Articles in Category: Automotive

Our Automotive MMI held steady for the third month in a row at 68.

Free Sample Report: Our January Metal Buying Outlook

Considering that other metals prices are still falling, it’s quite a feat that automotive has been able to even hold steady for this long. Prices of stainless, aluminum and copper are all down in their individual MMI sub-indexes this month and our Raw Steels MMI was flat.

Automotive_Chart_February-2016_FNL

Low prices simply have not been enough to entice larger raw material purchases by automakers. U.S. auto sales fell slightly in January because of the East Coast snowstorm, but analysts say end user demand remains strong and buyers will likely head back into dealerships this month. Sales fell less than 1% to 1.1 million, according to Autodata Corp.

Low gas prices and even lower interest rates are continuing to fuel sales and most automakers are optimistic that they can break last year’s sales record by the end of the year. The problem facing metal producers is that there is still so much oversupply out there that even the market hunger for new cars, trucks and SUVs can be sated several times over by the stockpiles that currently exist.

Producers Targeting Automotive

Automotive is still a coveted market for most producers. Nucor Corp. recently opened an office in Detroit as part of a push to increase its sales to the auto industry by 40% to 50% over the next two years. Charlotte-based Nucor saw its sales to the automotive industry increase 20% last year — 1.4 million tons of steel products — over 2014’s numbers.

Alcoa, Inc. is even coming closer to realizing its previously announced split by naming new directors for its new automotive and aerospace company, all of them with experience in the fields.

Free Download: The January 2016 MMI Report

The fundamental strength of the sector will likely still be there when stockpiles finally dwindle and we see prices rise. Many are predicting that rebound for later this year, but there’s very good reason to believe 2016 could be another low-price year as there is still no definitive deal to reduce oil production and many miners and metal producers are not curtailing production.

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Ford Motor Company took the automotive world by storm when it announced it was going to construct the iconic F-150 pickup truck from aluminum in 2015.

Free Download: The January 2016 MMI Report

The very idea that America’s workhorse could be made from something so fragile as aluminum was a complete anathema to some people, but the resulting product on the whole has been well received.

Classic car

An aluminum-bodied Rolls? It’s more likely than you think. Source: Adobe Stock/Dimitri Surkov.

Lighter, more economical and more responsive it can be said in most quarters to have been a success; so much so that Ford has recently announced it will increase the aluminum content in 2017 models.

GM Plays Catch Up

Despite initially trashing the idea, General Motors has now said it would sink $877 million into its Flint, Mich., truck factory this year with the intention of converting many of the bodies for models such as the Chevrolet Silverado and GMC Sierra pickups into aluminum. Read more

Thanks to a new law it looks increasingly likely that, for the first time in 33 years, new DeLorean DMC-12s will roll off an assembly line in 2017.

Free Download: The January 2016 MMI Report

For you millennials out there, that means you could buy and drive the two-seat sports car that Doc and Marty turned into a time machine in the “Back to the Future” movies. John DeLorean left his job at General Motors to start his own automobile company in the ’70s. His company, the original DeLorean Motor Company, went bankrupt in 1982 but only after it produced the DMC-12, which became popular after being featured in the film.

Go Back to the Future and own one of these in 2017. Source: DMC-Texas.

Go back to the future and buy a new DMC-12 in 2017! Source: DMC-Texas.

Stephen Wynne, the founder of the new DeLorean Motor Company-Texas, started producing “newly assembled” DMC-12s in 2008. The new company acquired DeLorean parts from the original suppliers and helped hobbyists maintain and refurbish their DMC-12s.

What Does This Mean to Metal Buyers?

It means more stainless steel will be necessary for the Humble, Texas-based automaker to start an assembly line to build all of those new cars! We’ve previously written about how the DMC-12 is pretty much the only stainless-steel-exterior car ever built. Wynne told SFgate.com that the new DMC has enough parts to assemble about 300 cars and a new DMC-12 will cost around $100,000. The tagline on their website is even “clean and timeless design. Stainless steel.”

