In August 2023, the ISM Manufacturing Index (PMI) increased to 47.6 from the previous month’s 46.4, slightly surpassing the market’s expected value of 47.0. Nevertheless, this figure still indicated that economic activity in the manufacturing sector had declined for the tenth consecutive month. While production levels stabilized, there was a faster decline in new orders, and the rate of job cuts showed some signs of slowing down. On the cost side, factory input prices remained relatively low but began to show signs of increasing. The survey’s measure of prices paid by manufacturers rose to 48.4 last month from 42.6 in July. Since November of the previous year, the PMI has consistently stayed below the 50 threshold, indicating an extended period of contraction in the manufacturing sector. This represents the most prolonged stretch of decline since the Great Recession of 2007-2009. 

In August, there was a drop in the Conference Board Consumer Confidence Index®, which decreased to 106.1 (1985=100), down from the revised figure of 114.0 in July. The Present Situation Index, which reflects how consumers perceive current business and job market conditions, also declined from 153.0 to 144.8 (1985=100) during the same period. The Expectations Index, which gauges consumers’ short-term outlook regarding income, business, and job market conditions, saw a decrease in August, falling to 80.2 (1985=100) after a noticeable increase to 88.0 in July. It’s worth noting that expectations hovered just above the 80 level, which historically indicates the possibility of a recession in the coming year.

“Consumer confidence fell in August 2023, erasing back-to-back increases in June and July,” said Dana Peterson, Chief Economist at The Conference Board. “August’s disappointing headline number reflected dips in both the current conditions and expectations indexes. Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular. The pullback in consumer confidence was evident across all age groups—and most notable among consumers with household incomes of $100,000 or more, as well as those earning less than $50,000. Confidence held relatively steady for consumers with incomes between $50,000 and $99,999.”

WTI Oil entered August at $80.920 per barrel. The monthly low was $78.890 per barrel, seen on August 23rd. Prices trended upward for the remainder of the month, closing at $83.630 per barrel. The reduction in available supplies and the anticipation of OPEC+ leaders prolonging production cuts for the remainder of the year have influenced the market sentiment. There’s an expectation that Saudi Arabia will continue its voluntary reduction of oil production by 1 million barrels per day into October, and Russia is also anticipated to enforce export cuts for the next month. In the United States, the most recent data revealed a significant decline in crude oil inventories, with a decrease of 10.6 million barrels last week, surpassing the predicted draw of 3.3 million barrels. In addition, a Reuters survey reported that Iran’s oil production increased to 3.1 million barrels per day in August, marking its highest level since 2018.

The online US Oil Rig Count is at 631 which is down 33 compared to last month’s report and down 129 from Sept 02 of 2022. 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 decrease. This decline in the U.S. rig count has occurred in 10 out of the last 11 weeks. Even the Permian Basin, which is the most productive region for oil and gas production in America, has experienced a drop in the number of operating rigs, with 337 currently compared to 342 last week and 350 a year ago.

This trend reflects the priority of drillers to focus on enhancing shareholder returns rather than expanding production coupled by the current administration’s desire to move away from fossil fuels. Additionally, there is uncertainty surrounding 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, there were 954 rigs 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 later this year. Currently, the West Texas Intermediate benchmark prices have been at around $75 per barrel, which is sufficient for most drillers to be profitable. Consequently, the U.S. is still expected to set a new annual oil production record in 2023, with a projected 12.4 million barrels per day, slightly surpassing the 2019 record of 12.3 million bpd.

Nickel entered August at $10.044 per pound. Prices trended downward, until it reached its monthly low on August 15th at $8.845 per pound, figures that have not been seen since July 2022. Nickel closed the month at $9.111 per pound. Beijing implemented more extensive measures to attract investors, while profits at Chinese industrial companies declined for the seventh consecutive month. Additionally, concerns in the property sector were highlighted by a drop in Evergrande shares after trading resumed. Conversely, reduced ore output from Indonesia, a key player in the industry, provided support to prices. Indonesia’s production has been impacted in recent weeks due to delayed quotas resulting from an ongoing investigation into illegal mining activities. Earlier, Standard and Poor’s (S&P) increased its projections for global car manufacturing in 2023, 2024, and 2025, which raised the demand for semiconductor materials. Meanwhile, the United States imposed sanctions on one of Russia’s major nickel exporters. However, the overall market sentiment remained pessimistic, as it faces the most significant demand-supply surplus in at least a decade.

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

Commodity stainless plate deliveries look to have pulled in again to a 8 to 10 week range. Nickel alloy plates tightened up to the 11 to 13 week range. Duplex plates are currently sitting in the 9 to 11 week range. Carbon steel plate mill deliveries continue to reside in the 7 to 10 week delivery range. Keep in mind some duplex and nickel alloy plates will exceed the estimated ranges depending on the mill’s schedule.

Welded tubing – Currently deliveries for domestically welded stainless tubing is in the 10 to 14 week range, whether small or large quantities (Up to 26 weeks has been seen for import). Carbon steel tubing deliveries have lead times ranging anywhere from 10 to 12 weeks when strip is available. Welded nickel alloy tubing ranges from 14 to 42 weeks.

Seamless tubing – Current schedules reflect 10 to 20 weeks or more for carbon steel (24 to 26 weeks for Western European carbon seamless) and 6 to 35 weeks for stainless. Seamless nickel tubing is being offered at the 8 to 12 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. 

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.