Market Update | May 18, 2022

 

DESPITE DECLINES INDUSTRIAL PRODUCTION REMAINS STRONG

Total industrial production increased in April for the fourth consecutive month and showed growth in all major sectors. This has helped push capacity utilization to its highest level since January 2019. Although the Empire Manufacturing Index declined for the second time in three months, the future business conditions index did remain virtually flat. U.S. homebuilder confidence may have fallen in May but it still had a very strong reading at 69.

 

Input Costs

After sliding last week, zinc pricing remained virtually flat this week.

    • Zinc pricing is currently at $1.65/lb., a still elevated level however.

 

Spot iron ore pricing increased slightly this week, climbing to $130.15/mt.

    • Spot iron ore pricing is now down 15.4% m/m and 44.0% below prior year levels however.
    • Spot iron ore pricing remains near its lowest level since late January as demand concerns continue as China’s strict COVID lockdowns are affecting both production and demand.

 

Pacific basin met coal pricing was virtually flat this week, holding at $525.50/mt.

    • Pricing is up 1.1% from this time last week and up 2.6% from this time last month.

 

The national average price of diesel slipped slightly this week but remains near all-time highs.

    • The current national average is $5.61/gallon, down slightly from $5.62/gallon previously.
    • The average has topped $5.00/gallon for the tenth consecutive week, after going more than 40 years since the last occurrence.

 

 

Supply

Domestic raw steel production increased slightly last week, climbing for the second consecutive week.

    • U.S. steelmakers produced 1.785 million tons at an 81.8% utilization rate.
    • Despite the recent rebound, YTD production is now down 1.8% compared to the same timeframe last year.

 

Through the first sixteen days of May, steel imports licenses are up 5.4%, on a daily average pace, compared to the same timeframe in April.

    • Excluding the volatile Brazilian slab imports, the May import pace is up 14.8% compared to April.

.

 

DEMAND

After showing strong growth in April, business activity, in the New York region, declined in May, down for the second time in the last three months.

    • ​​The May Empire Manufacturing Index came in at -11.6, down sharply from 24.6 in April.
    • The new orders and shipments components both declined in May, sliding 8.8 and 15.4, respectively.
    • The decline in shipments was the strongest since the beginning of the pandemic.
    • However, the index for future business conditions was virtually flat from April, coming in at 18.0.

 

Total industrial production increased again in April, up for the fourth consecutive month.

    • The industrial production index came in at 105.6, up 1.1% from March and up 6.5% from April 2021.
    • All major sectors increased in April, with manufacturing output increasing 0.8% in April.
    • The index for durable goods manufacturing increased 1.1% and was helped by a strong 3.9% increase in the production of motor vehicles and parts.
    • Capacity utilization increased as well, climbing to 79.0%, its highest level since January 2019.
    • Capacity utilization for manufacturing increased to 79.2%, the highest level since April 2007.

 

While still quite strong, confidence among U.S. homebuilders slowed considerably in May.

    • The May Housing Market Index came in at 69, down from 77 in April and is now at its lowest level since early on in the pandemic.
    • Any reading over 50 indicates a strong outlook on construction, while any reading below 50 denotes a slowing outlook.
    • All three components saw slowing growth in April, with the biggest decline coming from the Next Six Months outlook.
    • The short-term outlook component slipped to 63, down 10 points from 73, previously.

 

Housing starts came in at a 1.724 million-unit rate, down 0.2% from a 1.728 million-unit rate in March.

    • ​Starts continued to climb on a year-over-year basis; however, climbing 14.1% from a 1.505 million-unit rate in April 2021.
    • The boost in starts completely came from multi-family units, which increased 15.3% from March.
    • Single-family unit starts slipped, sliding 7.3% to a 1.100 million-unit rate.
    • Year-to-date actual new housing starts are now up 10.4% compared to the same timeframe last year.

Permits, a leading indicator for future construction, slipped as well in April, sliding 3.2% to a 1.819 million-unit rate.

    • Permits were up on a year-over-year basis however, climbing 3.1% from a 1.765 million-unit rate in April 2021.​​

 
 

ECONOMIC

Retail sales continued to push higher in April, now climbing for the fourth consecutive month.

    • Retail sales came in at a $677.7 billion rate, up 0.9% from March and up a sharp 8.2% from April 2021.
    • Excluding the volatile sales from gas stations, total sales came in at a $615.4 billion rate.
    • This is up 1.3% from March and 5.9% from April 2021.
    • The largest increases in sales, compared to April 2021, came from gasoline stations (+36.9%), bars/restaurants​ (+19.8%), online retailers (+12.7%), and grocery stores (+8.1%).
    • These increases were only partly offset by year-over-year declines in sales from auto dealers (-2.4%), electronic stores (-5.2%), and sporting goods stores (-5.4%).

 

 

This material, information and analyses (the “Content”) may include certain statements, estimates and projections prepared with respect to, among other things, historical data and anticipated performance.  Content may reflect various assumptions by Majestic Steel USA, Inc. concerning anticipated results that are inherently subject to significant economic, competitive and other uncertainties and contingencies and have been included for illustrative purposes.  Content is provided AS-IS.