3/28/21

 

RE: Coming up Short

 

All,

 

Cp rail went back to work last week under binding arbitration after our Monday edition was published.  Getting the rail operator back up and running should ease a measure of supply disruption here in the Midwest.  However, inflation and its partnering sanctions continue to hammer the economy, especially the metals segment where pricing continues to rise under the weight of constrained raw materials hampered by Russian supply concerns.  We discussed the implications of pig iron last week and its growing pull on rising domestic scrap numbers.  We continue to believe April will see higher pricing for both scrap and flat roll carbon products.  However, plate will also get in on the action as AMM notes today plate is already trending at record highs in the US.  What’s more, China is again locking down its citizens in the name of Covid which will begin to hamper some industrial outputs which flow into domestic supply chains.  At present, 25 million in Shanghai are under rolling lockdowns according Fox News online accessed on 3/28/22. However, for metals, we must consider in the near-term scrap may further accelerate the already blazing pricing fires.

 

What’s more, energy pricing provides a directional indicator for the metals.  Energy is consumed in both the manufacture and distribution of metals which are dense relative to volumes being moved meaning higher concentrations of freight cost per pound.  As such, with motor fuels trending at record highs for the last 2 weeks according to the Wall Street Journal earlier today we will be seeing more pricing moves on metals in the coming weeks.  Aluminum was already feeling the sting of energy pricing prior to the Ukraine debacle as multiple global suppliers curtailed production on the heels of rising energy rates…   Our present condition with high energy and sanctions will only accelerate the near-term upward pricing swing.  Fastmarkets (AMM) is predicting a 769,000-tonne global aluminum supply deficit in Q2 2022.  Imagine the pricing implications if your supply is not protected in this segment…  

 

While unemployment numbers continue to improve with 187,000 new filings last week which represents a low point not achieved since 1969 according to the Wall Street Journal, we remain a markedly pessimistic overall as negative economic forces continue to impact the Nation’s GDP potential.  We anticipate metals pricing will swing lower again later this year as both sanctions and the Ukraine theater event play out their present performances by limiting industrial supplies.  However, its food shortages that will be the next major drag on global economic activity.  We must closely monitor food supplies as under-fed workers do not hustle, and fatigue kills shop morale. 

 

We have been discussing the dangers surrounding global agriculture for the last 8-10 months as these impact all areas of industry.  However, even the US Administration leader got in on discussing the dangers to our economy via food in the past few days during his European talks as referenced in a recent NY Post article looking at risks to global Wheat supply.  What’s more, the automotive industry globally continues to suffer from shortages with last week’s production output numbers falling 96,300 units short of target according to Automotive News on 3/28.  As auto output slows, so goes the wages of production workers and subsequently all down the tiers of supply chain involvement.  Perhaps these factors contributed to slowing US home sales in February which dropped 7.2%, with the media attributing the moves to rising rates and declining supply (more people deciding to hold tight for fiscal security)…   With these factors as the backdrop, we see industry might be coming up short for a much longer time than many of our best economists anticipated.  Best to study market data, implement timed buying strategies, and limit risks through strategic vendor partnerships.  Contact us to better understand the latest market details helping you develop successful plans to weather the growing global turmoil


~A




3/21/22

 

RE: A Perfect Economic Storm

 

All,

 

Today, we delight in improved unemployment filings.  Last week’s first-time filing numbers were reduced by near 15,000 from the previous week’s figures according to the Wall Street Journal Online accessed on Monday 3/21.  However, those paying attention to the gathering force of numerous detrimental economic indicators might be seeing more clouds gathering on the horizon as opposed to sunshine and lollipops… 

 

However, it’s not all doom and gloom for everyone.  As we predicted, some nations will profit immensely from the West’s mismanagement of assets and uncalculated political bumbling.  Today’s winner is India.  The Wall Street Journal is reporting India is now purchasing oil at a discount form Russia.  It seems we predicted such occurrences just a couple weeks back.  Watch for China to pick up on this strategy across the weeks ahead.  Lower energy costs will help India (and others) extend unfair competitive advantages in global markets.  However, India’s (and soon to be others) newfound energy success comes at a price to others around the globe.  The price is a perfect storm in the making as shortages, sanctions, war, and logistics snarls combine to cripple economic progress through developing inflation and limiting production supplies across multiple nations.

 

Our inflationary accelerant front for today focuses on the CP rail strike and employee lockout impacting Canada and the United States.  An article in the Hamilton Spectator early today written by Lex Harvey and Omar Moslen notes CP rail moves 75% of Canada’s agricultural fertilizer requirements.  Fertilizer is important to keep an eye on as it predicts economic activity later in the year for retail food sales.  KFGO Am radio in North Dakota further defines the situation in explaining CP rail accounts for 11 MM tons of freight movement impacting commerce in North Dakota.  However, CP’s reach extends well beyond Canada and North Dakota as it also touches our metal markets…  CP moves finished steel coil and scrap to mills helping to support healthy trade and pricing.   CP presently services clients in ND, SD, MN, IA, IL, WI and MO.  No wonder why the railway carries 70% of North America’s potash requirements with so many of the nation’s farmstead states in its areas of service.  What’s more, KFGO goes on to report 29% of CP’s total revenue stream is attributed to US trade which means dollars presently at risk for US producers with trucks in short supply fuels and at high prices as sanctions and pipeline closures limit availability…  If the strike and its associated lockout have any legs, North American agricultural output will suffer this fall further accelerating inflationary forces for consumers and food manufacturers.  Fertilizer was already in shortage due to last year’s chemical plant fires and natural gas price spikes.  Adding further distribution issues all but assures smaller crop yields across N. America this fall.  However, food is only one aspect of the perfect storm…

 

Our second converging front in the perfect storm scenario is entirely metals driven.  With all of the Russia discussions ongoing, has anyone given consideration to how much impact Pig Iron actually exerts across our marketplace?  While EAF’s consume a considerable amount of scrap, a recent article written by AIM also notes these producers generally consume around 20% Pig Iron.  Pig Iron supply is only produced in 3 regions of the globe thanks to economic consolidation in the early 2000’s; Russia, Ukraine, and Brazil (which often uses Russian feed stocks).  As such, Russia and Ukraine according to AIM control about 75% of the US pig iron import market.  Now it seems the recent explosion in steel prices has a sizable measure of fundamental support all thanks to geopolitical actions executed by world powers who lack understand of the complex interplay of global supply chains.  The result is growing prescience of price volatility and goods shortages.  Cars Direct.com is now reporting chips will be in shortage well into 2023 which will make automobile purchases challenging this year.    Unfortunately, many of these factors will continue to accelerate as we look forward.  The perfect storm is building, and now Nickel is also on the radar as it impacts both stainless steel pricing and savvy inflation-aware investors.

 

Recent volatility witnessed nickel prices climb to slightly over $20/lb. However, the metals rise to such heights was not organic, it was the direct result of investor actions.  A short position player in China, Xiang Guangda (a company) is responsible for the market’s recent turmoil.  Amazingly, the company secured a standstill agreement avoiding further margin calls.  The agreement reduced further risk of price escalation when market reopened, which they did late last week.  However, the company remains short near 150,000 tons of nickel.  As such, LME implemented new rules and restrictions on nickel trade as follows:

 

  1. 15% either way daily limits on price movement which will close trade for the day.
  2. Brokers must disclose client positions in nickel larger than 600 tons.
  3. March 7th close price of $48,078 USD/ton was used as the basis for nickel daily price limits when market restarted.

