CONSTRUCTION SPENDING REACHES NEW ALL-TIME HIGHS

Construction spending in March increased for the 13th consecutive month, coming in at a $1.730 trillion dollar rate. While non-residential spending slipped slightly, residential spending increased enough to overcome the decline. Residential construction spending came in at a new all-time high of an $891.3 billion rate. This accounted for 51.5% of total spending, the highest percentage since mid-2006.

 

Input Costs

After rebounding last week, zinc pricing saw a sharp decline this week.

• • However, zinc pricing is currently at $1.79/lb., a still elevated level.
  • Skyrocketing energy pricing is affecting smelters around the globe, particularly in Europe, which has helped to push the price higher.

 

Spot iron ore pricing inched slightly this week, climbing back to $142.35/mt.

• • Spot iron ore pricing is still down 6.9% m/m and 25.3% below prior year levels.
  • Spot iron ore pricing remains near its lowest level in a month.

 

The national average price of diesel shot up sharply this week to a fresh all-time high.

• • The current national average is $5.51/gallon, up from $5.16/gallon previously.
  • This is the eighth consecutive week in which the average has topped $5.00/gallon, after going more than 40 years since the last occurrence.

 

 

Supply

Domestic raw steel production pulled back slightly last week after reaching a three-month high the prior week.

• • U.S. steelmakers produced 1.775 million tons at an 81.3% utilization rate.
  • Despite the recent rebound, YTD production is now down 1.0% compared to the same timeframe last year.

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DEMAND

Construction spending continued to climb in March and is now up for the thirteenth consecutive month.

 

Construction spending came in at a $1.730 trillion rate, up 0.1% from February and up 11.7% from a $1.549 trillion-​rate in March 2021.

• • ​While spending slipped slightly for non-residential projects, the increase in residential construction spending was enough to overcome that decline.
  • Residential construction spending came in at a $891.3 billion rate, up 1.0% from February.
  • This was a new all-time record high in residential construction spending.
  • Non-residential construction spending slipped 0.8% from February to a $839.2 billion rate.
  • This was the first month-over-month decline since June.
  • Residential construction spending accounted for 51.5% of total spending, the highest percentage since mid-2006.

 

Economic activity in the manufacturing sector continued to grow in April, now up for the twenty-third consecutive month.

• • The April ISM Manufacturing Index came in at 55.4, down slightly from 57.1 in March.
  • Despite the slight easing in April, the index remains above the key 50.0 level.
  • Any reading above 50 indicates growth, while any reading below 50 denotes contraction.
  • Both the new orders and production components slowed slightly in April but both remained above 50.
  • The new orders and production components came in at 53.5 and 53.6, respectively.
  • The backlog of orders component slowed as well, sliding to 56.0 from 60.0.​

 

Despite slowing slightly in April​, domestic light vehicle sales cracked the 1.2 million unit mark for the second consecutive month.

• • U.S. light vehicle sales totaled 1.227 million units in April, down 2.2% from April and down 19.2% from 1.518 million units sold in April 2021.
  • Light vehicle sales have now declined, on a year-over-year basis, for the ninth consecutive month.
  • On a units sold/day basis, April had the highest rate since last July.
  • While sales of cars declined in April, light truck sales were virtually flat.
  • ​April car and light truck sales declined 2.3% and 0.1%, respectively.
  • Year-to-date light vehicle sales are now down 16.6% compared to the first four months of 2021.

 

 

ECONOMIC

While energy pricing has seen a sharp increase since the start of the Russian invasion of Ukraine, domestic rig count activity has increased at a much slower rate.

• • Active U.S. drill rigs are 698, up 0.4% from last week.
  • Active rigs are now up 3.7% from this time last month and are up a sharp 58.6% on a year-over-year basis.

 

The U.S. Dollar is currently trading at a five-year high, and has a strong inverse correlation with commodity prices, meaning as the USD strengthens, commodity (raw material) prices decline far more often than not.

A recent WSJ article indicated that “higher interest rates typically support the dollar by making U.S. assets more attractive to yield-seeking investors.”

• • The article also stated, “investors expect that the Fed will increase short-term rates more aggressively this year than its central-bank peers.”
  • Such a move could, in turn, put pressure on commodities regardless of supply chain hiccups and high energy prices.

 

 

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.