As seen last month, the coronavirus continues to substantially impact global production and demand. Despite everything, the environment remains a buyer’s market, with material costs at historic lows. Leeco® Trading is working with customers every day to optimize their material buys. These economic points and news pieces are what we’re watching during the month of May.

Market Metrics to Watch

Manufacturing PMI (as of April 2020)


The manufacturing purchasing managers index fell sharply in Brazil and Mexico, down from 48.8 and 47.9, respectively, in March. A PMI below 50 indicates contraction.

Capacity Utilization (as of February 2020)


Capacity utilization figures in Latin America largely do not yet reflect the impact of the coronavirus. Brazil and Mexico had fairly strong capacity utilization rates in February, but analysts expect sharp declines in March data, when it is released later in May.


Brazil and Chile saw declines in import levels during April 2020. Falling currency values and regional economic shutdowns played roles in these declines and are expected to decline further in the coming months. Mexico’s most recent import data is from March 2020, well before the impacts of the coronavirus would be apparent in import levels.

Declining Car Production


Car production in Latin America’s two largest economies took a dramatic fall in April 2020 as non-essential manufacturing halted across the region. Brazil and Mexico typically report over 200,000 units produced per month, but both reported under 4,000 units produced in April.

Declining Currency Value

Real against USD (5/12)
Peso against USD (5/12)

The values of the real and peso remain at historic lows as investments slow and government spending and debt rise. Low currency values make exporting lucrative, but slowed international economies have reduced demand for imports.

In The News

It is of no surprise that the global economy is being negatively impacted by the pandemic. Analysts have generally agreed that recovery will be “U” shaped, rather than the initially-thought “V” shape. Below are a few of the stories Leeco Trading’s team is closely following.

Developing World Economies Hit Hard By Coronavirus

According to a story published by the BBC, the world is experiencing a sharp deterioration in economic performance, due to the continuing coronavirus pandemic. Many developing countries are being hit hard economically, by way of declining imports demand, less international investment and increases in foreign debt.

Mexico Auto Plants to Reopen reported that pressure is growing both domestically and from the United States for Mexico to re-open manufacturing activities, something President Andrés Manuel López Obrador says could happen by May 17 in areas of the country that haven’t been hit hard by the virus. Mexico has lost about 500,000 jobs because of the pandemic lockdown. Mexico has said it is working on a joint plan with the U.S. and Canada to reopen factories, especially auto plants.

Eurozone Economy Shrinks At Record Rate

The Eurozone economy shrank at the sharpest pace on record in the first quarter as the Covid-19 pandemic forced countries into lockdown. The BBC reported this story, citing a first estimate of GDP between January and March showed a contraction of 3.8%, worse than during the financial crisis. European Central Bank (ECB) President Christine Lagarde said that a sharp downturn in eurozone economic activity in April “suggests that the impact [of the pandemic] is likely to be even more severe in the second quarter.”

Brazil’s Car Production Nearly Halts

According to figures published by Trading Economics, car production in Brazil slumped 99% over a month earlier to a record low of 1.8 thousand units in April 2020, amid business closures due to the coronavirus pandemic. Output dropped for light vehicles (-99.4% to 1.05 thousand); trucks (-95.2% to 0.4 thousand) and buses (-80.1% to 0.4 thousand). Year-on-year, auto production shrank 99.3%.

Mexico’s Auto Exports Fall 90.2%

Mexico’s auto exports tumbled 90.2% over a year earlier to 27.9 thousand units in April 2020, as the coronavirus outbreak forced many businesses to close and people to stay at home. Among major exporters, shipments dropped from General Motors (-92.3%), FCA Mexico (-81.4%), Nissan (-99.7%), Ford Motor (-98.4%), KIA (-66.5%), Audi (-97.7%), Honda (-97.8%), Toyota (-100.0%), Mazda (-97.7%) and Volkswagen (-89.1%). On the other hand, exports from BMW Group jumped 1232.3% to 1.7 thousand from near zero last year.

Metal Markets View: Scrap Prices

Below are excerpts taken from an article from Barron’s. Read the full article here.

Covid-19 has hit many industries in obvious and some not so obvious ways. The steel sector, for one, is reeling from falling demand. Falling demand because cars aren’t being produced and construction projects are halted is an obvious impact from the pandemic. But there is also another problem for steel producers no one saw coming: rising raw material prices.

Commodities aren’t supposed to rise when demand is falling, but scrap steel prices are up about 13% year to date and up almost 40% from March lows. That’s a problem for steel producers because scrap is a key raw material.

Steel is the most recycled material on earth. It is put back into steel making furnaces and turned into brand new products. Steel producers, such as Nucor, still want scrap, but there is simply less scrap to be had with the global economies moribund.

Higher scrap prices, relative to steel prices, means lower profit margins unless demand improves and prices can rise.

Very little, after all, about 2020 has been predictable. Scrap steel price movements are just one more example of that idea.

During uncertain times, it is important to consult with experts regarding international trade. Leeco Trading’s team is actively watching markets and policy changes and advising clients on when, where and how to make the best strategic buying decisions. We, like the rest of the world, are eager for things to return to normal and for countries to begin recovering! Thank you for reading, and stay safe and healthy.