April 1, 2019
In this Issue:
• This Morning • The Week Ahead • Economic Week in Review • Commodity News • Transportation Costs: Diesel Fuel • This Week’s Story • This Week's Quote
This Morning
Caixin’s report on Chinese manufacturing PMI released over the weekend indicates China’s manufacturing sector enjoyed the healthiest conditions since July 2018. The unofficial reading on manufacturing PMI in China rose to 50.8 in March, up from 49.9 in February. The Chinese manufacturing PMI numbers are closely watched by commodity investors and the major commodity indexes advanced in early trading on Monday. In Shanghai, SHFE copper settled 1.3% higher this morning while SHFE nickel and zinc advanced 1.5 percent. In London, LME 3-mo. copper traded as high as $6,545/mt in early trading while 3-mo. aluminum improved to $1,930/mt this morning. In New York, NYMEX crude oil futures were up around $60.70 per barrel this morning. Reuters reports, “Oil prices rose on Monday, adding to gains in the first quarter when the major benchmarks posted their biggest increases in nearly a decade, as concerns about supplies outweigh fears of a slowing global economy.” In foreign exchange trading the dollar slipped in early trading with the euro buying $1.124 while the British pound edged up to $1.307.
This Week’s ISRI Market Report is Sponsored by:
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Selected Primary Commodity Prices: April 1, 2019 Last CHG % CHG Prior Open High Low COMEX Copper May 2.9530 0.017 0.6% 2.936 2.94 2.989 2.942 ($/lb.) COMEX Gold Jun 1,294.3 -4.2 -0.3% 1,298.5 1297.2 1,298.5 1,292.6 ($/to) COMEX Silver May 15.08 0.0 -0.2% 15.11 15.10 15.15 15.1 ($/to) NYMEX Light Sweet 60.69 0.6 0.9% 60.14 60.24 60.74 60.13 Crude May ($/bbl) SHFE Aluminum May 13,805 110 0.8% 13,695 13,740 13,900 13,735 (RMB/mt) SHFE Copper May 49,290 650 1.3% 48,640 49,200 49,480 49,100 (RMB/mt) SHFE Nickel May 101,650 1,460 1.5% 100,190 101,100 103,200 100,620 (RMB/mt) SHFE Zinc May 22,900 345 1.5% 22,555 22,835 23,160 22,730 (RMB/mt)
The Week Ahead
The Brexit saga, U.S.-China trade talks, and U.S. payroll numbers should feature prominently this week. As for Brexit, your guess is as good as ours given the sorry state of affairs currently. On the trade front, the Financial Times reports “U.S.-China trade talks continue this week when Beijing’s top trade negotiator, Liu He, travels to Washington for more trade discussions on Wednesday. The world’s two biggest economies wrapped up a lightning round of trade talks in Beijing on Friday, with the White House saying afterwards that the two parties ‘continued to make progress’.” On the U.S. economic calendar, the week starts off with a string of new reports on retail sales, manufacturing PMI, construction spending, and light vehicle sales on Monday. But investors will be paying particularly close attention to the U.S. jobs report due out on Friday given the unexpectedly weak payroll gains reported for February (+20,000). The consensus forecast is that U.S. employers added 170,000 nonfarm payrolls in March while the unemployment rate remained low at 3.8 percent. Please note that the next ISRI Market Report will be published on April 15, 2019 as we head to Los Angeles later this week for the best-ever ISRI 2019 Convention and Expo, the world’s largest recycling event! We hope to see you there!
U.S. Economic Calendar: April 1-5, 2019em Date Time Release Period Consensus Prior
Apr 01 08:30 Retail Sales Feb 0.2% 0.2%
Apr 01 08:30 Retail Sales, Ex-Auto Feb 0.3% 0.9%
Apr 01 10:00 Business Inventories Jan 0.5% 0.6%
Apr 01 10:00 ISM Manufacturing Index Mar 54.1 54.2
Apr 01 10:00 Construction Spending Feb -0.3% 1.3%
Apr 01 14:00 Auto Sales Mar NA 3.75M
Apr 01 14:00 Truck Sales Mar NA 8.91M
Apr 02 08:30 Durable Orders Feb -0.9% 0.4%
Apr 02 08:30 Durable Orders, Ex-Transportation Feb 0.2% -0.1% Apr 03 07:00 MBA Mortgage Applications Index 03/30 NA 8.9% Apr 03 08:15 ADP Employment Change Mar 178K 183K
Apr 03 10:00 ISM Non-Manufacturing Index Mar 57.9 59.7
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Apr 03 10:30 EIA Crude Oil Inventories 03/30 NA +2.8M
Apr 04 08:30 Initial Claims 03/30 217K 211K
Apr 04 08:30 Continuing Claims 03/23 NA 1756K Apr 04 10:30 EIA Natural Gas Inventories 03/30 NA -36 bcf
Apr 05 08:30 Nonfarm Payrolls Mar 170K 20K
Apr 05 08:30 Nonfarm Private Payrolls Mar 160K 25K
Apr 05 08:30 Avg. Hourly Earnings Mar 0.2% 0.4%
Apr 05 08:30 Unemployment Rate Mar 3.8% 3.8%
Apr 05 08:30 Average Workweek Mar 34.5 34.4
Apr 05 15:00 Consumer Credit Feb $18.0B $17.0B
Economic Week in Review
As indicated, Caixin’s Chinese manufacturing PMI increased to 50.8 in March, up from 49.9 in February. Markit Economics reports “China’s manufacturing sector finished the opening quarter of 2019 on a positive note, with operating conditions improving for the first time since last November. Firms signaled slightly quicker rises in output and overall new work, while employment increased for the first time in over five years … Sentiment regarding the 12-month business outlook improved to a ten-month high, amid hopes of further improvements in market conditions.”
