Ulbrich Economic Update - Number 56 (January 2025)
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
U.S. MANUFACTURING ACTIVITY SHOWS RENEWED MOMENTUM, with ISM forecasting a 4.2% increase in manufacturing revenues for 2025, up sharply from 0.8% in 2024, driven by strong performance in machinery, electronics, and electrical equipment. Meanwhile, consumer confidence retreated in December, dropping 8.1 points to 104.7, as future business and labor market expectations dampened optimism, though current labor market conditions remained stable. Manufacturing output increased 0.2% in November, rebounding from October’s declines, though the aerospace sector remains weak. Durable goods orders decreased 1.1% in November, led by a 2.9% drop in transportation equipment. The leading economic indicators index rose 0.3% in November, reversing an October decline and signaling potential growth ahead. The Consumer Price Index increased by 0.3% in November, with annual inflation reaching 2.7%, supported by rising shelter and food costs. The Producer Price Index climbed 0.4% in November, driven by higher food prices, particularly eggs, while service sector inflation showed signs of easing. Retail sales grew 0.7% in November, surpassing expectations, with strength in auto dealerships and online retailers. Construction spending remained steady, up 3% year-over-year in November, supported by residential projects.
Steel Industry Updates
U.S. STEEL AND NIPPON STEEL HAVE TAKEN LEGAL ACTION AGAINST THE BIDEN ADMINISTRATION, alleging the improper blocking of Nippon’s $14.9 billion bid for U.S. Steel on national security grounds. The companies claim political motivations tied to labor union support ahead of the 2024 election. A separate lawsuit accuses Cleveland-Cliffs and the United Steelworkers union of collusion to block the merger. Meanwhile, the U.S. steel market remains weak, with domestic output and exports struggling to recover. Analysts are watching closely as the industry anticipates potential shifts with new production facilities in 2025.
Overseas
THE EUROPEAN UNION IS STEPPING UP TRADE DEFENSE MEASURES TO COUNTER UNDERPRICED IMPORTS FROM CHINA, which have surged due to Beijing’s response to U.S. tariffs and domestic oversupply. Divisions among EU member states, particularly over Chinese electric vehicle tariffs, have complicated policy decisions. Meanwhile, Volkswagen announced plans to cut over 35,000 jobs in Germany as the company grapples with rising competition from cheaper Chinese EVs and stagnating demand for combustion engines.
Energy Sector News
THE BIDEN ADMINISTRATION HAS EASED GREEN HYDROGEN PRODUCTION RULES, delaying stricter tax credit requirements until 2030 to boost confidence in the clean hydrogen sector. Revised guidelines allow renewable energy to be measured annually instead of hourly and include hydrogen from nuclear plants for tax credits. Despite these incentives, only 6% of U.S. hydrogen projects have secured supply agreements, highlighting ongoing demand challenges.
Automotive Trends
U.S. CAR SALES REBOUNDED STRONGLY IN 2024, with General Motors and Ford achieving their highest totals since 2019, driven by easing interest rates, improved inventory, and discounts. November’s vehicle loan rates hit their lowest since December 2022. However, Tesla experienced its first U.S. sales decline since 2011, attributed to slowing demand for EVs, aging models, and political controversies. The auto sector exceeded expectations by year-end, alleviating fears of an economic slowdown.
Aerospace Developments
UNITED AIRLINES IS SET TO BEGIN TESTING STARLINK-ENABLED WI-FI, with the first equipped planes expected on major routes by year-end. The partnership with SpaceX’s Starlink will provide fast, free Wi-Fi for MileagePlus members. The rollout will begin with regional fleet planes and eventually extend to United’s entire lineup. This initiative underscores a growing trend in aviation, with airlines leveraging satellite networks for enhanced passenger connectivity.
Medical Insights
OUT-OF-POCKET HEALTH SPENDING GLOBALLY AVERAGED 30% OF ALL HEALTH EXPENDITURES PER CAPITA IN 2022, with advanced economies generally showing lower shares due to government support. The U.S. out-of-pocket share was 11%, comparable to Germany and Japan but higher than France (9%). In contrast, countries like Turkmenistan, Armenia, and Nigeria saw out-of-pocket costs exceed 75% of total health spending. China’s share stood at 34%, driven by limited coverage benefits. The U.S. private health insurance sector spent $1.3 trillion, reflecting its reliance on private systems over universal healthcare.
Metals & Commodities
SHELL ANNOUNCED A $5 BILLION INVESTMENT IN THE BONGA NORTH OFFSHORE OIL PROJECT IN NIGERIA, signaling a pivot to high-value, offshore developments. The company also divested its onshore assets to local operators due to years of community tensions and ecological damage. This move reflects a broader trend in the oil and gas sector toward less contentious energy sources.
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