 

Interestingly, these nickel actions resemble aspects of the Hunt Brothers market manipulation back in the 1980’s and we’re sure a few players executed on excellent profits at the expense of this the company at the center of this folly…  However, these latest moves in Nickel seem to be coming without the legal repercussion’s the Hunt’s faced meaning we may experience more market volatility runs from similar mechanisms on other alloys and commodities.  Be very aware of the currencies being used for oil trade.  The Saudi’s recently transacted a deal in Chinese currency.  A shift away from global dollar dominance will exact pricing repercussions across markets.  Such moves, make for an interesting to time to be in business as risks run high and balancing supply with exposure is critical.   To stay ahead of these moves and make a profit you need superior intelligence and ours is just a call away.


~A





3/14/22

 

RE:  The Supply Crisis Deepens

 

 

All,

 

Our outlook this week suggests global supply constraint will deepen and accelerate impacting multiple facets of the economy, especially metals, as inflation and geopolitics combine forces in developing a climate of global economic turmoil.  As such, we are finding no nation is immune from the fray.  Turmoil here in the US appears on the Wall Street Journal’s digital front page today as Author Katherine Blunt declares, “Electrical utility bills are soaring and likely to go higher”.  We suggest Ms. Blunt is entirely correct and metals prices will reflect a portion of our nation’s utility mis-management follies. 

 

Looking in the rearview several years back, our domestic natural gas industry was booming.  During the boom years, previous environmentally conscious leadership moved many power plants away from coal-fired production toward cleaner gas in an effort to protect the climate while lowering operating costs.  However, America’s energy plans neglected a redundant hedge, the ability to move to whatever fuel is lowest cost.  As geopolitical issues proliferate and are addressed by sanctions energy costs will continue to rise for American consumers and businesses while coal-fired nations such as China enjoy lower costs and open markets. 

 

Remember the energy-based production curtailments we discussed in a recent edition within the global Aluminum industry?  Consider similar actions may arrive here at home by the summer months for a variety of industries which could spell the development of our next metals purchase price opportunity…  However, at present, in certain economic sectors the fruits of our nation’s energy policy moves have already arrived, just ask a farmer.  We spent part of the past weekend speaking with several Central Minnesota farmers who were happy to discuss their challenges in obtaining fertilizer.  All parties we engaged suggest that if fertilizer was not under contract for this year, you will not have any…  Also, prices are up substantially reflecting the inflationary environment.  Remember, fertilizer uses natural gas too!  Welcome to higher food prices and empty store shelves… However, it’s not just the stores and consumer goods we are discussing. 

 

AMM is reporting looming price issues with Brazil pig iron as the impact of black sea region supply begins to take hold.  Add in supply issues with certain alloying elements such as ferro-titanium, chrome, silicon, surging coking coal prices, surging scrap prices, and sanctions, and we have the making of a mess beginning to unfold… Your authors suggest the situation is going to get worse.  If global conflicts escalate ala’ Ukraine, Russia, Poland, Iran, or China seaborne shipment of anything could grind to a near standstill, which will drive the next set of price declines after the present run unfolds.   No wonder why we witnessed a 7.9% consumer price increase year over year for February 2022 as reported in today’s edition of the Wall Street Journal.  As geopolitical factors unfurl, employment and price details are likely to fluctuate widely through the coming months.  As such, last week’s unemployment numbers edged up to 227k new filings which is no real surprise for those monitoring the situation…. However, we must start digging deeper below the surface to see where all these supply lines connect…  It may start with Chips.

 

Chip issues are going to return to the world stage in a big way very soon.  CNBC reports Ukraine supplies 45-54% of the world’s semiconductor grade neon essential to chip manufacturing operations.  Suppliers in the region are presently under force majeure meaning no shipments of product will be departing anytime soon.  The situation is bleak enough to garner a statement of Taiwan’s chip giant TSMC who notes they have enough safety stock to continue operations for only a short period of time.  Our interpretation is electronic component prices will be headed up, and lead times will be extending exceptionally further fueling inflation…  Perhaps your businesses' next new car, telephone, computer, or home electronics purchase should be sourced today instead of next week.  However, it seems automobiles may be receiving a double hit in the present supply crunch.  Roughly 7% of the global supply of vehicle wire harnesses is served by the Ukraine according to Autoweek.  Present force majeure moves may explain why Autoweek is reporting in their 3/14 edition that Porsche is halting production at several European plants impacting 911, 718, Macan, Panamera, Cayenne, and Taycan models.  All this after a recent shipment of the luxury vehicles bound for the US sank…  However, we suggest these cars are just the latest causality. 


Anticipate metals pricing to surge now as demand remains solid under a globally constrained supply.  However, if we see wider global conflict involvement supply constraint will cool demand bringing with it a pricing retreat a few months later… Our latest read on the markets suggest we could start seeing a retreat from the growing extreme price runups sometime late Q3…. 


When you are ready to put our intelligence to work and begin moving ahead of the markets give us a call.



Regards,


~A





3/7/22

 

Re: This New Inflation Will Steel Your Money.

 

All,

 

Today, we set aside our typical snarky commentary for a few minutes to discuss vital concepts relating to metals business conditions which continue to grow more complex and expensive as we look toward the future.  We hinted on the arrival of more black swan events in the economy back on 2/7/22 with the following quote, “Interesting days ahead folks, the swans are again gathering in formation, and something will break loose.”  Indeed, if you are following the news, something has broken loose in a big way…  War in Ukraine.  The conflict is serving to compound gathering inflationary forces here in the US exerting a tremendous impact on the economy’s energy, metals, and agri-business sectors.  The impact of what we are presently witnessing will cut deep and run much longer than media experts anticipate. 

 

An article in the Wall Street Journal published online today discussed Russia’s Rusal looking to split off international operations in attempt to continue playing a role in the supply of alumina to nations presently sanctioning Russia and entities owned by the nation’s financial elite.  The current price of aluminum (ingot form pre-conversion) has risen to $1.7147/lb. USD as of earlier this AM.  We anticipate Aluminum’s escalation will continue as it has over the past number of weeks preceding the present conflict.  However, we must also begin to connect the dots between Russia’s Oligarchs and our nation’s metal needs as their reach is more substantial than many casual news readers grasp meaning we are in for a wild and expensive ride. 

 

Russia’s Oligarchs hold large percentages of interest in numerous global metals companies, from operations like Severstal Steel, to manufactures of Titanium.  In fact, titanium from Russian sources is presently impacting operations at Boeing.  As educated traders begin connecting the dots, we are seeing commodity prices surge in reaction.

 

Nickel prices crested north of $20/lb. earlier today, previous week’s number was $11.46/lb.  Best get some stainless hedge positions in place now before it’s too late….

 

Aluminum also continues to climb, and will likely do so for some time.   With tremendous Russia involvement in the industry and sanctions abounding, a recipe for higher prices is developing rapidly. 

 

However, the recipe for higher prices here in the US also affords unfavorable opportunities for China…  China will receive numerous benefits from present Western Nation actions against Russia which will drive down materials prices for China to capitalize upon in their industrial sector meaning more lobsided competition here in the US.  In addition, as US Tech and Auto companies exit the Russian marketplace China will be poised to step in and fill the void.  The resulting gains in market share, revenue, and financial strength for China come at the expense of US consumers who must source more expensive product from sanction compliant nations, as US business deal with declines in revenue associated with lost emergent markets.  In addition, we must turn our attention to Taiwan and Hong Kong. 

 

China has engaged years of expansion efforts at the expense of other nations (via land, ocean rights, and defense rights).  No sanctions have been enacted to thwart China’s global ambitions over the past several years.  As such, we must be cautiously aware of Taiwan’s position in the world order with relation to China.  Taiwan serves as an economic powerhouse for financial transactions.  In addition, its global value in semiconductor technologies would be difficult to replace meaning a substantial future supply risk is looming in plain sight. 

 

Hong Kong operates numerous aluminum manufactures, and, in particular supplies much of the US metal spinning industry.  Hong Kong 1100-o temper alloys enjoy retail sales at several US sources…  Growing constraint on these nations will impart further economic difficulties to the US and other Western economies.       

 

In addition, the newest members of the left-leaning nations club, Chile and Peru continue to cash in on growing global copper demand as today’s price hit another high with numbers touching $4.6863/lb. USD in trade earlier this AM.

 

As US first-time unemployment filings fall to 215K, and employment numbers continue to post gains, we must remember these jobs come as the dollar buys less in terms of retail and industrial supply.  Steel prices are again on the rise, and rise they must to cover Australian coking coal that has now risen to $578.33/met ton USD for the present month (an exceptionally high number).  Add in heightened export demand for scrap, surging domestic scrap prices, along with climbing energy prices and soon buyers will feel like someone is steeling their metals budget money.  However, metals will not be the only commodity group feeling the surge of inflation…

 

Agri-businesses will also feel the sting later this spring as energy-derived fertilizers begin to impact the market…  What’s more, a string of global chemical plant fires and disasters prepared the markets for a new scarcity which will equate to declining farm yields this fall.  Unfortunately, all of these factors combine just as entire nations must switch food sourcing operations to avoid sanctions… The end game suggests even high food pricing right here at home, where packages are already shrinking, and prices are already climbing.  Be prepared.  Things are not going to be getting better.  As we have stated in previous editions, now is the time for supply partnerships on on-site inventory.  Fuel costs will be impacting all aspects of business, especially the transport of metals which are weight dense relative to volume moved… With oil climbing over $120/barrel USD today $5-7/gallon fuel is right around the corner and that means further inflation for any items requiring movement prior to consumption.  The end result is we all might be feeling as if someone has stolen our money very soon…   When your ready to keep more in your pocket, reach out and we will show you how!


Stay safe & Intelligent


~A                     

 


2/28/22

 

Re:  Don’t Believe the Hype

 

To quote Eighties superstar Flavor Flav, sometimes its best if we, “Don’t believe the Hype”.  Especially today…  As media super cycles continue to pitch paranoia and reactionism on a global scale business operators must sift through mountains of hype to determine if bigger impacts arise from facts or fiction as both drive reactions in financial markets.  Your author just ran across a national news article posted online by a major network concerning US Governors requesting bars in their states discontinue the sale of Russian Vodka…  However, the story seems to present primarily hype pandering to emotion while presenting an absence of critical facts.  Let’s walk through the article’s pandering premise… 1. Russia is bad.  2 Russian Vodka supports Russian interests.  3. Drinking Russian vodka potentially funds terror.  However,  we must realize as critical consumer of digital information product presently on the shelf in the US arrived months ago.  Tariffs, duties, and fees were already paid meaning support of a foreign adversary already transitioned into whatever clandestine warfare measures were intended for our Greenbacks.  However, even granting that much is a stretch as not all companies pay profits into governments.  Thus, requesting Americans to stop selling pre-sanction goods only accomplishes one thing, further removal of dollars from Americans pockets without just compensation.  We believe the developing situation is deteriorating so far it may be forcing musicians to continue selling off their entire career catalogs of musing.  The latest star to convert notes into dollars is Neil Diamond.  While ”Diamonds are Forever”, they too, must cash in ahead of an impending global economic crash. 

 

It almost seems as if numerous global leadership administrations need a good crisis to divert attention away from failures in their domestic economies.  A good common enemy scenario ala NATO seems well-poised to rally the troops so to speak while shifting attention away from problems at home such as:

 

Lack of Workers

Collapsing Transportation Lanes
Surging inflation

Lack of products and supplies

Closure of Small Businesses

 

Consider the following…

 

US petrol product prices experienced a break-neck rise for months following inflation upward while supply was constrained by lack of domestic drilling and administration pipeline closures.  However, now that Russia attacked Ukraine, we see a ripples across the financial markets (fact or fiction?) spurred by EU nations pulling away from the Nord Stream pipeline providing a perfectly wonderous external explanation for surging motor fuel and natural gas prices.  Remember shortages earlier this year drove natural gas prices from the upper $2.xx range to the upper $4.xx range?  The moves also set a stage for upcoming global shortages and further price escalations across numerous products which will now conveniently tie back to fuel surcharges and NATO nation sanctions.  What’s more, fuel is not the only ingredient in these new explanations. 

 

Food (and metals) are beginning to take center stage as the situation devolves further.  Just forget for a moment about all the fertilizer and chemical plant fires in the US over the past year, and aluminum price increases on the heels of energy price escalation prior to the Russia sanction situation.  Previous price jumps were based on global energy shortages from COVID-fueled poor national energy policy execution.  Now, sanctions will initiate a metal price rally while defining a readily acceptable rational for worsening food prices and shortages on numerous goods all around the globe.  Remember wheat from Ukraine feeds the Middle East…  Add in dwindling farm yields in the US which will limit exports for this coming season on the heels of higher fertilizer pricing and we have the makings of surging inflation with great explanations to readily silence the curious…   Sure, prices could be lower, but do you want to support terrorists?  Such forces are rapidly translating into the metal marketplace as we speak.  

 

Metals like aluminum, copper, and Nickel will continue to trend high on the heels of sanctions, rising electric vehicle demand, and tighter production/distribution control from producing nations as we previously discussed in earlier editions concerning the Philippines and Chile.  What’s more, added price inflation will begin to surface from the necessary transportation channels via labor shortage price inflation and fuel surcharges.  Even steel will not be immune…  We are presently witnessing Brazil increase pig iron pricing on the heels of Russian supply constrain and sanctions according to a recent AMM article.  Steel prices in Europe are now poised for a jump on the heels of energy constraint created by the new round of sanctions… Now, Cliffs up $50/ton last week on HRC feels more solid, and Nucor’s recent announcement of up $50/ton on HRC seems to suddenly have enough “Staying Power” to even impress Barry White.  However, shortages, are not just for food, fuel, and metal in these days ahead of us as 2022 continues to unfold.  The automotive industry has been suffering chip shortages for over a year… Now, with a world on the bring of conflict, we are free to bring on terror-related shortages into the developing globalization equation.       

 

Toyota is poised to shutter all operations across Japan tomorrow according to an article on carscoops.com today to contend with their plastic and electronic component sub-supplier Kojima Industries experiencing a large-scale cyberattack.  With such things happening around the globe, its easy to explain away unemployment trending high.  Last week’s US numbers seem modestly improved showing 232k first time filings.  However, as we know, domestic numbers do not count those who intentionally exited the labor force which is a number that continues to grow across the US and developed world according to recent data (we continue to await early 2022 numbers)…   All in all, we suggest the year ahead will be far more challenging than the previous two. 

