Member Briefing April 26, 2022
S&P Global Flash PMI for April: U.S. Up, Eurozone Down
The S&P Global Flash U.S. Manufacturing PMI rose to 59.7 in April, the best reading since September, with key measures strengthening, proving that manufacturing activity remained resilient despite numerous challenges. Still, the index for future output eased to a six-month low, even as it continued to point to optimism about production growth moving forward.
Manufacturers continued to cite supply chain bottlenecks and workforce shortages as significant challenges to growth, and inflation remained highly elevated, with output prices soaring to a new all-time high and input costs not far from November’s record high.
Meanwhile, the S&P Global Flash Eurozone Manufacturing PMI decreased from 56.5 in March to 55.3 in April, the weakest reading since January 2021. The Russian invasion of Ukraine negatively impacted activity, with new orders and output expanding at the slowest pace since June 2020 and exports contracting for the second straight month.
Invasion of Ukraine Headlines
- Ukraine and Russia: What You Need to Know Right Now – Reuters
- Heavy Weaponry Pours into Ukraine as Commanders Become More Desperate – Politico
- NATO Warships Arrive at Finnish Port for Training Exercises – Reuters
- Large Fires Break Out at Russian Oil Depots – The Guardian
- U.S. Says Putin ‘Failing’ to Reach War Goals, Looks for Moscow to be Weakened Militarily – NBC
- Biden Nominates Bridget Brink as US Ambassador to Ukraine- The Hill
- Russian Military’s Next Front Line: Replacing Battlefield Equipment Destroyed in Ukraine – WSJ
- U.S. to Reopen Kyiv Embassy Soon, says Russia has Failed in War Aims – Reuters
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Chain’s April Market Swoon Continues
The April market selloff is continuing apace with China stocks falling to their lowest level in two years on Monday. Overnight, the Shanghai Composite plunged over 5% for its biggest one-day drop since February 2020, while WTI crude oil slipped more than 4% to below $100 on demand concerns. Rising coronavirus cases are increasing fears of a wider lockdown in Beijing, and the country’s easy monetary policy may be no match for the effects of its zero-COVID policy.
“There is no shortage of blood on the financial market dancefloor this morning,” SocGen’s Kit Juckes wrote in a research note. “A poor equity market close on Friday rather set us up for it, but the war in Ukraine, the threat to the Chinese economy of Covid restrictions, and the monetary policy rhetoric, led by the Fed but followed all over the world, make a potent cocktail.
Pandemic Border Policy Could Complicate COVID Relief, Ukraine Bills
When Congress returns this week, a pandemic-era immigration policy could complicate efforts to pass further coronavirus relief legislation and possibly another Ukraine aid measure. Earlier this month, the Biden administration said that in May it will end its use of Title 42, a controversial policy dating to the Trump administration that allows Border Patrol agents to quickly turn away migrants at the southern border.
Liberal Democrats cheered the decision, but Republicans and some Democrats, particularly those in difficult re-elections, said the administration didn’t have a detailed plan in place to deal with the expected increase in migrants to the southern border at a time when migrants are already crossing illegally at the fastest pace in at least two decades. Republicans are trying to amend a $10 billion coronavirus relief bill that is being considered in the Senate to reinstate the border policy. They are hoping enough Democrats will join them. A request for additional aid to Ukraine could also become tied up.
US COVID – CDC Study Age-Adjusted Death Rates, by Race and Ethnicity
From 2020 to 2021, disparities in AADR ratios from COVID-19 decreased significantly by 14.0%–40.2% for most racial and ethnic groups, including non-Hispanic White persons, who accounted for 59.6%–65.2% of all decedents; and increased non-significantly (7.2%) for non-Hispanic Native Hawaiian and other Pacific Islander persons (0.2%–0.3% of all decedents) compared with non-Hispanic multiracial persons.
The CDC concludes that providing effective preventive interventions, including vaccination and clinical care, to all communities in proportion to their need for these interventions is an effective tool to reduce racial and ethnic disparities in COVID-19 deaths.
