Sandra Ulbrich

Main Menu

  • Palladium
  • US Steel Prices
  • Iron Prices
  • Copper Prices
  • Saving Investment

Sandra Ulbrich

Header Banner

Sandra Ulbrich

  • Palladium
  • US Steel Prices
  • Iron Prices
  • Copper Prices
  • Saving Investment
US Steel Prices
Home›US Steel Prices›2022 Recession Fears Analysis – Steel, Aluminum, Copper, Stainless Steel, Rare Earths & Metals Prices, Forecasts

2022 Recession Fears Analysis – Steel, Aluminum, Copper, Stainless Steel, Rare Earths & Metals Prices, Forecasts

By Brian D. Smith
April 27, 2022
0
0

Recession fears have so far largely focused on the United States. However, a recent note from Capital Economics to its clients predicts that we are much more likely to see a recession in Europe.

Are US recession fears really valid?

Recession fears among most U.S. economists stemmed from the brief reversal last month in the spread between two-year and 10-year U.S. Treasury yields. Historically, this curve has inverted before every US recession over the past 50 years. In fact, there was only one significant false positive, and that was in 1998.

As expected, economists warned that ignoring the yield curve would essentially be “betting against history”. However, CE suggests that large-scale asset purchases by central banks over the past decade have skewed the dynamics of the curve. In their view, this disconnected the relationship between short and long-term returns.

Recession or not, metal prices are constantly changing day by day. Get all the latest news from MetalMiner’s weekly newsletter here.

A closer look at the numbers

Consider the “short-term” two-year chart instead of the 90-day one. In doing so, it becomes clear that the relationship between the 2 and 10 year chart is in fact showing no reversal. By the logic of most economists, this does not indicate a coming recession. At least not Again.

CE also reported that US household balances are exceptionally strong from a historical perspective. They go on to suggest that it is much more likely that tougher Fed policy will soon interfere with easing post-COVID supply chain friction. This may cool the economy a bit, but it should help avoid a full recession.

Recession fears the point is across the pond

Unfortunately, the real red flags of recession are in Europe. On the one hand, trend growth is already much weaker there (1% compared to 2% in the United States). This leaves much less room for error. Second, Europe is a larger net importer of raw materials than the United States.

So, as commodity inflation feeds through to prices, inflation is likely to exceed even the historically high estimates currently under discussion. If this were to happen, it would likely lead to deterioration in consumer spending and investment.

Real household disposable income in the United States and the euro zone (Q4 2019 = 100)

Graph reproduced with the kind permission of Capital Economics

Whether Europe falls into a mild technical recession or simply stagnates for 2 or 3 quarters may not make a significant difference in the long term. However, Europe’s underperformance will weigh on global growth, however soft or hard the landing. Moreover, it will likely usher in subsequent years of slower growth than we could have predicted just 6-12 months ago.

Obviously, much will depend on how aggressively the ECB raises rates. Currently, markets are expecting 0.25% by the end of the year, but CE is less confident. Recently, they suggested the first quarterback could arrive as early as July. Such an aggressive tightening could spook an already fragile sentiment. This is especially likely if it comes on top of falling real incomes from high inflation this year.

Metal prices have already been hit by the soaring dollar this week. There were also strong sales of aluminum, copper and palladium, in particular. It’s almost as if the markets have finally become aware of the evolution of the fundamentals.

The easiest way to keep up to date with movements in the metals market is MetalMiner’s monthly MMI report. Register here to start receiving it for FREE. For a real competitive edge in the metals industry, try a demo/tour of our revolutionary insights platform here.

Related posts:

  1. More than wood: building materials are causing price hikes
  2. Listed solar tracker companies bearing the brunt of the costs, showing little sign of slowing down
  3. Steel nail duties will remain in effect after USITC vote
  4. Soaring raw material costs could delay new US chicken plant

Recent Posts

  • The government announces the reduction of customs duties on iron and steel inputs
  • Generation Mining announces the end of the public hearings
  • BizVibe Adds New Business Insights for Over 14,000 Steel Companies | Risk assessment | Regional Analysis | Similar businesses
  • Atico posts higher quarterly net profit as its gold and copper production in Colombia increased in the first quarter
  • Will the US steel stock regain its momentum?

Archives

  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • March 2021

Categories

  • Copper Prices
  • Iron Prices
  • Palladium
  • Saving Investment
  • US Steel Prices
  • Terms and Conditions
  • Privacy Policy