 

As such, we suggest looking to insulate supply chains as early as possible.  We have been advocating stocking agreements and consigned inventory since early 2021.  Search for onshore suppliers not subjected to as much fuel volatility and potential sanctions.  Look to limit freight delay exposure by increasing inventory positioning on all critical components.  Also, develop strategic partnerships across your supply base.  Your suppliers need you as much as you need them, leverage your position.  Also, pay close attention to the detail below to help your business chart a path through this developing new year of challenges and call one of our staff to set your path toward success:


~A             




2/21/22

 

Re: Economic Balance, It’s a Matter of Output & Inflation…

 

All,

 

Individuals awaiting delivery of new Porsche, Lamborghini, Bentley, or other high-end VW products (like Audi) might soon be downwardly adjusting their expectations while simultaneously increasing their levels of investment.  On the heels of news concerning a sell-out of Mercedes G-Wagon models through 2025 combined with updates suggesting chip shortages mean no new US Benz V8 models will be produced for the immediate future, we have the makings of a wonderful demand vs supply imbalance.  The developing imbalance is fueling existing used luxury vehicle price inflation.  As such, used ultraluxury SUV market prices soared in recent weeks climbing to levels on par with the cost of a small home in many midwestern states which are well above prices for the previously available new units.  We are now seeing 2019 and 2020 Mercedes G-Wagons offered for sale in the $190’s and low/mid $200,000 range for AMG variants…   As the situation develops further, we are learning of an additional blazing new vehicle market deficit outside that of luxury V8-products, such as run of the mill F150’s, Hondas, Toyotas, and Mazda’s due to extended chip shortages according to recent news on The Drive.com. 

 

As such, it was a shock when news broke on automotive and media sources including the Wall Street Journal late last week of fire on a ship containing near 4,000 new exotic vehicles from VW’s flagship brands as referenced earlier in this writing.  The ship’s crew already made like Elvis and left the building so to speak, as EV battery fires are not easily contained.  The blazing barge of money to burn is presently adrift about 900 miles off the coast of Mainland Europe near Archipelagos according to the Washington Post.  The ship was destined to unload these new status transportation units in Rhode Island, US. 

 

It seems developing shortages and disasters across the globe, (like recent fertilizer fires) will serve to further pressure prices within their respective industries, adding yet another level of complexity to the already pyramid-esk surge of developing inflation in the US marketplace that ties into the web of transportation failures, disasters, and shutdowns further fueling our inflationary cycle as fiat currencies move toward fixing problems by adding more paper to the already blazing fires.  Our present inflationary surge explains January’s US PPI move up 1% as reported in today’s edition of the Wall Street Journal.  The situation becomes even more complex as employers continue struggling to finding enough workers in support of production requirements.  The emerging trends further fuel the growing presence of demand vs. output imbalance.  Recent US unemployment data from last week shows 248,000 new first-time filings.  High demand and an unemployment jump to not align to balance out our lobsided equation.  We have much to consider for metals this week as prices continue their trend of erosion.  Remember, its all about balance and presently the scales are tilted meaning the balance will soon swing.

 

Climbing US output drove prices down over the past several months as shortages delayed demand consumption.  The rise in output is evidenced in higher new MSCI US Service Center inventory numbers.  However, when these numbers combine with the US Ruling Administration’s removal of tariffs from several nations while freight costs increase, we begin to see a position of parity between US costs and import costs from multiple supplying nations. The development means import will be of little issue to the market other than setting the ceiling as we have been predicting.  Thus, upcoming HRC market prices will be defined by the balance of US employment, consumer demand, and corresponding mill output/lead times which are now swinging back below the four-week rage suggesting buyer control is developing.  With Cliff’s Goncalves recently speaking of pulling out a furnace at a recent fireside steel chat event the domestic balance may again be preparing to shift.  However, the question remains do we see a resulting dead cat bounce, or does the kitty get some legs and run?  Our present view is prices will bottom in the coming months.  However, employment and labor participation rates will limit how far markets rebound as consumption may continue to lag.  We do believe HRC prices will increase as all factors in the market play out… However, these factors are absent considering the developing US:Russia geopolitical turmoil which may alter pricing and mechanics drastically.

White metals, Copper, and Nickel will continue to perform strongly.  Aluminum will continue to accelerate in volatility and upward mobility so long as political rhetoric remains supportive of escalating conflict or financial sanction.  At present, buy today, as prices will be higher tomorrow for these items…

 

Contact the author on our site for detail further defining the movement in these commodities:


~A



2/14/22

 

Re:  Superhero Love

 

As we celebrate a holiday filled with love for one another, one thing is apparently clear in American culture:  We also love superheroes…  The Pitjournal at the University of North Carolina recently compiled a body of research suggesting our love of heroes is born in times of social strife such as war, cold wars, and civil rights movements.  As such, it comes as no surprise that officials in Missouri would call on one other than Batman to save the day back on January 19th of this year.  An amber alert test gone awry as reported by Fox News caused phones across the Ozark state to light up with detail alerting recipients to be on the lookout for the Joker’s purple Dodge car.  Fortunately, the Missouri State Patrol sent a retraction message several minutes later…   However, laughter, snickering, and memes were already proliferating online across the state...  Perhaps, given our present social constructs Missouri’s Bat signal holds a little more merit than anyone cares to admit.  It seems we are all in need of saving today, as inflation, joblessness, and transportation difficulties are beginning to engross more of the population creating goods shortages and work stops across the globe.  Recent auto production curtailments we highlighted last week point to the potential for an interesting and challenging year to develop in 2022.  Store shelves across the nation also show the strain as once-common items are beginning to grow scarce.  A Target store location in St Cloud MN was over 50% empty on all product as of Sunday 2/13/22.  We are getting similar reports form all over the nation as of today…   What’s more, economic data is already highlighting the furthering of strain in our economy. 

 

The United States economic freedom score, a measure of citizen’s financial freedom against all other nations slipped 2.7 points since 2021 falling to a low reading of 72.1 at present as reported in Fox News Online early today.  The new score makes our nation number 25 on a list of all global powers.  The now lower ranking comes as hot rolled steel prices continue to slide, while stainless prices surge, and inflation combined with conflict worries continues to push oil toward the $100/barrel mark.  Trouble inspired by the US Administration’s continued push for conflict with Russia is also complicating numerous markets from global securities trade, to gasoline, natural gas, and aluminum all of which are experiencing increased volatility and will continue to trend as such in the coming weeks/months until the US inflammatory rhetoric ceases.

 

However, our greatest concern for metals and manufacturers continues to be transportation at the moment.  Delay and cost escalation (via fuel and driver shortages) are creating a landscape for US manufacturers with delay baked into the recipe all across the supply chain, from port, to receiving dock, to customer location.  Rising prices, and global political insecurity do little to resolve the situation… Our present 2-month outlook is as follows:

 

Carbon steel & Steel plate—Continued settling with market pricing falling on both items.  We believe supply shortages will cause price erosion as material consumption will be delay by late component arrivals necessary for product manufacturing.  Trucking issues will further destabilize the equation.  However, we must be careful, as inflationary forces will hit the markets driving a rebound…. China ore is rising substantially, Au coke is also trending high, but looks to cool out past March.  We will keep a close eye on these trends as they give some insight to market direction…   

 

Stainless---Continued volatility with upward price escalation… Escalating is driving from investor hedge interest, industrial demand, Growing EV battery demand, and global transportation issues combined with political instability in many regions associated with Nickel mining.

 

Aluminum---Pricing will be volatile with huge upward leaps possible as Russia situation continues to develop…  Russia represents a huge supply portion in the global markets and any military or financial moves by the US or others against the nation will drive prices upward while further constraining already tight supply that is tightening further due to global power instability driving mill curtailments.