“Concerned but Not Troubled”: Upstate New York is Now a Covid-19 Hot Spot
The latest color-coded map from federal health officials detailing Covid-19 spread across the United States has sobering news for this part of the country: Upstate New York is an apparent hot spot for transmission of the virus. But a large swath of upstate New York, running from Erie County to the Vermont border, is colored either yellow, for medium transmission, or orange, for high transmission. In fact, of the 40 counties across the country with high Covid-19 levels, 23 are in upstate New York – including Erie, Niagara and Orleans.
Public health experts contacted Sunday said they didn’t know precisely why Covid-19 is spreading so rapidly here, compared with the rest of the country, though they suggested weather, behavior and variant types all are likely factors. As noted in recent weeks, officials said they’re not terribly worried about the recent rise in Covid-19 cases here and across the state because it hasn’t been accompanied by a corresponding rise in hospitalizations.
Japan’s Shionogi Says COVID-19 Pill Shows Rapid Clearance of Virus
An experimental treatment from Shionogi & Co Ltd (4507.T) has shown rapid clearance of the virus that causes COVID-19, according to new data, the Japanese drug maker said on Sunday. The pill, S-217622, “demonstrated rapid clearance of the infectious SARS-CoV-2 virus”, Shionogi said in a statement, citing Phase-2b results from the Phase II/III clinical trial of the drug.
The company has global aspirations for the antiviral pill, which is now being evaluated by Japanese regulators. The drugmaker said in March it would launch a global Phase III trial worldwide for the drug with U.S. government support, and Chief Executive Isao Teshirogi has said production could reach 10 million doses a year.
Indonesia’s Palm Oil Export Ban Leaves Global Buyers With no Plan B
Global edible oil consumers have no option but to pay top dollar for supplies after Indonesia’s surprise palm oil export ban forced buyers to seek alternatives, already in short supply due to adverse weather and Russia’s invasion of Ukraine.
The move by the world’s biggest palm oil producer to ban exports from Thursday will lift prices of all major edible oils including palm oil, soyoil, sunflower oil and rapeseed oil, industry watchers predict. That will place extra strain on cost-sensitive consumers in Asia and Africa hit by higher fuel and food prices. Vegetable oil prices have already risen more than 50% in the past six months as factors from labour shortages in Malaysia to droughts in Argentina and Canada – the biggest exporters of soyoil and canola oil respectively – curtailed supplies.
Beijing Races to Contain ‘Urgent and Grim’ Covid Outbreak as Shanghai Lockdown Continues
Beijing is racing to track a Covid-19 outbreak that may have been spreading in the capital for a week, city authorities said over the weekend. The rush to contain the outbreak comes as fears grow across China that more stringent measures could be in store as the country sticks with a stringent “zero-Covid” policy to eliminate the spread of the virus in each outbreak.
That policy has faced its most stark challenge since March 1 as the highly transmissible Omicron variant sparked several simultaneous outbreaks. Case counts have ballooned to unprecedented levels in China, driven by large outbreaks in northeastern Jilin province and Shanghai. Lockdowns and enforced quarantines in Shanghai have sparked anger and desperation among citizens, who have struggled to access to food and medical care. The city had earlier said it was not going to implement a full, citywide lockdown, leaving many unprepared when officials rapidly changed course late last month.
Joe Manchin 1. Poll Finds West Virginia Senator Manchin’s Popularity Skyrocketed Over Past Year
Morning Consult found that, even as Manchin has faced backlash from progressives nationally, about 57 percent of West Virginia voters viewed him favorably in surveys conducted from January through March. His popularity jumped 17 points — more than any other senator — compared to the same period last year. The poll found that Manchin’s popularity particularly grew among independent and Republican voters in West Virginia, while it dropped among Democrats.
Manchin, a moderate, has frequently staked out positions that have found him at odds with the White House and progressive leaders on issues such as expanding the social safety net. The senator has identified inflation as his primary concern when lawmakers have discussed large-scale spending proposals and has often worked to scale back proposals.
