Kinks in the supply chain

Supply chain issues continue to affect manufacturers, with Timothy R. Fiore, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee, saying, “Recent record-long lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy.”

The “April Manufacturing ISM Report On Business,” the most recent available as of press time, calculates the Manufacturers Purchasing Managers Index at 60.7 percent. Fiore notes that the Customers’ Inventories Index reached another all-time low for the month, while the Backlog of Orders Index remained at a record-high level.

A trader with a scrap processing company with operations in the Upper Midwest and Southeast says, “There are a lot of supply chain issues all over the place.”

He points specifically to the intermittent delays in automotive manufacturing related to the computer chip shortage and to the inability of other manufacturers to get raw materials from outside of the country. “Domestic suppliers are already at capacity,” he says.

“Scrap flow is plentiful from [the] retail/wholesale and industrial streams.” – an executive with a scrap processing company based in the Midwest

His company has received inquiries for semifinished goods from some of its scrap-generating customers as their traditional suppliers have been unable to supply what they need, he adds.

Despite the supply chain issues, scrap generation is not suffering. “There is a lot of scrap out there right now,” the trader says.

“Scrap flow is plentiful from [the] retail/wholesale and industrial streams,” an executive with a scrap processing company based in the Midwest says.

He characterizes domestic demand for copper and stainless scrap as strong. “Aluminum demand is strong, but spreads and delivery times have both been widening,” the executive says in the third week of May.

The “tremendous demand” for aluminum has driven the Midwest premium to an all-time high, the trader says, which is where it was as of mid-May.

Copper pricing also is at a record high. “The market is pricing in being able to procure metals in the future. Demand is not at all linked up to the price of metal. It is concerning how high a price we reached so quickly,” the trader says.

He adds that he’s concerned that a correction likely is in order for metals prices. “There are warning signs all over the economy,” including signs of inflation and “frothiness in stocks and equity markets.”

The trader says that as of mid-May, copper pricing has much more to do with China’s demand than that of domestic consumers. However, he notes wide inconsistencies in how the country’s customs officials are applying the Chinese government's standards for high-quality copper scrap imports.

The executive with the Midwest-based company says export inquiries for aluminum scrap have picked up, though prices have not kept up with those in the U.S. market.

He says domestic demand is strong for aluminum extrusion grades. “Extruders/billet makers are busy and will likely continue to be with construction and infrastructure.”

The executive says nonferrous scrap prices have widened relative to terminal market prices. “Copper spreads have only been widening slightly as the market has jumped drastically. On the other hand, aluminum spreads have widened and likely will continue to do so if the market continues upward.”