Ulbrich Economic Update - Number 55 (December 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 U.S. MANUFACTURING SECTOR SHOWED SIGNS OF IMPROVEMENT IN NOVEMBER, yet it failed to avoid another month of contraction. The manufacturing sector has contracted in 24 of the last 25 months, while the broader U.S. economy has continued to expand for the 55th month in a row. Other November data included: Job growth surged after being severely hindered by hurricanes and strikes, increasing by 227,000 jobs. Services sector activity slowed after posting big gains in recent months. Consumer confidence increased to a 16-month high.
October data included: Industrial production fell 0.3%, depressed by hurricanes and the Boeing strike. Factory output fell 0.5%. Motor vehicle and parts output dropped 3.1%, while aerospace production tumbled 5.8%. Mining output rebounded 0.3% and utilities production rose 0.7%. Durable goods orders gained 0.2%, lifted by a 0.5% rise in orders for transportation equipment. Motor vehicles and parts orders fell 0.4%. Orders for commercial aircraft and parts increased 8.3% after falling 16.6% in the prior month. Producer prices were up 0.2%, another sign that progress towards lower inflation was stalling. Consumer prices increased 0.2% and progress toward low inflation has slowed in recent months, which could result in fewer interest rate cuts from the Fed next year. Retail sales increased 0.4% as households boosted purchases of motor vehicles and electronic goods. Consumer spending increased 0.4%, suggesting that the economy maintained its strong pace of growth early in the 4th Qtr. Existing home sales rebounded sharply jumping 3.4% and posting the first annual gain since mid-2021. The trade gap narrowed 11.9% to $73.8bn.
Overseas
THE EURO FELL TO ITS LOWEST AGAINST THE DOLLAR IN ALMOST TWO YEARS, buffeted by the specter of U.S. tariffs and a weakening economy. The euro fell more than 1% to $1.033 on 11/22, dragged down by weaker than expected business activity in the Eurozone. The global aluminum deficit is set to increase as China’s smelters have hit the 45mn tonne capacity cap. A 13% rebate previously applied to exports of aluminum will be eliminated by China in December, raising costs for international buyers.
Steel Industry Updates
THYSSENKRUPP’S STEEL UNIT WILL REDUCE ITS LABOR FORCE BY 40% THIS DECADE, cutting 5,000 jobs and moving another 6,000 positions off the books by selling operations or moving people to external service providers. TK Steel plans to slash annual production capacity by up to 25%, to between 8.7mn and 9mn tonnes. Chinese steel exports have exploded higher, as steelmakers there are leaning heavily on overseas sales to soak up a surplus caused by the property crisis. Over 11mn tons were exported in October, a nine-year high. Nippon Steel promised USS’ unionized workers it won’t send steel shipments from its overseas mills into the U.S.
Automotive Trends
NEW U.S. VEHICLE SALES WERE PROJECTED TO HAVE RISEN 6.7% IN NOVEMBER from a year earlier, driven by higher discounts to clear elevated inventory. The annualized rate for total new-vehicle sales was forecast at 16.5mn units. Bosch, the world's largest car parts supplier, will reduce the working hours and pay of 10,000 employees in Germany and cut up to 5,550 jobs, the latest sign of the challenges facing Germany's auto sector due to weak demand and competition from cheaper Chinese rivals.
Aerospace Developments
ROLLS-ROYCE IS IN TALKS WITH POTENTIAL CUSTOMERS FOR ITS MICRO NUCLEAR REACTOR, a technology it hopes will also provide power for space missions. Rolls believes there is a business case for micro reactors for both terrestrial and space applications. Boeing will lay off more than 2,200 workers in the Northwest as part of its plan to cut 17,000 jobs. Spirit Airlines filed for bankruptcy protection after struggling with a long run of quarterly losses, failed merger attempts and looming debt maturities.
Energy Sector News
WESTERN COMPANIES ARE STEPPING UP EFFORTS TO WIN NUCLEAR CONTRACTS IN EASTERN EUROPE. The region appears ripe for business as it struggles to build up renewable power industries to hit stringent EU net zero targets. U.S. nuclear companies Westinghouse and NuScale Power are active there. Sweden’s Liquid Wind raised €44mn to produce green fuel for the shipping industry. It plans to have its first e-methanol plant running by 2027 in Sweden and aims for nine more, mainly in the Nordic region.
Metals & Commodities
ANGLO AMERICAN SOLD ITS REMAINING STEELMAKING COAL MINES TO PEABODY ENERGY for up to US $3.78bn, securing a key milestone in Anglo’s restructuring plan. American Rare Earths’ discovery of over 2bn tons of rare earth elements in Wyoming could significantly disrupt China's current dominance in this sector. Glencore is moving forward with a new extraction technology at its copper mine in Chile as part of the industry’s efforts to squeeze out more metal from lower quality ore.
Medical Insights
MEDTRONIC RECEIVED FDA CLEARANCE FOR ITS NEW INPEN SMART INSULIN PEN APP that can recommend corrections for missed or inaccurate insulin doses at mealtime. It paves the way for the launch of Medtronic’s Smart MDI system, which combines InPen with the Simplera CGM. Neuralink received approval to launch a new feasibility study using its brain implant and an experimental robotic arm, assessing the effect of the implant in patients with quadriplegia to control external devices with their thoughts.
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