Joe Manchin 2. Manchin Pushes for Democratic Compromise on Climate Agenda
Voter unrest over high energy prices and concern over dependence on Russian energy have given Sen. Joe Manchin (D., W.Va.) leverage to press for measures promoting more domestic fossil-fuel production in the Democrats’ new climate legislation and potential executive actions. Mr. Manchin’s interests include getting financial and permitting help for natural-gas exports and oil and gas pipelines, as well as policies to make it easier for companies to drill more on federal territory.
More Democrats, including President Biden, have tried to push the country away from fossil fuels in recent years to address climate change. But in a closely divided Senate, Democrats need Mr. Manchin’s support for clean-energy initiatives they hope to revive. They were included in Mr. Biden’s Build Back Better bill, which Mr. Manchin helped torpedo last year.
Container Prices Continue to Drop
Empty containers are piling up in depots at ports along both coasts due to persistent supply chain delays and bottlenecks over the past two years. The most recent snags are being driven by the Russia-Ukraine crisis and Covid-19-related lockdowns in China that have stalled supply lines. These pressures will continue to drive down container costs in the short- and mid-term, according to Container XChange analysis, which shows that U.S. container prices have declined as much as 30% in the past two months along both coasts, and by as much as 50% at some ports compared to 2021.
Some large carriers are shipping empty containers back to Asia to increase profitability and ensure that the high-value cargo in the East makes its way to U.S. shores, where the demand is, according to the report. Such trends may continue as containers pile up.
Read more at Supply Chain Quarterly
Weaning Manufacturers Off Fossil Fuels Requires Lowering Business Risk
Without finding low-cost, environmentally friendly substitutes for industrial materials, the traditional production of steel, cement, ammonia, and ethylene will continue pumping out billions of tons of carbon annually; these sectors alone are responsible for at least one third of society’s global greenhouse gas emissions.
A major problem is that industrial manufacturers, whose success depends on reliable, cost-efficient, and large-scale production methods, are too heavily invested in processes that have historically been powered by fossil fuels to quickly switch to new alternatives. It’s a machine that kicked on more than 100 years ago, and which MIT electrochemical engineer Yet-Ming Chiang says we can’t shut off without major disruptions to the world’s massive supply chain of these materials. What’s needed, Chiang says, is a broader, collaborative clean energy effort that takes “targeted fundamental research, all the way through to pilot demonstrations that greatly lowers the risk for adoption of new technology by industry.”
Nucor Q1 Profit More Than Doubles From ‘21
Charlotte-based Nucor posted a first-quarter net profit of nearly $2.1 billion in the first three months of the year, more than double its prior-year number, on net sales that climbed 50% to $10.5 billion. The company was able to limit increases in its cost of goods sold to about 30%, lifting its operating margin to nearly 28% versus 18.5% in early 2021 even though it shipped 11% fewer tons of product than early last year and 1% less than in Q4.
President and CEO Leon Topalian said in a statement. “Our key forward-looking indicators for 2022 remain favorable and we expect another strong year in both earnings and cash generation.” Topalian and his team said demand remains strong in the company’s end markets but noted that shipments slipped from late last year because sheet mills were less profitable to run and because some customers trimmed their inventories.
War in Ukraine Cuts Fertilizer Supply, Hurting Food Prices and Farmers
As we move fully into spring, the high price of fertilizer is impacting everyone from home gardeners to landscapers and farmers. Prices have more than doubled in the last two years, and it’s making it difficult for businesses and farms to keep their prices down. From supply chain issues to the Russian invasion of Ukraine, there are many reasons the cost of fertilizer is going up.
According to the U.S. Department of Agriculture, in just one year, the price of anhydrous ammonia is up 235%, nitrogen fertilizer urea is up 149% and liquid nitrogen is up 192%. “These price increases aren’t new unfortunately to farmers. Farmers are expecting a significant increase in costs this year because they need that fertilizer to plant those crops.”