Weekly Market Update June 7, 2012

Employment, manufacturing and construction. In May 2012 employment in the mining and natural resources industries was the highest for 26 years, (April 1986). Employment in oil and gas extraction was the highest since November 1988. These industries bottomed out 10 years ago and with one blip have been increasing ever since, (Fig 1). Highly encouraging as sign of the US shifting away from dependence on imported raw materials. Overall the month of May showed a total non farm payroll increase of only 69,000 and March and April were revised down by 49,000. Manufacturing slowed to a growth of 12,000 jobs in May as construction lost 28,000, (Fig 2). Service industry employees outnumber goods producers in this country by over six to one and even though government is shrinking it still employs more people than all production industries combined, (Table 1).	Fig 1
Infrastructure and highway construction. Infrastructure expenditures declined 13.1% in 12 months through April y / y, (Fig 3) as highway expenditures dropped 16.3%. The AP reported on May 24th, “It's been nearly two decades since Congress last increased the federal gas tax that has historically paid for highways. Meanwhile, the cost of road and bridge construction has gone up and the purchasing power of fuel taxes has declined by more than a third. Revenue is down as people drive less miles due to high fuel prices and cars become more fuel-efficient. Federal and state fuel tax revenues peaked in 2007 at B$ 72.4, then dropped to B$ 68.6 in 2010, the most recent year for which data are available. The loss was partly made up by state and local toll collections up from B$ 6.5 in 2000 to B$ 11.4 in 2010. The trust fund that pays for federal highway programs is forecast to go broke sometime next year, though the House and Senate are trying to negotiate a bill to shore up the funding and overhaul transportation programs. If they do reach a deal it's likely to be a short-term fix.”	Fig 3
China production, exports and domestic prices. Through April there is no sign that slowing of the Chinese economy has affected steel production, (Fig 4). The growth rate of production has been linear for over six years and the tonnage of exports has been flat for two years. Within the long products group, merchants have exhibited an increase in exports in the last two years but rebar exports have been virtually zero for 3 years suggesting that the construction boom is not slowing. The bad news is that Chinese domestic prices have been falling for about nine months so we can’t afford to take our eye off this ball, (Fig 5). China's central bank moved aggressively to support growth by lowering interest rates 0.25% effective this Friday.	Fig 4
Import licenses, US and Canada, May. Total licensed long product tonnage into the US in May was down 17% from the April preliminary result, the big tonnage drops being for rebar, down 49,000 tons and wire rod down 57,000 tons, (Table 2). The biggest increase was in SBQ, up 27,000 tons. YTD total imports are up 25% from the same period last year. The big discrepancy between rebar licenses in March and what actually arrived was resolved in the April preliminary figures when the missing tons from Turkey showed up. Total permitted long product tonnage into the Canada in May was down 19% from the April preliminary result, the big tonnage drops being for wire rod, down 18,500 tons and merchant bars down 40,000 tons, (Table 3). The biggest increase was for beams, up 12,000 tons. YTD total long product imports are up by 23% from the same period last year. US market share was 71.4% through May compared to 66.4% for the same period last year.	Table 2