 

Scrap—Buyer sentiment seems to suggest markets will bottom in Feb… Auto curtailments may drive prices up.  However, we are going to need to monitor other supply chain behaviors closely as consumption rates drive scrap production, and overall market demand will set price.  Note AISI production numbers continue to fall, so a bit more data is needed, but caution looking forward is warranted.

 

Contact one of our staff to understand the data driving these opinions and guiding your business toward success in these challenging times:   


~A



2/7/22

 

Re: Its only History Repeating

 

 

All,

 

Remember last year, back in the dark winter days of 2021 when we warmed ourselves around the flames of countless burning pieces of American infrastructure?  We witnessed natural gas prices surge when Texas froze kicking off a chain of unfortunate supply complications.  Subsequently, bouts destruction flared up around the nation damaging critical chemical, industrial, and forest resources supporting the bounty of our economy and its previous low prices.  As we stand here with hope and optimism on the cusp of 2022, it seems the same exact scenario of unfortunate events is beginning to unfurl.  Your authors propose price, and availability via shortage and transportation snarls will act as inflationary drivers deep into the developing year for key products and components.  Let’s look at some current headline examples to understand the mechanics and their impact on metal pricing and availability looking deeper into the year.  

 

Last week dealt a short-term scare to US natural gas markets as cold weather sagged South touching Northern Texas once again… In response to the doom and gloom news cycle, traders began to bid up prompt gas pricing early in the week.  Remember our previous discussions regarding the premium placed on hedge gas this winter that pushed many buyers into the prompt market which we anticipated would drive 2-3 Texas-like price surge events this year?  Well, markets just encountered our first for 2022, albeit short-lived.  Fortunately, the rally faltered as the cold blew further East sparing us an exact rerun of last year’s melee save for a few days of price jitters hitting prompt market customers.  Unfortunately, situations like this one are the factor driving aluminum production curtailment around the globe right now fueling a price increase frenzy.  International politics and potential Russian sanctions only serve to further decorate the stage for an amazing performance.  However, 2022 risks run much deeper than gas and aluminum.  Current risks run from sea to shining sea hitting farms in the heartland especially hard.   

 

Agricultural products represent a high-risk area for price and availability sustainment given the present trucking issues we recently discussed.  In fact, if you view the included photo slide show posted from contributors all across the country you can get a feel for the depth of present food supply disruption.  The photos are current, posted on a reddit forum by people across the US, look at a number of chain and local supermarkets…  Please note, however, the views expressed on Reddit do not reflect those of your authors, and in some cases may be found as offensive.  However, the discussion is an important one and must be addressed.  Take a look via the following link:  

External link opens in new tab or windoweconomicninja (reddit.com)

 

Remember the value of anecdotal economic indicators… What we see sometimes holds more value of truth than what we are told…

 

In addition, the chemical plant damages we discussed multiple times last spring drove up fertilizer prices substantially due to reduced supply availability.  The developing outcome seems to suggest we may see reduced farm yields this year from less crop stimulation further fueling food and agricultural goods inflation and shortage conditions.  Last week’s North Carolina fertilizer plant fire rendering the complete destruction of a production facility located in Winston-Salem will only exasperate the existing warped ag market fundamentals for the balance of 2022.  The fire claimed of 5,000 tons of finished product, and 600 tons of ammonium nitrated as referenced on a local NC CBS news affiliate.  The plant is a total loss, as were many of the torched facilities last year.  Stock up on chips now, the upcoming Super Bowl and auto makers may further diminish supplies…    

 

Yes, supplies of chips are again dwindled forcing auto makers began to curtailing production… Ford, VW, and Mercedes all recently announced production curtailments as GM claims their chip crisis is over according to multiple recent US auto news sources.  However, the popular (and expensive) high-tech Mercedes G-wagon V8 is sold out through 2025, with numerous delays due to component shortages…  In fact, V8-powered Mercedes products will not be sold in the US this year according to a recently published dealer network memo due to chip shortage for the essential operating systems like engine control… The dealer memo is now posted on numerous auto sources online…  Falling auto production will touch scrap markets and may impact pricing… The key will be how busy other industries remain in the same period..  However, if transportation remains crimped work may slow across numerous industries, which will eventually hit metals demand… Fortunately (for them), mills and ore suppliers are beginning to react now...

 

ABC news MN reported earlier today on the destruction of the main conveyor line at US Steel’s MinnTec taconite facility.  The conveyor issue comes approximately 1 weeks after the facility’s smaller conveyor line collapsed causing damages and work stoppage at the facility.  The ore facility damages come on the heels of USS announcing a March 45-day outage at Granite City.  Cliff is also planning to take down a furnace at its Cleveland facility.  However, timing of these actions is presently not in the public realm…  Although, Nucor and SDI both presently operating at reduced capacity rates is in the public realm.  Perhaps this is why NLMK made the comment on Q1 prices falling in today’s edition of AMM online.  We know prices for HRC, and especially galv are witnessing substantial drops across the past several weeks.  Excess inventory and supply snarls are definitely fueling some of this market shift.  In the short term, scrap markets will feel a bit of the pinch…

 

We are seeing developing trade running $20-35/ton down on prime in Detroit and Ohio according to several of our sources… Obsolete may trend sideways, but overall prices will feel a drop… The size of drop may embolden buyers and start additional pushing on plate prices too which have remained static for several weeks.

 

Nickel, aluminum, and copper remain volatile with prices generally poised for additional market expansion… Investors, inflation, and electric vehicle demand are helping fuel the category.  Politics also plays into the equation via Russia and international energy policy, which could get interesting as we see China incurring further fiscal losses via industrial pullback and Evergrande which might come home to roost soon…   Interesting days ahead folks, the swans are again gathering in formation, and something will break loose.  Contact your author for the latest data necessary to guide your organization toward success in these uncertain times: 


~A



1/31/22

 

Re: Always Have a Backup

 

All,

 

IT professionals offer a tidbit of wisdom business owners might find value in implementing.  As we look forward to the developing challenges 2022 holds in the cards, preparation and implementation of countermeasures will be critical for the maintenance of market positioning and future growth.  As such, we must pay close attention when countless IT managers speak on the value of always having a backup.  Indeed, the value of business backup planning today might hold the key to success where others will be encountering strain and failure through the years yet to unfurl.  Looking at the trends across the past several years alongside emergent data for the current year phenomenon like continuation of the Great Resignation, continued supply shortages, and growing population loss your authors firmly believe 3 areas of business operation are in need of creative reinforcement today to ensure tomorrow’s profit and operational integrity:

 

1. Supply

2. Transportation

3. Labor 

 

As evidenced in the photos included with our contract newsletter, transportation remains an area of current critical concern.  We know a percentage of drivers has exited the industry via the great resignation as of recent while others still counted amongst the working are protesting mandates recently placed on the movement of goods across North America.  Remember near 80% of trade with Canada occurs via truck according to recent ATA data.  However, what we do not know is the actual number of individual drivers impacted and that is where the unacceptable risk to our businesses is located.  We published ATA estimates over the past several weeks to key our readers into the developing situation.  Over the past weekend, a Truckers for Freedom event rolled across Canada converging in Ottawa on Saturday.  However, media participant number estimates range from approximately 1,700 trucks and a few thousand disgruntled individuals as discussed on MSN.com to more than 50,000 trucks and approximately 1.5-1.75 million individuals referenced on Fox News and CTV (A Canada Television & News Network).  What the data (and store shelves) tell us is the reliability of trucking is presently entering a downward spiral.  We have no idea how many operators have elected to depart the profession.  However, we do know a percentage of allegedly still-employed drivers are presently preoccupied with something other than moving goods and that will make for more expensive shipments and less carrier options to choose from when loads need to hit the road.  What’s more, similar protests are occurring across portions of Europe, South America, Australia, and multiple other nations which means freight disruptions and delays might creep into unanticipated areas as carriers remain preoccupied with local politics.  In addition, rumors continue swirling around actions leading up to a West Coast Longshoreman’s strike.  As such, we are labeling transportation a critical path item for business success in 2022. 

