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December 2019 Insight Guide: Market Indicators

The Economy

U.S. trade deficit dropped almost 8% in October to a 16-month low. This is largely due to lower imports from China tied to the ongoing trade dispute. The deficit slide to $47.2 billion from a revised $51.1 billion the prior month. If this persists through this month, the smaller gap could boost gross domestic product for the fourth quarter.

The U.S. added 266,000 jobs in November, far more than expected. The unemployment rate registered at a historical low of 3.5%.

Economic Indicators

The Architecture Billings Index for October registered at 52, up 2.3 points from September. A score above 50 indicates an increase in billings from the previous month.

The November Purchasing Managers Index registered at 48.1%, down 0.2 points from the previous month. The New Orders Index registered at 47.2%, down 1.9 points from October. The Production Index registered at 49.1%, up 2.9 points from the previous month.

The Steel Industry

President Donald Trump has imposed new tariffs on steel and aluminum imports from Brazil and Argentina, according to a Tweet he sent out on December 2.

The Section 232 tariffs that went into effect on March 23, 2018, impose a 25% tariff on imported steel and 10% on imported aluminum. In May 2018, the U.S. government announced that it reached agreements with Argentina, Australia, and Brazil on their steel and aluminum quotas. Argentina secured a “permanent exemption.”

The U.S. steel industry is currently waiting to find out whether the tweet has the power to shape domestic trade policy. So far, nothing has happened since the president sent out the tweet.

For more information, contact your local sales representative or view the December 2019 Market Insight Guide below.

Metalwest Market Insight -December 2019
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MW Leadership Reflects on Acquisition of Metalwest

With the acquisition of Metalwest by Norfolk Iron & Metal (Norfolk Iron) approaching the 1-year mark, we thought it would be a great opportunity to talk with the members of the Metalwest leadership team to see how they feel about the acquisition and what it means for the two companies.

“Going through an acquisition can be very disruptive, for both the company buying and the company being bought. The Norfolk Iron team couldn’t have worked harder to make the transition as seamless possible. The result was very little disruption for both companies. The Norfolk Iron executive team has been fully supportive of Metalwest throughout our first year together. Their main goal is for Metalwest to continue operating profitably and find ways to grow an already very successful company. Every company has its own unique “personality” which means our cultures are a bit different. However, our company’s values are well-aligned. This makes Metalwest a perfect fit as part of the Norfolk Iron family of companies. Going into 2020, I’m excited about the opportunities that are in front of us as we leverage the combined strength of Norfolk Iron and Metalwest to grow our business together to higher levels than we thought possible.” – Jeff Simons, President, CEO

“For me the acquisition meant a great future and security for our team and our company. During the acquisition process the main goal of Metalwest leadership was to secure a future for the entire Metalwest team and we were able to accomplish this goal with Norfolk Iron. They made it abundantly clear that they wanted everyone to stay on board and run as we existed prior to the acquisition. We have owners/a parent company in Norfolk Iron who have the desire and willingness to invest in our future and our growth. This shows a tremendous amount of respect for our team and our abilities to perform successfully. For the Metalwest team, it means a bright future with owners who are supportive of growth through investment. The acquisition also means a return to our roots as Metalwest and I know this had a significant meaning to a majority of our employees. The name change allows us to return to an identity of a very successful and entrepreneurial company.” – Phill Cavender, Senior Vice President

“I’m comforted that Norfolk Iron and Metalwest share the same values. Things like safety, integrity, win-win relationships, and customer service are paramount to both companies. Becoming a part of the Norfolk Iron family provides us the opportunity to offer more products and services to our customers that value sourcing from a company with our shared values. It’s inspiring that both companies are doing an excellent job of collaborating with one another to develop and capture the best experience for our customers, suppliers, and employees. I’m excited to combine the Metalwest success of the last several years with the financial strength of Norfolk Iron, I feel we are poised to grow and expand even more with the combined companies. The future is bright!” – Tony Hammes, Vice President of Supply Chain

“The acquisition of Metalwest by Norfolk Iron initially created concern for many of the Metalwest team members. Being acquired by another company creates uncertainty and the potential for change. Fortunately, Norfolk Iron and their leadership share all of the important values that Metalwest considers to be at the core of our culture. Norfolk Iron’s integrity and commitment to excellence have made for the successful transition of ownership for Metalwest. Norfolk Iron is family owned and family oriented, and they have consistently displayed those values as they have welcomed Metalwest into the Norfolk Iron family of companies.” – Brian Madison, Vice President of Corporate Services

“Its personally rewarding to work for a company that is appreciative of the contribution you make to their success. The folks at Norfolk Iron share the same values as the Metalwest leadership team and that makes it easy to communicate and work through the myriad of integration issues. I think that Metalwest has a much brighter future with Norfolk Iron because they see Metalwest as an important vehicle for growth and is willing to invest the money necessary to move the company forward. It is imperative that we reward their generosity with industry leading return on capital.” – Bruce Pole, Vice President, CFO

It seems like the Metalwest leadership team views the acquisition positively and are excited about the future. We also talked with the Norfolk Iron leadership team to get their side of the story as well. You can check it out on their blog, Norfolk News.

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November 2019 Insight: Market Indicators

The Economy

U.S. productivity fell for the first time since 2015 in the third quarter. This reflects a cutback in production as the U.S. economy slowed. Productivity declined at a 0.3% annual rate while economists predicted a 0.6% increase.

The U.S. economy added 128,000 jobs in October while the jobless rate edged up to 3.6%.

Economic Indicators

The Architecture Billings Index registered at 49.7 in September, slightly below the 50.0 threshold that signifies growth in billings. This is up 2.5 points from the August reading, however.

The October Purchasing Managers Index registered at 48.3% in October, up 0.5 percentage points from September. The New Orders Index registered at 49.1%, up 1.8 points from the previous month. The Production Index registered 46.2%, down 1.1 points from September.

The Steel Industry

U.S. steel imports increased month-over-month in October as countries subjected to the Section 232 quotas rushed to export their material at the beginning of the fourth quarter. The increase was highly anticipated following a similar jump seen in July. This is largely due to Brazil, a major source of U.S. slab imports, being subjected to a Section 232 quota that reopens every quarter.

Due to the falling U.S. Midwest aluminum premium, stronger currencies in Asian, and sustained higher freight rates, the estimated arbitrage opportunities between the U.S. and Asia have been limited. Weak demand and cheap scrap are the primary reasons for the Midwest premium’s downward trend.

For more information, view the “November 2019 Market Insight Guide” below or contact your local sales representative.

Metalwest Market Insight - November 2019