Industrial Manufacturing News

#MetalMarketUpdate – May ’21 Newsletter

Declining slightly from March’s 64.7 reading, the April ISM Manufacturing Index (PMI) maintained a healthy 60.7 mark, still indicating solid expansion since the sharp contraction in April of 2020.  Of concern, however, is the chorus of comments from survey committee members lamenting the struggle to meet increasing rates of demand due to COVID-19 impacts that limited availability of parts and materials. Long lead times, wide scale shortages of basic materials, rising commodity prices and challenges with transporting products were identified as significant concerns. These factors look to weigh on any acceleration in manufacturing sector growth. It is likely that these issues persist throughout the summer months and into the fall. 
April’s Consumer Confidence reading leapt to a 14-month high, reaching 121.7, decidedly up from the 109.7 mark in March.  The two main propellants of this increase are the high numbers of vaccinations that have taken place and the latest round of federal stimulus money. Now that over half of the U.S. adult population has had at least one dose of a COVID-19 vaccine, look for growth to continue for the balance of the year. Retail sales, capital investments, and leisure activities all look to take off as we enter the summer months. 
April’s WTI Oil Price mimicked March, as the commodity spent the month near or above the $60 per barrel level – starting at $61.41 per barrel, falling slightly to the $59 per barrel level for a week before turning it around, and eventually closing the month at $63.58 per barrel. Current positive economic data and a slightly weaker dollar have helped push WTI prices upward. Demand for gasoline is slated to increase at a healthy clip this summer as those in the U.S. ramp up vacation plans. This will help keep prices above the $60 per barrel mark and push them towards $70 per barrel as the economy continues to improve. 
The online US Oil Rig count is at 440 which is up 10 compared to last month’s report and up 32 from May 1 of 2020 (high of 1609 in October of 2014 before oil pricing dropped below $20 per barrel). 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.
Starting at the $7.35/lb. level, nickel spent the first three weeks of April hovering just below the $7.40/lb. level. What occurred in the last week of the month was a different story. Nickel rocketed up from $7.25/lb. on April 21st, to close the month at $7.94/lb.  Speculators and investors helped drive up the price on the heels of reports that global nickel demand is set to increase 12% in 2021 compared to 2020. 
Below is the 90 day Nickel Price Trend (US$ per tonne).
Domestic steel plate mills continued to test the upper threshold of the price spectrum, announcing a $60/ton price increase in April. This marks the sixth consecutive month that producing mills have implemented a price increase. For context, steel prices have gained nearly 60% in 2021. 
The United Steelworkers Union (USW) and Allegheny Technologies (ATI) labor dispute has disrupted the plate, sheet, and tube supply chain in dramatic fashion. Existing plate orders on the books with ATI were pushed anywhere from 2 to 8 weeks out from their original completion date, while tube mills who utilize strip have been forced to offer up to 30 week deliveries on new tubes. The production delays are creating serious downstream production complications and forcing fabricators to either push delivery dates or find alternate, more costly solutions to meet their material needs. New Castle Stainless continues to offer commodity stainless and Duplex deliveries from 6 to 8 weeks, while Special Metals nickel alloy plate deliveries are in the 12 to 14 week range. Carbon Steel plate mill deliveries continue to remain in the 8 to 9 week delivery range.
Tubing deliveries have only become more uncertain since our last update. Access to strip and hollows to make tubes is the key driver of availability at the present time. It is such a challenging environment that at least one major tube mill is quoting 30 weeks or more for welded stainless tubing. That said, here’s the latest summary of both the welded and seamless product offerings.
Welded tubing – December’s announcement that ATI was beginning to exit the commodity stainless sheet and strip market hamstrung the welded tube market to a degree – taking capacity out of the market and putting more stress on the other two domestic stainless mills (NAS, Outokumpu) to fill the void of supply. The March 30th USW strike against ATI is now over a month old, and the tangential impacts of this work stoppage are too numerous to list. Allocation and late deliveries of strip have pushed welded stainless tubing deliveries to a range from 14 to 18 weeks or more if strip is available, with deliveries of 16 to 20 weeks as the current range for nickel alloys. Carbon steel tubing deliveries remain mired in their own challenging situation, with allocation stifling the availability of raw material, pushing lead times anywhere from 9 to 16 weeks if strip is available. 
Seamless tubing – Carbon and stainless tubing no longer enjoy their delivery advantages. Current schedules have been increased due to demand and now reflect 8 to 16 weeks for carbon and 14 to 16 weeks for stainless. Seamless nickel alloy tubing continues to be hampered by raw material availability as some suppliers have narrowed their quantity of stocked hollows as well as alloys in inventory. As long as hollows are available, anticipate deliveries of seamless nickel tubing in the 14 to 16 week timeframe. 
There is a lot of turmoil in the metal market right now so please don’t hesitate to reach out if you have any questions. 
Here’s the current surcharge chart for 304/304LSS, 316/316LSS, 2205, C276 and 625.