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
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has approved a capital budget of US$31.28 billion for production expansion to meet long-term development needs during the artificial intelligence (AI) boom. The company’s board meeting yesterday approved the capital appropriation plan for purposes such as the installation of advanced technology capacity and fab construction, the world’s largest contract chipmaker said in a statement. At an earnings conference last month, TSMC forecast that its capital expenditure for this year would be at the higher end of the US$52 billion to US$56 billion range it forecast in January in response to robust demand for 5G, AI and
PORTFOLIO REBALANCING: The adjustments in three global equity indices reflect rising investor appetite for semiconductor and artificial intelligence-related stocks Taiwan’s weighting in major global equity indices compiled by MSCI Inc is to rise modestly following the latest quarterly review, underscoring the market’s expanding role in emerging-market portfolios, as global investors continue to favor the nation’s technology sector. Taiwan’s weighting in the MSCI Emerging Markets Index is to increase by 0.30 percentage points to 23.76 percent, after the changes take effect at the close of the May 29 session. Its weighting in the MSCI All-Country Asia ex-Japan Index is to rise 0.37 percentage points to 27.16 percent, while that in the MSCI All Country World Index is to edge up slightly to
NEW MARKET: The partnership opens up India to the Dutch company, which already has a strong hold in the semiconductor market of South Korea, Taiwan and China ASML Holding NV entered into a partnership agreement with Tata Electronics Pvt Ltd aimed at ramping up India’s goal to develop domestic chip-manufacturing capabilities. The Dutch company’s technology would help power Tata Electronics’ planned 300 millimeter (mm) semiconductor foundry in Gujarat, according to a joint statement from the two companies on Saturday. The signing of a memorandum of understanding coincides with a visit by Indian Prime Minister Narendra Modi to the Netherlands, which is looking to deepen bilateral relations with New Delhi. ASML, whose top customers include Taiwan Semiconductor Manufacturing Co (台積電) and Samsung Electronics Co, makes lithography machines that can print
The Hsinchu County Government’s Labor Affairs Department yesterday said that it has received a plan from cosmetics brand Taiwan Shiseido Co (台灣資生堂) detailing mass layoffs at its plant in Hukou Township (湖口). While the labor authorities did not disclose the number of employees to be laid off, Japanese news media earlier in the day reported that the closure of the company’s factory in Hukou would result in 170 employees losing their jobs. Shiseido followed the law by reporting its layoff plan, the department said, adding that authorities would closely monitor negotiations between the management and affected employees and step in if any
RSS