Aluminum buyers in the US are holding off inking new orders over fears that rising inflation and crumbling supply chains might spark a recession.
Spot deals have taken a breather in the past few weeks as Russia’s invasion of Ukraine added increased uncertainty in a market already facing long wait times and weakening demand, according to several people who trade the lightweight industrial metal.
Buyers continue taking delivery of their contracted metal, but recent economic gauges have people worried enough to hold off purchasing extra for their shipments.
A measure of US manufacturing activity lost steam last month, falling to the lowest level since 2020 as new orders and production slowed, while US consumer prices rose by the most in 40 years as higher gas prices and food inflation ratcheted up pressure on the US Federal Reserve to raise interest rates.
“There is demand destruction happening at different fronts, but since the market is still working on back orders, market participants are not really feeling it yet,” Harbor Intelligence managing director Jorge Vazquez said in a telephone interview. “It’s about shortages of key components, but also it is about demand exhaustion — the people who wanted an RV, boat, bicycle, washing machine or those who remodeled their houses, it’s over.”
A major driver of the slowdown is ongoing semiconductor shortages in the automotive industry, which is preventing automakers from hitting full capacity.
The auto industry accounts for 31 percent of US aluminum needs, according to data from the Aluminum Association industry group.
The cost to ship aluminum to the US Midwest dropped in the past two weeks, indicating quoting activity has slowed.
The chief executive officer of Alcoa Corp, the largest US producer, said during last week’s earnings call that chip shortages are making supply chain disruptions more difficult, creating knock-on effects for broader economic growth.
While Alcoa left its outlook for full-year shipments unchanged, the Pittsburgh, Pennsylvania-based producer now expects global aluminum demand growth of 2 percent this year compared with its earlier outlook of 2 to 3 percent growth.
While automotive has slowed, aluminum still has its bright spots. Aerospace sales and packaging are strong. Packaging, which accounts for one-fifth of US aluminum demand, has seen a surge in the past few years as more people drink beverages from cans instead of plastic bottles.
Aluminum producers are not yet forecasting major declines in shipments.
Much of the hesitation is from buyers and sellers assessing whether inflation, supply chain bottlenecks and higher energy costs would linger into the second half of the year. The widespread economic effects of China’s COVID-19 lockdowns also adds to uncertainty.
“We see the COVID situation that’s evolved again in China, and we’ve got the war so it’s hard to see how it will play out,” Hilde Merete Aasheim, the CEO at Norsk Hydro ASA, one of the largest European producers that also does business in the US, said in a phone interview. “We are concerned that with the pressure we see now that we could go into a recession, but there are so many things going on.”
Other metals:
‧Gold for June delivery on Friday rose US$20.40 to US$1,911.70 an ounce, down 1.2 percent weekly.
‧Silver for July delivery fell US$0.09 to US$23.09 an ounce, down 5.6 percent for the week, and July copper fell US$0.02 to US$4.41 a pound, down 3.7 percent weekly.
Additional reporting by AP
HANDOVER POLICY: Approving the probe means that the new US administration of Donald Trump is likely to have the option to impose trade restrictions on China US President Joe Biden’s administration is set to initiate a trade investigation into Chinese semiconductors in the coming days as part of a push to reduce reliance on a technology that US officials believe poses national security risks. The probe could result in tariffs or other measures to restrict imports on older-model semiconductors and the products containing them, including medical devices, vehicles, smartphones and weaponry, people familiar with the matter said. The investigation examining so-called foundational chips could take months to conclude, meaning that any reaction to the findings would be left to the discretion of US president-elect Donald Trump’s incoming team. Biden
INVESTMENT: Jun Seki, chief strategy officer for Hon Hai’s EV arm, and his team are currently in talks in France with Renault, Nissan’s 36 percent shareholder Hon Hai Precision Industry Co (鴻海精密), the iPhone maker known as Foxconn Technology Group (富士康科技集團) internationally, is in talks with Nissan Motor Co’s biggest shareholder Renault SA about its willingness to sell its shares in the Japanese automaker, the Central News Agency (CNA) said, citing people it did not identify. Nissan and fellow Japanese automaker, Honda Motor Co, are exploring a merger that would create a rival to Toyota Motor Corp in Japan and better position the combined company to face competitive challenges around the world, people familiar with the matter said on Wednesday. However, one potential spanner in the works is
SEMICONDUCTORS: Samsung and Texas Instruments would receive US$4.75 billion and US$1.6 billion respectively to build one chip factory in Utah and two in Texas Samsung Electronics Co and Texas Instruments Inc completed final agreements to get billions of US dollars of government support for new semiconductor plants in the US, cementing a major piece of US President Joe Biden administration’s CHIPS and Science Act initiative. Under binding agreements unveiled Friday, Samsung would get as much as US$4.75 billion in funding, while Texas Instruments stands to receive US$1.6 billion — money that would help them build facilities in Texas and Utah. The final deals mean the chipmakers can begin collecting the funding when their projects hit certain benchmarks. Though the terms of Texas Instruments’ final agreement is
Call it an antidote to fast fashion: Japanese jeans hand-dyed with natural indigo and weaved on a clackety vintage loom, then sold at a premium to global denim connoisseurs. Unlike their mass-produced cousins, the tough garments crafted at the small Momotaro Jeans factory in southwest Japan are designed to be worn for decades, and come with a lifetime repair warranty. On site, Yoshiharu Okamoto gently dips cotton strings into a tub of deep blue liquid, which stains his hands and nails as he repeats the process. The cotton is imported from Zimbabwe, but the natural indigo they use is harvested in Japan —
RSS