Ulbrich Economic Update - Number 16 (September 2021)

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Ulbrich Stainless Steels & Special Metals, Inc., has proudly published our monthly Economic Update electronically since September 2019 for our six stakeholders: Customers, Vendors, Employees, Shareholders, Community and Creditors. The news and ideas presented in these reports are reflections of what is currently happening in the economy with special focus on the metals industry. We hope you have found this information to be valuable to your daily business, in addition to assisting you in making informed future decisions based on the data.

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Click here to download the 16 page Economic Update for the full details of recent economic trends impacting the steel and commodities markets, as well as the associated industries across the globe. Continue reading below for the Executive Summary.

September 2021 Economic Update Executive Summary

The Americas

SMALL BUSINESS OWNERS GREW LESS CONFIDENT ABOUT THE ECONOMIC RECOVERY during July as labor shortages remained a problem. U.S. hiring slowed sharply in August as the surging Delta variant dented the pace of the economic recovery. The economy added only 235,000 jobs, but the unemployment rate fell to a pandemic low of 5.2%. U.S. corporate earnings surged in the 2nd Qtr after the coronavirus crisis severely depressed profits last year. Profits of companies listed on the blue-chip S&P 500 index have jumped about 90% and sales by a quarter. The U.S. trade deficit narrowed 4.3% in July as imports demand slowed for consumer goods and industrial supplies and materials. Exports expanded 1.3%, helped by a rebound in auto shipments. Container ships are stacking up again off California’s jammed ports due to a flood of imports and logjams in domestic logistics networks. Consumer prices rose 5.4% in July vs. a year ago, but price pressures weakened on a monthly basis. U.S. retail sales fell 1.1% in July, autos by 3.9%.

Overseas

EMERGING MARKETS ARE CONFRONTING A NEW HEADACHE — RISING INFLATION. Prices rose above 5% in Mexico and South Africa, 6% in India and Russia and 9% in Brazil. Soaring prices for food and energy are to blame. Eurozone business activity recorded a second-consecutive month of strong expansion in August. China and the U.S. are trading places in the economic growth race. U.S. GDP rose 12.2% in the 2nd Qtr of this year from a year ago, outpacing China’s 7.9% gain. The American edge should continue for at least the next few quarters. The reversal reflects the difference in the two nations’ responses to the pandemic.

Stainless Steel Demands

STEEL PRODUCTION IN THE U.S. IS BACK TO 2019 LEVELS, but only in the last few months. Crude steel output for the week ending August 21 was up 27% from the same week last year. Stainless steel demand continues strong in breadth and depth with growth in all major markets. Cold-rolled coil is tight due to ATI exiting the commodity sheet markets; the other three producers can’t satisfy the current demand. Stainless prices are set to rise 5-7¢/lb. in September. Cleveland-Cliffs reported that its mill inventory of steel rose by $300 million during the 2nd Qtr because shipments to automotive customers were 20% less than the company expected.

Metals & Commodities News

IRON ORE PRICES FELL 40% SINCE MID-JULY ON CONCERNS ABOUT DEMAND FROM CHINA, who until recently was churning out steel at record rates but now wants to keep steel output this year at 2020 levels. The price of metallurgical coal imported into China has soared, reaching $440mt at the beginning of September, up from $230mt in May. China’s domestic coking coal output simply cannot meet steel industry demand, particularly for low sulphur coke. Aluminum prices are reaching 10-year highs, as buyers far from storage centers in Asia compete to line up shipments for use in beverage cans, airplanes and construction. LME aluminum forwards have climbed by a third this year to about $2,650 a metric ton. Prices are around 80% higher than at their low point in May 2020.

Automotive Industry Advancements

GM IS CUTTING PRODUCTION AT EIGHT NORTH AMERICAN ASSEMBLY PLANTS IN SEPTEMBER because of the ongoing semiconductor chip shortage, now hitting its profitable truck and SUV business. The global semiconductor shortage has finally started to bite at Toyota. It is slashing global production in September by 40%, after reducing North American factory output by 40 to 60% in August. The London Metal Exchange launched a new contract for battery metal lithium, setting up a transatlantic battle with U.S. rival CME Group, as exchanges look to capture rapid growth in demand for commodities tied to the electric car industry.

Energy Sector Updates

US WIND PLANS MARYLAND’S 1ST FACILITY FOR MANUFACTURING OFFSHORE WIND FOUNDATIONS. The company leased 90 acres at the Sparrows Point Shipyard, formerly part of Bethlehem Steel. Wind production is expanding as the renewable energy source becomes more economically competitive with fossil fuel sources of electricity. U.S. utilities are looking to miniature nuclear reactors, as they seek a steady energy source that can help reduce the carbon emissions linked to climate change.

Latest Aerospace Developments

LIQUID OXYGEN (LOX) IS IN SHORT SUPPLY AS DEMAND RISES WITH COVID-19 CASES IN THE U.S. SpaceX President and COO Gwynne Shotwell said the shortage could impact upcoming launches, as many launch providers rely on LOX, a commonly used propellant. The U.S. Air Force and several venture capital firms are making a $60M investment in Hermeus Corp., a startup that wants to develop the world’s first reusable hypersonic aircraft. Boeing delivered 184 jetliners for this year through July.

Innovation

MAGNETS EXTRACT VALUABLE RESOURCES, ELEMENTS FROM BRINE. A team of researchers tackling the problem of finding an economic way to get valuable rare earth elements out of brine water from mining/drilling fluids, geothermal plants and seawater developed a nanotech process that miniaturizes most of the extraction and eliminates the need for ion exchange separators.

Medical Insights

A PACEMAKER THAT DOES ITS JOB, THEN PULLS A HOUDINI was developed by researchers at Northwestern and George Washington Universities. They have taken bioresorbable medical devices to a new level with the development of a transient pacemaker that disappears after it is no longer needed. Medical-device stocks have been star performers lately, returning 28% over the past year and 45% from their pre-pandemic high, despite the spread of the Delta variant causing hospitals to postpone elective surgeries.

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