But trade barriers have translated into a disconnect between China’s manufacturing output and Chinese scrap import demand from the United States. According to trade data from the Census Bureau, the value of total U.S. scrap exports to mainland China plunged to $173 million in January 2019. For comparison’s sake, the U.S. exported nearly $1.16 billion of scrap to China in the month of August 2011:
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To reiterate, the monthly data for January 2019 show that U.S. scrap exports to China were down nearly a billion dollars from their monthly peak in 2011. That’s the bad news. The good news is that a number of other export markets have helped to take in the slack. According to the Census Bureau trade data, the fastest year-on-year export growth markets for U.S. scrap in January (in dollar terms) were Canada, Malaysia, South Korea, Indonesia, Italy, Japan, Hong Kong, and Taiwan:
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Commodity News
Ferrous – The World Steel Association reported last week that global crude steel production during Jan- Feb 2019 rose 3.8% Y-o-Y to 287.6 million metric tons as Chinese steel production increased 9.2% year- on-year to 149.6 million mt during Jan-Feb. Of note, worldsteel also reports U.S. steel production was up 6.9% year-on-year during Jan-Feb '19 to 14.4 million mt while Turkish steel output declined 16.1% during the corresponding period to 5.2 million metric tons.
For the week ending March 23, 2019, the American Iron and Steel Institute reports “domestic raw steel production was 1,934,000 net tons while the capability utilization rate was 83.1 percent. Production was 1,826,000 net tons in the week ending March 23, 2018 while the capability utilization then was 78.3 percent. The current week production represents a 5.9 percent increase from the same period in the previous year. Production for the week ending March 23, 2019 is up 0.2 percent from the previous week ending March 16, 2019 when production was 1,930,000 net tons and the rate of capability utilization was 82.9 percent. 5
Nonferrous –
The International Aluminium Institute estimates primary aluminum production came in at 4.92 million metric tons in February, down 9 percent from January but up 0.26% from one year ago. IAI estimates that China produced 2.78 million tons of primary aluminum in February following Chinese aluminum production restrictions during the winter and weaker than expected demand from the automotive industry. Meanwhile, LME 3-mo. aluminum prices reportedly traded as high as $1,925 per ton on Friday as LME 3- mo. copper prices approached $6,500 per ton.
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Paper and Plastic – Indonesia recently announced that all scrap paper imports will return to 100% inspections on container loading as of April 1, 2019. Indonesia became an important alternative market for scrap paper and plastics exports after the Chinese government implemented their Blue Sky initiative that severely restricted import volumes of these products to China. U.S. exports of recovered paper to Indonesia nearly doubled from 2017 to 2018. Most of the volume increases were in corrugated grades and mixed paper.
For plastics, Indonesia has also benefited from the focus on quality and there’s been a marked increase in their demand for U.S. PET plastics.
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On the domestic side, New York is expected to pass a state budget bill which includes provisions to ban single-use plastic bags, primarily for grocery and food service purposes, and permit local governments to opt into a fee program for paper bags. For more information, please contact ISRI Research Analyst Bernie Lee.
Transportation Costs: Diesel Fuel
U.S. On-Highway Diesel Fuel Prices* (dollars per gallon) Change from 03/11/19 03/18/19 03/25/19 week ago year ago
U.S. 3.079 3.070 3.080 0.010 0.070
East Coast (PADD1) 3.123 3.124 3.132 0.008 0.094
New England (PADD1A) 3.183 3.200 3.214 0.014 0.099
Central Atlantic (PADD1B) 3.315 3.313 3.310 -0.003 0.093
Lower Atlantic (PADD1C) 2.981 2.981 2.995 0.014 0.097
Midwest (PADD2) 3.011 2.992 2.993 0.001 0.059
Gulf Coast (PADD3) 2.881 2.869 2.876 0.007 0.053
Rocky Mountain (PADD4) 2.939 2.944 2.974 0.030 -0.017
West Coast (PADD5) 3.505 3.497 3.526 0.029 0.088 *prices include all taxes
This Week’s Story
Two southern ladies are sitting at the country club by the pool. The first lady from Texas says, "When I had my first child, my husband bought me a diamond ring." The second lady from Virginia says, "Well, isn't that nice."
The first lady says, "When my second child was born, my husband took me on a cruise." The second lady says, ''Well isn't that nice.” The first lady from Texas continues, "When my third child was born, my husband took me on a trip around the world." And the second lady from Virginia says, once again, "Well, isn't that nice."
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The first lady asks, "Well, what did your husband get you when your first child was born?" The second lady replies, "My husband sent me to the finest finishing school in Virginia."
The first lady asks, "Well, why did he do that?" And the second lady says, "So instead of saying, ‘Go to hell,” I could learn to say ‘Well, isn't that nice.’”
This Week’s Quote
“Tact is the ability to describe others as they see themselves.”
-- Abraham Lincoln
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