Manufacturing Market Updates

On Saturday the US House of Representatives passed President Biden`s $1.9T Stimulus package. Should the package pass the Senate, most Americans will receive an additional $1,400.00 check. The $15/hr minimum wage hike was removed before the bill went to the Senate, a benefit for US Manufacturing. For manufacturers both domestically and overseas, the prospect of additional stimulus is likely to cause increased demand for products in the near term. Supply chains could be stretched even tighter, and inflation could become a concern as too many dollars chase too few goods.

On another note, vaccine rollouts have been ramping up and with the single shot Johnson & Johnson vaccine starting distribution, plans to bring COVID under control are on the horizon. Crucially, dock workers across the country have been prioritized as essential and many have already been vaccinated. Hopefully, this will help ease record congestion that has built up at West Coast ports and start returning empty containers back overseas.

New Trends

Metals markets have been volatile as mills have trouble meeting demand, and prices on steel are expected to continue rising in the short term. Steel mills domestically and in Asia are struggling to meet demand as the global economy rebounds sharply. Factories have told us of rationing and monthly quotas from steel mills, especially on specialty steels such as 316 Stainless. Even domestic mills are raising lead times by 50-100%. A recent report by the Shanghai Metals Market details the skyrocketing price of copper in February, and the increases in Nickel, Aluminum and Zinc. Copper and Aluminum prices could come down in the short term, as a decrease in new orders due to the recent spikes is expected.

The continuing demand for imports has caused congestion at ports to increase. Currently more than 50 container ships are at anchor outside of Long Beach – In February there were about 30. Gene Seroka, the Executive Director of the largest US port in Long Beach stated recently, “These are levels of shipments we have never seen in our 113 year history.” The vaccination of dock workers should help, but the backlog of finished goods waiting to ship from Asia and strong demand suggest that the stretched freight market is now expected to continue through 2021. Consumers are still spending more on durable goods (retailers have record-low inventory levels) and less on entertainment and dining.

Ongoing Concerns

The USD has continued weakening relative to most other currencies in the past year. Most of the decline in value has been since October 2020. Relative to the Taiwan Dollar, the USD is at the lowest point since 1997. Relative to the Chinese Yuan, the USD is 8.3% weaker than this time last year. Wall street analysts are suggesting that a weak USD will continue for some time, with US interest rates expected to stay at or near 0% and further economic stimulus increasing the supply of US Dollars. With a weak USD, imports become more expensive and costs for material purchased in USD increases.

Adding to lead times, secondary processors like painters and platers are backed up with work. On large quantity items, lead times have been significantly extended as there is simply not enough capacity to meet the current demand. We are still seeing some RFQs rejected outright due to lack of capacity at painters. Owners are reluctant to add much capacity to their lines, as they have told us they do not believe the strong demand will continue beyond 2021 as manufacturers replenish inventory that ran low during the pandemic.

The Solution

The vaccine rollouts have consumers and markets feeling positive about the future. Manufacturers and distributors have a less rosy outlook for the coming months as high demand and uncertainty make forecasting more of a crap-shoot than a science. There are still numerous risks in a global supply chain due to COVID and its associated effects and the solution is still to plan further in advance to account for unpredictable events and demand transparent communication from all members of your supply chain. We will successfully navigate 2021 together with foresight and planning.

If you have any questions on how to mitigate these risks or concerns, please reach out to us at 1-800-535-2800 or email sales@uneedabolt.com

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