 

With such headwinds developing in the transportation sector, supply will continue to represent a critical path item for business looking forward.  In 2021 we witnessed a transition away from JIT programs across many industries with automotive being the standout due to decades of lean methodology implementation.  It appears, businesses electing to carry heavier inventory may hold a strategic advantage looking deeper into 2022.  We recommend viewing your supply chain partners through a nonconventional lens and exploring options such as consignment inventory or onsite partnerships like many steel service centers developed with key mills over the years.  Looking ahead, businesses with inventory will be likely to make sales while competitors subject to market forces will likely experience extended lead times as transportation and labor compound on top of the existing supply snarls creating economic gridlock across multiple industries.  We see these trends maturing further in CEO resignation data from the end of 2021.

 

Executive placement firm Challenger, Gray & Christmas was recently quoted in a Washington Times article that notes 106 American CEOs resigned their current positions last December.  Such a movement suggests no class of worker is immune to the labor shifting we witnessed developing early in 2021.  As many HR leaders presently know, effective leadership is difficult to find and retain in a normal environment.  In today’s world, data suggests the search may take significantly longer as we look toward the years on the horizon.  Recent CDC data is showing an unexplained death rate increase of 40% in the last 6 months for US workers aged 18-49.  An insurance executive contact of your author’s corroborates the CDC data via life policy payouts noting US death rates have surged between 40-65% depending on the age group referenced.  Worker retention and health may be growing more critical than what we have traditionally known.  Author Tom Rees in an article appearing on the Telegraph.com 8-days ago hints at these developing social tend in an article entitled “The Population Timebomb”  which explores growing death rates alongside declining birth rate data.  In addition, recent US Military health reports are noting disturbing trends which further support the CDC fatality data we referenced above in looking at the health of US service personnel.  US military health data for Jan-Oct 2021 show a 269% increase amongst enlisted personnel for heart attacks, a 469% increase in pulmonary embolisms, and a 905% increase in the reporting of Dyspnea (labored breathing) amongst enlisted personnel.  As business owners, me must monitor these data points as they impact the ability to obtain the supplies and labor we need in order to produce goods fueling the economy.  IF we fail to meet the developing trends head on with novel solutions the results of a novel virus could be devastating to our customers, stockholders, employees, and families.  Fallout is also hitting financial markets as we referenced last week.  We met with a fund manager in the Minneapolis region last week who notes he pulled over $1BN USD of client investments out of the markets in recent weeks as a protection against market capitalization issues as we discussed last week in our article.  Time to assess market positioning.    

 

All of the issues above are presently operating in the metal’s marketspace. The coming year will be different, and likely more challenging than those previously experienced.  In order to survive we must cultivate programming and resources to counter the emergent trends, if not, we will be relegated to life in the status quo whatever that may be as the year unfolds.  Think about contracting with us to obtain the latest trends and data to chart your path toward success in these unconventional times...


~A     



1/24/22

 

Re: A Big Trucking Problem

 

All,

 

Store shelves and industrial supply cribs across the nation were already feeling the strain of supply chain failures over the past 8 months.  Imported goods faced delay at ports stressed by the pandemic while container shortages further compounded delays driving price escalation (and container volume shortages) beyond control with a contact of ours reporting India container costs in excess of $27K for a recently booked 40-foot high cube unit destined for the East Coast of the US.  Meanwhile, pandemic-related closures shuttered nations around the globe further straining the availability of specialty materials like Silicon and Manganese used as alloying elements in both Steel and Aluminum coil product.  However, a developing situation across the North American continent (US, Canada, and Mexico to be exact) is primed exasperate our existing shortage situations into one big trucking problem right here at home.  The ATA (American Trucking Association) suggests 72% of our nation’s freight is transported via truck in addition to 80% of US imports heading to Canada.  Recent mandates in the US and Canada will increase costs and shipping times while limiting the availability of carriers (due to resignations) which is going to rapidly compound the availability of goods issues in both consumer and industrial sectors as illustrated in the attached photos. 

 

Your author snapped these two shots this past Friday evening at a chain grocer located in a major central South Dakota city.  I spent several days on the road tracking the impact of mandates on freight carriers across the Midwest.  I also visited numerous major interstate truck stops across several states to track carrier volumes on the road.  My findings suggest the volume of trucks is markedly declining post-mandate.  A freight contact we have right here in MN shared they used to run 11 trucks into and out of Canada on a weekly basis.  However, as of last week 7 of the 11 drivers responsible for covering the route refused to run their Canadian assignment.  If the ATA is correct, up to 37% or 2.5 million American truck drivers may be joining the Great Resignation over the latest mandate.  If so, we have a serious problem America…  A contact of your author’s along State HWY 23 in Central Minnesota used to see 5+ trucks pass by their business every minute during the day.  At present, they are reporting 1 truck every 30-45 minutes.  If truck traffic is truly declining as our anecdotal evidence suggests prices and availability will be impacted in the coming weeks.  In a recent press conference, Fauci suggested another shot may be required for Americans to maintain immunity.  However, if what we are seeing anecdotally holds merit, the requirement could further serve to pull other individuals away from their chosen professions.   Lest we remind you, singer George Thorogood only needed 3 shots: “One bourbon, One scotch… And one beer”. Time will tell which treatment regimen is better for America’s soul and economic health.

 

Speaking of economic health, as we monitor other related indicators, the latest unemployment data shows an increase last week with 286K Americans filing for first time benefits.  In addition, Goldman Sachs is anticipating 4 rate bumps this year in attempt to stifle the nation’s growing inflation problem.  Your author believes the bumps will be relatively small as otherwise investors will pull back significantly from paper markets rapidly causing a collapse in market capitalization.  Perhaps, the general sentiment of social unease we are experiencing is the driving force behind continued commodity performance as we witness gold and other investment-grade metals holding onto favorable performance.  Pricing on these commodities may be prepared for additional pressures as the world falls into a rut of growing geopolitical unease. 

 

As the US administration talks sanction and troop involvement in Ukraine, we must look at the possible outcome for metals on international trade.  Conflict and its associated embargos will further pressure metals markets.  We see additional layers of risk ahead especially for Aluminum as Russia plays a major role for this metal globally.  On a lesser level, nickel, copper, and gold may also see additional upside.  We continue to see downward pricing pressure for steel as the many participants in the US marketplace turn bearish due to component supply shortages that are limiting their steel consumption.  As such, present April CME futures numbers are now below the $1,000/ton mark which means pricing is conforming to our market outlook we have been suggesting since last summer.  As such, keep your eyes on business needs, monitor freight stability, and contract with us for the data necessary to chart your path through these challenging markets.   


