The ISM Manufacturing Index (PMI) in the United States dropped to 49.2 in April 2024 from 50.3 the previous month, significantly below market expectations. This decline indicated a contraction in the US manufacturing sector, reversing the slight expansion seen in the prior month, which had been the first in 16 months (i.e. a PMI reading above 50 means expansion, while below 50 means contraction). New orders also fell back into contraction territory (49.1 compared to 54.1 in March), mainly due to decreased demand in textile mills, food, beverage, tobacco, machinery, and electrical goods industries. However, production remained in expansion mode (51.3 versus 54.6), supported by the continued decrease in backlog of orders for the 19th consecutive month (45.4 compared to 46.3). Consequently, declining demand for capacity led to a drop in employment levels for manufacturers for the seventh consecutive month (48.6 versus 47.4). Meanwhile, the price index surged to 60.9, indicating the most significant increase in cost pressures since June 2022, driven by rises in crude oil, aluminum, steel, and plastics.

The Conference Board Consumer Confidence Index declined for the third month in a row in April, dropping to 97.0 (1985=100) from a revised 103.1 in March. Despite this three-month decline, the index has remained relatively stable within a narrow range for over two years. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—declined to 142.9 (1985=100) in April from a downwardly revised 146.8 in March. Meanwhile, the Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell to 66.4 (1985=100) from a slightly upwardly revised 74.0 last month. An Expectations Index reading below 80 often signals a forthcoming recession.

“Confidence retreated further in April, reaching its lowest level since July 2022 as consumers became less positive about the current labor market situation, and more concerned about future business conditions, job availability, and income,” said Dana M. Peterson, Chief Economist at The Conference Board. “Despite April’s dip in the overall index, since mid-2022, optimism about the present situation continues to more than offset concerns about the future.”

WTI Oil entered April at $83.710 per barrel. Prices hit their monthly high on the 5th at $86.910 per barrel. We then saw prices start to ease back down, closing the month at $81.930 per barrel. Egypt led efforts to revive stalled peace negotiations between Israel and Hamas this week, with US Secretary of State Antony Blinken calling on Hamas to accept Israel’s ceasefire-for-hostages offer. In the US, EIA data pointed to a sharp 7.3 million barrel increase in crude stockpiles in the most recent week, while crude production rose to 13.15 million barrels per day in February, the most in nearly three-and-a-half years. Additionally, dimming prospects for US Federal Reserve interest rate cuts continued to weigh on the outlook for overall demand. Meanwhile, OPEC+ said it could extend its voluntary output cuts of 2.2 million bpd beyond June if oil demand fails to rebound.

The online US Oil Rig Count is at 605 which is down 15 compared to last month’s report and down 143 from May 5 of 2023. This key and leading indicator shows the current demand for products used in drilling, completing, producing, and processing hydrocarbons which all of us use every day as fuel sources and finished products.

The number of rigs conducting oil and gas drilling in the United States continues to remain stagnant. This trend reflects the priority of drillers to focus on enhancing shareholder returns rather than expanding production coupled with the current administration’s desire to move away from fossil fuels. Additionally, uncertainty surrounds the economic outlook, leading the industry to remain cautious, especially compared to pre-pandemic times when the rig count showed a slower recovery over the past few years. To provide context, in 2019, 954 rigs were drilling for oil and gas in the U.S., and, in 2014, there were 1609 rigs before oil prices dropped below $20 per barrel at the end of that year.

However, solid oil prices will likely prevent the rig count from decreasing significantly and may even lead to a rebound in 2024. Currently, the West Texas Intermediate benchmark prices have been at around $75 per barrel, which is sufficient for most drillers to be profitable.

Nickel entered April at $7.515 per pound. By the 22nd, it reached its peak for the month at $8.953 per pound. The price then began to trend downward, closing out the month at $8.726 per pound. This move away from the 7-month high mirrors the weakness seen in other non-ferrous metals, since eased geopolitical tensions in the Middle East reduced its attractiveness as an inflation hedge. Additionally, the demand outlook remained subdued, with nickel inventories at LME warehouses exceeding 70,000 tonnes. However, talks of potential buying by the Chinese government and a lower supply outlook offered some respite. Several sources reported plans by China’s National Food and Strategic Reserves Administration to purchase nickel pig iron, the key raw material for stainless steel. Meanwhile, Indonesia, the world’s top producer, continued reviewing applications for mining quotas, and the US and UK previously banned deliveries of newly-produced Russian nickel to both the LME and CME.

Below is the 90 day Nickel Price Trend (US$ per tonne).

Domestic commodity stainless plate deliveries have moved in slightly depending on the grade and size, landing in the 6 to 8 week range. Nickel alloy plates moved out to the 10 to 12 week range. Duplex plates bump in, sitting in the 7 to 9 week range. Domestic carbon steel plate mill deliveries are scheduling in the 6 to 9 week range. Keep in mind, some plates will exceed the estimated ranges depending on the mill’s production schedule.

Welded tubing – Currently deliveries for domestically welded stainless tubing are in the 5 to 12 week range, leaning towards the long side. For import tubes, deliveries are anywhere from 18 to 26 weeks. Carbon steel tubing deliveries have lead times ranging anywhere from 6 to 12 weeks when strip is available. Welded nickel alloy tubing ranges from 8 to 14 weeks (up to 42 weeks for imports).

Seamless tubing – Current schedules reflect 10 to 20 weeks or more for carbon steel (24 to 26 weeks for Western European carbon seamless) and 8 to 35 weeks for stainless. Seamless nickel tubing is being offered at the 10 to 14 week delivery window so long as hollows are in stock. If hollows are not readily available, anticipate deliveries of seamless nickel tubing in the 20 to 32 week timeframe as most hollows are of foreign melt.

Please don’t hesitate to reach out if you have any questions about the current state of our industry’s material supply chain.  

Here’s the current surcharge chart for 304/304LSS, 316/316LSS, 2205, C276, and 625.

Nickel Prices have had an interesting ride over the past two decades with a low of $2.20/lb. in October of 2001 (following September 11 events) and a high of $23.72/lb. in May of 2007. Surcharges trail Nickel prices by approximately two months, so they would have been at their lowest in December of 2001 (304 was $0.0182/lb.) with the peak in July of 2007 (304 was $2.2839/lb.). 

The chart below illustrates Nickel price by way of U.S. Dollars per Metric ton.

Here’s the Price Index for Hot Rolled Bars, Plate, and Structural Shapes.