first proposed it, but its proponents say the technology is now about to reach the commercial power market. An MTF reactor made by Canada’s General Fusion (Jeff Bezos-backed) is pressurized to super-heat plasma. This pressure is applied by pistons that coordinate to make a pressure wave. From there, the rest is a more prosaic business. Hot neutrons escape the plasma and are captured in the liquid metal, and their energy powers a heat exchanger to generate power.

Latest Aerospace Developments

JUNO MISSION EXPANDS INTO THE FUTURE. NASA has authorized a mission extension for its Juno spacecraft exploring Jupiter. The agency's most distant planetary orbiter will now continue its investigation of the solar system's largest planet through September 2025, or until the spacecraft's end of life. The extended mission's science campaigns will expand on discoveries Juno has already made about Jupiter's interior structure, internal magnetic field, atmosphere (including polar cyclones, deep atmosphere and aurora) and magnetosphere, providing a wealth of new science opportunities that the extended mission capitalizes on.

Metals & Commodities Economic Trends

EV SURGE SENT COBALT PRICES SOARING. Energy-dense cobalt is used as the stabilizer in batteries, protecting the battery’s cathode from corrosion that can lead to a fire. In 2017 and 2018, during an earlier rush of interest in EVs, the price of cobalt quadrupled in the space of two years before a boost in production calmed the market down. Nickel prices are up 70% from COVID-lows. Zinc’s price trajectory has been similar. Iron ore prices recently surged to a nine-year high of $176/tonne.

Automotive Industry Advancements

WHEN THE EV REVOLUTION ARRIVES, WILL THERE BE ENOUGH PLACES TO PLUG IN? The country will need thousands of charging stations for drivers to accept vehicles that are powered by batteries alone, but automakers and charging companies are struggling to raise the numbers because they're investing before demand arrives. With more than 40 fully electric models on the market in the U.S., or coming within the next three years, auto and charging company executives say the demand is on the way.

March Innovation

THE RECHARGEABLE LITHIUM-ION BATTERY IS POISED TO DISRUPT INDUSTRIES. After a decade of rapidly falling costs, the lithium-ion battery has reached a tipping point. No longer just for consumer products, it is poised to transform the way the world uses power. Companies are working on new configurations that could significantly enhance the power and further lower battery prices. The value of such a breakthrough could be measured in the billions of dollars, if not trillions.

Medical Insights

STAINLESS STEEL IS CRUCIAL IN FIGHT AGAINST INFECTION. Non-toxic, chemically inert and with nonabsorbent properties, stainless steel can be safely sterilized without any corrosion or degradation. A recent university study examined the enduring power of stainless steel by testing the effectiveness of both new and old surfaces, with a “cycle of fouling and cleaning” developed to simulate aging. There was also no discernible difference in effectiveness between the new or aged stainless steel.

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