~A


1/17/22

 

 

RE: Of Liberty, Unity, & Economic Prosperity

 

 

All,

 

In the summer of 1963 Dr. King delivered his famous “I Have a Dream Speech” in which he voiced the improprieties limiting the social and economic participation of an entire race of people based on nothing more than ill-fated social constructs.  As we stand before history today, not much has changed, just the definition of the oppressive construct…  Nations across our world stand ready to repossess the God-given freedoms of citizens based on the definition of these created constructs.  As the popularity of a Green Pass in cities around America (and other nations such as Canada, Germany, and France) begins to build, the liberties of men fall into a sad and desolate state of decline brining with it severe economic consequences for the nations choosing such measures.  Dr. King sums up our present situation back in the summer of 1963 as he spoke the following:

 

“When the architects of our great republic wrote the magnificent words of the constitution and the declaration of independence, they were signing a promissory note to which every American was to fall heir.  This note was a promise that all men, yes, Black men as well as White men would be granted the inalienable rights of Liberty and the Pursuit of happiness”

 

As our nation celebrates King’s life and contributions today, we must not forget the truth of the words he so eloquently spoke those years ago as the consequences of forgetting rip apart the fabric of civilized society.  Indeed, a constant media droning of segregationist propaganda is serving to bring forth tumultuous economic consequences for metals, families, peoples, and businesses whose prosperity shape the very future of our republic.

 

To better understand the impact of current US Legislation, we turn to a recent survey conducted by the Blue Beyond HR consulting group looking at employee job retention behaviors amongst a group of survey respondents.  The study conducted in November of 2021 found 50% of surveyed knowledge workers intend to depart their current employ if the business assumes social positions opposed to the personal beliefs the employees hold in esteem.  Given our Nation’s current labor shortages, and the ongoing great resignation, these numbers are concerning.  Businesses short on staff experience shipment delay, revenue loss, and if the situation does not improve market share slippage often results.  We are beginning to see the fruits of these social phenomenon on store shelves around the country.  Your authors have reports and photos of empty grocery store shelves from over a dozen US cities.  However, grocery stores are just the publicly visible symptom of our growing problem.  Industrial supply chains are about to feel the crunch of a rapidly declining industry driver position tied to government mandates.  

 

Canada implemented their version of a green pass vaccination requirement for truck traffic entering/departing the nation as of January 15th according to a Wall Street Journal article appearing in today’s edition.  The article goes on to note 80% of Canadian trade with the US is presently truck-based.  Canada is anticipating a 10-15% fallout rate for the nation’s existing tuck driving population as a result of this legislation.  However, the bigger story is what will be going into effect right here at home in the coming week.  As of January 22, 2022, all truck traffic entering or departing the US will need to comply with green pass requirements.  Chris Spar, CEO of the American Trucking Association notes prior to this legislation the US was 80,000 drivers short.  The association notes 20-30% of US drivers may exit their profession in the coming weeks.  If we lose more of the existing trucking labor force, pricing, delays, and the movement of goods will fall out of control driving further inflation and limiting our nation’s economic output, further limiting American Liberty and the pursuit of happiness via economic and social control.

 

Present daily HRC pricing has fallen below .75/lb. as of this AM reported by AMM.com.  In addition, we see multiple US mills adding EAF capacity.  Considering capacity adds in conjunction to the building hurdles working against demand consumption, we continue to believe pricing will fall on ferrous metals.  However, we still see blue sky available for additional altitude on nickel, stainless, and copper.  Inflation is running rampant, and limited availability for many manufactured components will continue to push end user pricing upward while transportation, and employment challenges and weigh heavily on our economy at large.  Today while we reflect on these things we should remember Dr. King’s dream, and look in the mirror very carefully to question if our own actions build on this dream, or if we are personally guilty for the subjugation that tears it down.  Contact us to develop programming considering all of these forces together while enabling the economic success of your business, all while successfully supporting the liberty of others.


~A


1/10/21

 

Re:  A House Less Full

 

All,

 

In the past 11 days America’s television house appears just a little less full.  The beloved golden girl of stage and screen, Betty White, made her final exit into the vastness of eternal cheesecake celebration and St. Olaf jokes on December 31st, 2021.  However, those catching this morning’s early news found in between the apartment fires, police drama, and Greek letter disease celebrations that America’s television father and comedian Bob Saget made the journey away from our troubled earthly plane late last night after a show in Florida.  Truly, the loss of these two legends will leave an indelible void in our nation’s repository of dirty jokes and Southern Minnesota lore. 

 

However, as we mourn the loss of comedy, another void in America continues to develop and deepen in scope. 

 

It seems our great nation should also be mourning the loss of individuals willing to work across multiple industries.  The latest information released last week in from the Bureau of Labor Statistics suggests November witnessed an additional 4.5 million individuals exit the world of employment as the Great Resignation continues.  The new number represents a .3 increase over the 4.2 million we discussed previously from the October report.  What’s more, our nation’s recent job adds of 199,000 in December (as opposed to the over 400K adds our ruling administration anticipated) fail to amass much meaning when we consider the gravity of those electing non-participation in our existing social systems which impacts finished goods demand and consumer spending.  With that said, last week’s unemployment adds of 207K also hold little merit considering the gravity of shortages abounding across numerous industries in our society.  The fallout of these shortages impacts supply chains, airlines, healthcare, city functions, industrial work, and numerous other sectors of existing social support function as worker

suppliers run thin.  The next area we anticipate will feel the pinch is North American Logistics as Canada has doubled down on green pass requirements for drivers entering the nation as of 1/15/22 according to trucknews.com.  Your authors suggest Canada’s move could be problematic as numerous commodities flow through the nation and into the US.  Metals, automotive manufacturing, and liquor stand out as items presently at risk.  If anyone requires Canadian social lubricant for personal pondering and reflection, the time to stock up is upon us…   The great CC (Canadian Club) shortage of 22’ may have just arrived…  However, the aforementioned items are small compared to the scope of what is brewing across the economy at large.    As we reflect on the weight of these changes, we must further consider the impact for our metals complex.

 

Recent news in the Wall Street Journal suggests the US Dollar has just reached its highest valuation since 2015.  Climbing currency is impacting financial markets as bellwether commodities like oil, lumber, and copper climb while Dow volumes ease in response.  However, the bigger shock emerges as one assumes a more macro view of the developing situation.  As the dollar climbs and nations like turkey falter, scrap trade balance begins to waver further accelerating downward price changes domestically.  Virus disruptions further this price erosion trend as demand is disrupted or delayed (which can be problematic with whip saw recoveries developing later in the year).  We are already witnessing Jan scrap numbers in Detroit trending down $60/tonne in early trade according to AMM earlier today…..   As workers walk off and component deliveries begin to falter based on transportation and geopolitical issues commodity steel feels more of a pinch.  Perhaps these trends explain US mills rapidly eroding order books and prices.  Look for steel to continue easing in both sheet and plate thicknesses for the coming couple months…. However, look for items like copper, nickel, and Zinc to continue riding high as investors hedge and anticipate EV interests and decarbonization social trends to accelerate globally driving future demand and supporting higher prices that are already pressured by financial moves.  Interesting times ahead folks.  Reach out to your authors for relevant detail to helping to navigate the accelerating financial shift that is likely to change industry as we know it...


~A


1/3/22

 

Re: Business as Usual

 

All,

 

Welcome to the New Year, 2022.  As we sit awash in awe and wonder pondering the blessings and curses might emerge from the horizon ahead, remember we already have a good idea of where things are heading…

 

Commodity performance, currency interaction, and social narrative all provide insight on what to expect from the pricing of goods and services for the coming year.  Current news from AMM.com suggests HRC has dropped below $.78/lb. as we coasted through the Omicron-tainted finish to 2021.  We anticipate a general easing in the carbon markets will continue until numbers reach the low $.5X/lb. range somewhere in the first half of this year.  However, numbers should not drop below the low .50’s as too much consolidation is occurring with producers acquiring scrap companies which will help to stabilize raw materials pricing while leading to additional control of the industry.  Both the Wall Street Journal and AMM.com have current writings published on the subject.  In addition, freight constraint will help keep import threats in check.  While the attractive pricing will help establish a market ceiling this year, difficulties in moving said materials will likely isolate their impact to mainly coastal areas.   

