Shapiro Metals- April Market Insights
Black swan last year. Roaring 20s this year.
Last year, April was the start of an “unprecedented” time with Covid-19 striking our nation, 22 million people losing their jobs, and business plummeting. The Covid-19 death total currently continues to rise but at a much slower rate, millions of people are getting vaccinated daily and 12 million people have returned to work and more will soon. We are starting to see the light at the end of the tunnel.
This year, we are benefiting from the December Trump $900 billion stimulus followed by the Biden $2 trillion package. There is a lot of pent-up demand, even though there is $1 trillion in added savings and consumer debt reduction. This means the economy will be booming soon. Conservative Fed GDP growth forecasts are now 6.5%, and some banks think it could go above 9%. Many are calling for this uptick to last into 2023, indicating the V- shaped economic recovery has finally begun. Let’s enjoy the party while we can and hope that the bill won’t be too exorbitant when it gets here.
Most people like the idea of Biden’s proposed infrastructure program bill called the American Jobs Plan. The proposed $2.2 trillion would be spent over the next eight years and paid for with tax increases over the next 15 years. There is $900 billion for roads, bridges, transportation, utilities, and improving buildings and schools that need it the most. This part of the bill would be a boom for domestic steel mills since it calls for recycled US steel. Copper and aluminum would also benefit, but less of those would be used. There is also $500 billion for jobs, innovations, business support, and R&D and $400 billion for in-home care workers. In addition, it contains $174 billion in incentives for buying electric vehicles and more for setting up 500,000 EV charging stations. I always thought that capitalism should take care of the car incentive and the charging stations, but maybe this bill has lots of projects the administration knows it can compromise on. We will see what gets passed.
The computer chip shortage is going to reduce auto production this year by over a million vehicles. This shortage is for the $1 chips used to light up computer screens on cars, phones, games, and appliances. It happened because the auto industry cut back most orders in Q2 last year, and as the lock downs began, those same chips went toward fulfilling the skyrocketing demand for computers, games, and other electronic devices. Chip production is still running at full capacity and new production won’t be available until year’s end.
The ISM PMI manufacturing index rose almost 5% in March, its highest level since 1983, even though the March PMI was actually held down due to supply chain, labor, and transportation problems. New orders were up 4% and production was up 7%. These are the two most forward-looking indices. Meanwhile, March also showed a whopping jobs gain of over 900,000, although there are still 8.4 million people out of work compared to pre- pandemic numbers. The unemployment rate is predicted to drop drastically throughout the year. The Shapiro Nonferrous Scrap Activity Index, reflecting a cross- section of the economy, was up 8.5% in March and up 13% from January. Even though we measure this on a daily basis, normalizing it for only the same accounts, the lost days in February because of the weather were somewhat a factor.
Aluminum keeps soaring while copper and nickel take a breather. Prime aluminum spiked 9 cents per pound with the Midwest premium reaching over 21 cents and still going, although it may be getting close to a top. LME aluminum is nearing the top end of most year- end forecasts. Excluding the 2018 Russian aluminum embargo, prices are the highest in 10 years. Even so, these forecasts are being revised upward because of all the anticipated world wide growth. China’s PMI actually dropped a bit in March to just above 50, but its growth is still forecasted at over 8%.
Scrap aluminum prices continue to rise with the market and are up 5 cents per pound, more on prime scrap and 4 cents per pound on aero chips. Prime copper fell slightly but is still near record highs. Prime nickel also fell almost 15% but stainless prices dropped only 2 cents per pound due to strong demand and high ferrous prices. Scrap steel also held the same as last month. These prices are close to twice what they were last year at this time. Steel mills are very busy and they likely will be the rest of the year. HRC keeps moving up too. Chinese iron ore prices are also high.
“If we think about how we’re going to take what we’ve learned from this [year of remote work] and move it into the future, we’ve got to take a hybrid approach that’s good for the employer and for the employee… I think productivity in the future is going to be much more a measure of results, rather than activities.” -Andi Owen, CEO of Herman Miller
Life is good. Family and health are precious. We have lots to be grateful for.
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This report was prepared by Bruce Shapiro and reflects my current opinion of the economy. It is based on sources and data I believe to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice.