Activity in the manufacturing sector continued to grow in November, as evidenced by the ISM Manufacturing Index (PMI) coming in at a 57.5 reading (slightly down from October’s 59.3). Labor market difficulties continue to be a challenge, yet five of the six largest manufacturing industries (including fabricated metal products and chemical products) registered solid growth in November.
Consumer Confidence slid backwards in November, registering a 96.1 reading compared to October’s 101.4 mark. With a resurgence of COVID-19 cases, uncertainty weighed on the assessment of business conditions and labor market opportunities. Increases in new claims for unemployment and the absence of a new stimulus program also contributed. There is hope that late breaking vaccine news will turn the tide as we head into 2021.
WTI Oil made a run in November, climbing from $36.81 per barrel up to $45.34 per barrel at month end. The 25% increase in value was buoyed by the announcement of multiple COVID-19 vaccines and the expectation that supply cuts will remain in place. Vaccine deployment is anticipated to boost the global economic rebound and thus, increase demand for oil in the medium to long term.
The online US Oil Rig count is at 320 which is up 24 compared to last month’s report and down 482 from November 1 of 2019. This roughly equates to a 60-70% drop since this time last year with these historic lows. This key and leading indicator shows the current demand for products used in drilling, completing, producing and processing of hydrocarbons which all of us use every day as fuel sources.
Nickel rebounded and sustained enough momentum to crash through the $7.00/lb. barrier in November – and stay there. The commodity began the month at $6.87/lb. yet quickly rose above $7.30/lb., eventually closing at $7.27/lb. As stated earlier this year, much of Nickel’s rise has been attributed more to investor speculation than any solid demand increase.
Continuing to test the price threshold, domestic steel plate mills pushed through a $50/ton price increase in the middle of November and a $40/ton increase on December 2nd for non-contract orders set to ship in January 2021. Producing mills are seemingly aiming for a tight balance between supply and demand to maintain higher price levels.
With the Christmas holiday fast approaching, domestic stainless mill deliveries are running from 7 to 8 weeks, while Duplex stainless mill deliveries and Nickel alloy plate deliveries are in the 8 to 10 week range. Carbon Steel plate mill deliveries have pushed to the 8 to 12 week range.
Tubing deliveries range from 4-8 weeks for stainless steel depending upon stock availability and up to 8-14 weeks for nickel alloys. Carbon steel tubing deliveries are still carrying longer lead times anywhere from 6-16 weeks.
Here’s the current surcharge chart for 304/304LSS, 316/316LSS, 2205, C276 and 625.
Effective June 1st 2018 – the Trump administration imposed 25% steel and 10% aluminum tariffs (section 232) on all countries including the European Union, Canada and Mexico. The month of August finally showed some clarity and stability in material pricing and availability as we have settled into the new norm pending better trade deals.
The Section 301 tariffs that are now in full effect on imported finished Chinese products have definitely made an immediate impact on the purchase of more domestic pressure vessels and heat exchangers.
A lot has happened over the past two years so we’ve condensed this section to only show the recent months’ activities. Please refer to previous newsletters for the full story.
6/8/20 update – The US and China reaffirmed their commitment to the Phase 1 deal on May 8th. China has since released a new list of approx. 80 US products eligible to be excluded from retaliatory tariffs.
7/7/20 update – Talks continue to appear to be on hold until we get through this global COVID-19 pandemic.
8/3/20 update – On 7/25/20, it was announced that the US and China trade negotiators were set to hold talks on the progress of the Phase 1 Deal. No release of when this discussion is to take place as of yet.
9/3/20 update – August 15th was the date set to re-implement the phase 1 deal talks but the US and China abruptly called off the scheduled negotiations. No official reason was given for the postponement but it has been rumored that it was to give China more time to live up to its end of the bargain (i.e. to make more purchases of American grains and other commodities as agreed upon). President Trump has increased the pressure on Chinese technology firms with executive orders to ban the short video-sharing app TikTok and social media platform WeChat in recent weeks.
10/1/20 update – 50 US Senators have called for talks on a trade agreement directly with Taiwan. Part of this call to action is for a stronger play to counteract China, who still makes the claim that Taiwan is a sovereign Chinese territory. The trade between the US and Taiwan was valued at close to $85.5 billion.
11/4/20 update – all efforts have been focused on the US Election this past month so no news to report here.
12/3/20 update – The Biden Administration has given very little details as to their stance with China and will need to walk a careful line. They state that they want to take a smarter approach in lieu of the punishing tariff measures that are currently in place by the Trump Administration. Biden states that he is eager to maintain leverage over China in an effort to accomplish our own policy goals.
Stay tuned as the trade talks continue to unfold.
We trust this post finds you well and we hope this information adds value to your busy day. We appreciate the opportunity to connect with you and your Team in all facets of the business cycle so please don’t hesitate to call us at 704.568.3001 or email us at sales@wardve.com if we can be of any assistance.
With the COVID-19 pandemic still canvassing the globe right now, please stay safe by following the CDC guidelines and be well!