 

We also believe inflation will continue to run rampant both domestically and globally as we head into the uncharted territory known as 2022. We continue to see the Turkish situation developing though the media’s lens as the situation there further develops.  Domestic Inflation will be fueled by government spending, goods shortages, transportation constraint, and worker shortages spurred by legislative acts and the proliferation of illness around the globe.  The most recent data available here in the US published by USBLS continues to show a labor participation rate trending right around 61.6% meaning 38.4% of the able-bodied population continues to sit out of the labor markets.  The working-aged US population is considered to be between the ages of 15-64 according to the St Louis, MO Federal Reserve office meaning as of Nov 2021 the US has 204,773,454.012 individuals of working age.  However, our labor participation rate equates to 78,633,006.33 of these able-bodies individuals choosing to remain out of work.  Perhaps the number of individuals not working is now beginning to surface in our airline and healthcare industries as opposed to the industrial sector where the impact has been evident for years.  A growing sting of flight delays and cancellations since the holidays totaling substantially over 1,000/day spell trouble ahead for the US economy.  In fact, the unchecked proliferation of certain government interventions may further complicate the labor equation looking forward and your authors believe our metals commodity markets tend to agree.  Watch the transportation industry and mandates carefully through the coming weeks.

 

Continued volatility is anticipated to present well into 2022 on metals such as Copper, Aluminum, Gold, Silver, and Zinc.  However, in particular, nickel is interesting to watch as many institutional investors use it as a position holding against their paper assets.  The pressures generated combined with supply constraint and growing EV demand mean higher pricing is likely to extend further in the upcoming period.  However, pressures will not be limited to metals alone in 2022.  In fact, petrol fuels are just getting started.  Also, keep on eye on the LNG sent to Europe overt the holiday as that may hit now that heating season has arrived along with sub-zero weather around the US ramping up natural gas demand across the country.

 

As such, your authors monitored local news feeds from around the nation in 2021 bringing you news of numerous industrial disasters impacting supply and cost basis for many of our readers through the past year.  It appears, 2022 may be starting off on a similar footing bringing our eyes back to TX where the previous year’s major news seems to have begun. 

 

Back on Dec 23rd, 2021 a fire broker out the Exxon Baytown, TX refinery according to a local CNBC.com affiliate.  Since the fire, gas pricing has moved up around .08-.10/gallon in your author’s region of MN.  We believe petrol fuels will continue to see upward pressure and supply squeeze looking forward.  Interestingly, CO and its suburbs also experienced a fire over the holidays.  However, this one will impact local real estate by removing near 1,000 private homes form the market in the greater Boulder area helping to propel a hot market’s pricing further.  Wow, it’s only Jan 3rd, and we’re already off to quite a start…  The weeks ahead will certainly be an adventure, and the data to help you chart a solid course is just a phone call and small contract fee away.          


~A


12/27/21

 

Re: 2021, A Year of Headlines in Review

 

Texas froze

Then Forests burned,

More Booster Shots,

are what We earned.

 

With Horn-Headed Shaman

Supposedly saving the day,

‘Should have know

this darn virus                                                                                                                                                                                                                                            

Wasn’t going away.

 

Swan Flights were building,

 

Now they’re here to stay…

 

With Riots and fires

And a general increase in crime

Defunding police, all on the taxpayer dime.

 

Explosions-a-plenty across chemical plants,

Paint, grease, and antifreeze are now found by the

Seat of your pants.

With last week’s new explosion, gas will now

Be in shorter supply as  

Infrastructure keeps crumbling across

Our country. 

 

Why?

 

However, building back better’s

Just not the way.

 

Americans working

Has a much better stay.

 

But a new surge of delta,

with omicron too,

Nineteen Greek letters tell us

The Government

Knows just what to do…

 

A second shot

A third shot

And a fancy new pill,

From Pfizer or Merk

All with Uncle joe

Having us footing the bill.

 

With a climate in shambles,

AOC needs an accord,

 

An over-arching agreement,

 

Call in the energy Lord.

 

Bring Paris back to the table,

 

to saving the day,

 

It’s just carbon taxes

For “We the people” to pay.

 

As Chips they went missing

Gas cars fade away

Say hello to

All new Electrics,

The green energy way…

 

Ports got congested,

Containers were short,

Force Majeure announcements

Became a matter of sport,

 

As Lockdowns hit Europe

Australia,

And

South Africa too

Should have known alloying elements

Would not be making it through.

 

New surcharges kept coming,

Didn’t matter the season

With swans in flight,

Who needs a new reason?

 

Then Ever Given hit

the Suez shore’s ground…

There goes the whole new

spring shipping season.

 

Chauvin was found guilty

By the weight

of Lady Justice’s scale

While business continued waiting

for stocking ships to sail.

Target ordered early,

Walmart Chartered ships

Supply chains were strained

Purchasing jobs were the pits….

 

Then the world bore witness

To a new growing race…

 

Not involving airlines,

Or seeing who could cancel flights,

At a faster neck-breaking pace.

 

It was the wielding of rockets,

 

Celebrity Billionaires

 

in space.

 

As the rockets went up

 

Florida condos

 

Came

 

tumbling

 

Down

like our nations’ growing

stock market woes,

 

Ask yourself who else can bank

money

Like the pharma bros?

 

J&J’s now a duo,

GE turned into three,

Pfizer’s menage’ dates back to

2018.

 

Then Braves won the series,

As Afghanistan fell,

Both evens were

prerequisites

Of an Earth

bound for Hell.

 

Unemployment or participation

which one do we watch?

 

The ticking your hearing is not

Of a swatch…

An app on the cell phone

An eye in the sky

Our kids are all stars,

in an espionage

Lie.

 

With so much data to sort

Perhaps the Tok can now see

A great Resignation is

Brewing for thee..

 

Twenty Twenty-Two will witness

A percentage of America’s truckers walking away.

Freedom from tyranny

over

The earning of bucks,

Be wary of carriers parking their Trucks.

 

Then Evergrande’s failure primed

International markets for bust.

 

As inflation keeps surging

To near 39-year highs…

Remember,

Economies need investment,

inputs, outputs, consumer products and such.

 

They need shipping and travel,

With teens awash in green holiday cash.

 

We need Doctors, and nurses,

And pilots,

not masks.

 

Keep Attendants attending,
all earning that scratch..

Remember the bill of Rights and

Its first Ten amendments.

 

Its liberty for all,

Both those with rockets,

and peasants.   

 

Then the strike at JD,

Sent 10,000 more home,

As parts and service were waining

Ag commodity prices kept rising.

 

It kept authors and consultants busy

with industry advising.

 

Looking back in retrospect,

It was that kind of year,

 

Filled with

short supplies,

 

Awkwardness,  

 

Fear.

 

Let’s just be glad

We’re at the forefront of an entire new year!

 

A year filled with wishes

 

for your future success

 

As we look to new ways to emerge from this mess.

 

Data and advisement

That’s what we do

 

Here’s to you,

 

our clients,

 

in the year 22’.

 

Happy holidays and most blessed new year to you all!

 

Our regular weekly updates will resume next week.