Ulbrich Economic Update - Number 53 (October 2024)
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 for the Executive Summary.
The Americas
THE FED KICKED OFF WHAT IS EXPECTED TO BE A SERIES OF INTEREST RATE CUTS with a large 0.5% reduction to bolster what appeared to be a cooling job market. Other September data included: The comprehensive annual GDP update showed a 5.5% average inflation-adjusted increase in gross GDP from the 2nd Qtr of 2020 through 2023 vs. a previously published 5.1% advance. U.S. manufacturing contracted for the sixth consecutive month, but service providers expanded at the fastest pace since February 2023, driven by a flurry of orders and stronger business activity. Consumer sentiment rose amid expectations that inflation will continue moderating and household incomes improve. U.S. job gains reached 254,000 and the unemployment rate fell to 4.1%. On a YOY basis, average hourly earnings rose 4%.
August data included: Factory orders unexpectedly fell 0.2%. Factory output rose 0.9%, boosted by a 9.8% rebound in motor vehicle production. Mining was up 0.8%; utilities output was unchanged. Overall industrial production rebounded 0.8% after decreasing 0.9% in July. Durable goods orders were unchanged after surging 9.9% in July. Motor vehicles and parts orders rose 0.2%. Commercial aircraft orders and parts fell 7.5%. Producer prices rose 0.1% as an energy-driven rebound in the cost of goods was tempered by cheaper services. Consumer prices increased 0.2%, matching July’s reading. The energy index declined by 0.8%, but the shelter index soared by 0.5%. Retail sales rose 0.1% as a decline in receipts at auto dealerships was more than offset by strength in online purchases, suggesting the economy remained on solid footing. Consumer spending increased 0.2%; the saving rate fell to 4.8%.
Overseas
THE ITALIAN GOVERNMENT IS EXPLORING THE POTENTIAL OF ADVANCED NUCLEAR TECHNOLOGIES, particularly small modular reactors (SMRs), to help meet the country’s growing energy needs. Italy's electricity demand is expected to nearly double by 2050. Russian officials were instructed by President Putin to consider restrictions on exports of commodities, including uranium, titanium and nickel, in retaliation for fresh Western sanctions against Moscow and its allies, China, Iran and North Korea.
Steel Industry Updates
NIPPON STEEL RECEIVED AN EXTENSION IN THE CFIUS SECURITY REVIEW over its deal for U.S. Steel, restarting the clock and keeping the proposed transaction alive. China’s steel crisis is setting the stage for a wave of bankruptcies and speeding consolidation of the industry. Three-quarters of China’s steelmakers suffered losses in the first half. British Steel had an eightfold increase in pre-tax losses during 2022 (just released) as concerns mount about the future of the once renowned, now Chinese-owned, company.
Automotive Trends
MAJOR AUTOMAKERS IN THE U.S. REPORTED WEAKER SALES FOR THE 3RD QTR, citing affordability concerns and fewer selling days as a drag on performance. Chrysler-parent Stellantis suffered a 20% drop. Car dealerships across China are facing losses of $20bn for the 1st half of 2024 as consumers hold off making major purchases and vehicles pile up in sales lots. European carmakers face multi-billion euro fines or significant production cuts when new EU carbon emissions standards come into force next year.
Aerospace Developments
BOEING'S NORTHWEST FACTORY WORKERS STRUCK AFTER REJECTING A CONTRACT DEAL. Roughly 30,000 IAM members who produce Boeing's top selling jets in the Seattle and Portland areas voted on their first full contract in 16 years, with 94.6% rejecting it and 96% favoring a strike. The Polaris Dawn crew splashed down in a SpaceX capsule off the coast of Dry Tortugas, Florida, capping a groundbreaking mission that included the world’s first commercial spacewalk, while wearing SpaceX’s new spacesuits.
Energy Sector News
FOURTEEN OF THE WORLD'S LARGEST FINANCIAL INSTITUTIONS, including Goldman Sachs, Morgan Stanley and Bank of America, intend to support an effort to triple the world's nuclear energy capacity by 2050. The banks did not say specifically what steps they would take to help achieve this goal. Constellation Energy will reopen the Three Mile Island nuclear plant in Pennsylvania to provide power to Microsoft as it searches for ways to satisfy its soaring AI energy demand, while keeping its emissions in check.
Metals & Commodities
ENRICHED URANIUM HAS MORE THAN TRIPLED IN PRICE to $176 per separative work unit (the standard measure of the effort required to separate isotopes of uranium). Demand for uranium has been driven by a revival in atomic power. A shutdown at one of China’s largest lithium mines has done little to revive prices of the battery metal. Other battery metals, including cobalt and nickel, have struggled as a flood of new production overwhelmed demand just as the pace of EV adoption cooled. Stainless steel scrap prices are holding even as nickel price declines. LME nickel averaged $7.24/lb. through Sept. 23, down from $7.37/lb. in August.
Medical Insights
ABBOTT LAUNCHED ITS FIRST OVER-THE-COUNTER GLUCOSE SENSOR IN THE U.S. a week after Dexcom began selling its competing product. Abbot’s Lingo is for people 18 and older without diabetes, for wellness purposes. Neuralink’s experimental implant aimed at restoring vision received the USDA’'s "breakthrough device" designation. The experimental device, Blindsight, has a chip that processes and sends neural signals that could be transmitted to devices a computer or a phone.
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