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As sanctions against Iran came down this week, a flurry of business deals were announced by the Islamic Republic and steel production was a major beneficiary of Iran being welcomed into the world community.

Free Download: The January 2016 MMI Report

Iran is the largest steel producer in the Middle East and Northern Africa and is among the 15 largest producers in the world. Even with significant domestic production capacity, Iran remains a net steel importer. Over 50% of downstream industries are currently non-operational or unable to operate at optimal capacity. This has led to a high demand, low supply situation. It is estimated that the country imports around 8 million metric tons of steel every year, mainly from China and Turkey.

Steel Deals

That all could change, though, as Iran is in the mood to make a deal and South Korea’s Pohang Iron & Steel Co. (POSCO) and Italy’s Danieli both made announcements that they will go into business with Iran this week.

Steelmakers are eager to make deals with Iran but can new demand outstrip new supply? Source: AdobeStock/icarmen3.

Steelmakers are eager to make deals with Iran but can new demand outstrip new supply? Source: AdobeStock/icarmen3.

POSCO plans to sign a preliminary agreement with Iranian steelmaker PKP in March to buy a stake in a $1.6 billion steel mill project in the Middle Eastern country. Read more

Lead prices took a hit this month.

Free Download: New! The January 2016 MMI Report

In December, prices rose while other metal prices fell, but the rally turned out to be short-lived, a typical behavior in this bearish commodity market. Our subscribers knew, though, at the beginning of January that it wasn’t a good time to buy, since lead was destined to fall as it neared resistance levels around $1,800 per metric ton.

Lead prices fall in January

Lead prices fall in January. Source: MetalMiner analysis of FastMarkets data.

In only two weeks lead prices fell 16% from December’s high. Interestingly, the slump came during one of the strongest months in the auto industry. Auto sales in US hit a new high in 2015, with sales topping 17 million units. In Europe, they grew by 9.3% in 2015 to 13.7 million vehicles. Meanwhile, China, with the largest vehicle market in the world, hit record sales in December, up 18.3% from a year earlier.

Although China’s vehicle sales hit a new record in 2015, its car market decelerated in 2015. The annual growth rate in 2014 was almost 10% while annual growth in 2015 was only 4.7%. In addition, the Chinese market grew thanks to a strong last quarter, which came from a 50% tax cut for small cars, serving as a stimulus measure rather than a sustainable longer-term demand increase.

Free Sample Report: Our January Metal Buying Outlook

If it wasn’t because of those inflated numbers, China’s auto market would have probably seen its first down year in 2015.

What This Means For Metal Buyers

It can be argued that, overall, automotive output remains one of the few bright spots in a darkening global manufacturing picture. However, that is not enough to lift this metal up under the current commodity environment. What lead has done in January is just another example of how any metal can struggle when investors don’t put money in commodity markets.

 

One of the largest tractor manufacturers in the world and one India’s top automakers, Mahindra & Mahindra Ltd. is reportedly building an SUV for the American market.

Free Sample Report: Our January Metal Buying Outlook

A recent report in The Wall Street Journal said the company has cobbled together an engineering team to set up a unit near Detroit, home of much of the US auto industry. Mahindra’s new staff has been carefully poached from US giants such as Ford Motor Co. and Tesla Motors Inc.

Genze_20_Mahindra_550_012116

Mahindra’s new Genze 2.0 is a scooter designed for the North American market. Source: Mahindra.

The same report claims Mahindra was already testing the large SUV, said to be comparable to the BMW X5, on the streets of metropolitan Detroit. The SUV will have to meet stiff US safety and fuel economy regulations, and cater to the whims of American buyers if it wants to be successful.

Mahindra’s US Ambitions

This isn’t Mahindra’s first attempt to crack the US automotive market. About a decade ago, the $16.9 billion conglomerate, which controls about 40% of the SUV market in India announced partnerships with US dealers, with the promise of delivering vehicles by 2009. But Mahindra claimed it had trouble meeting US vehicle regulations and canceled its plans in 2010, and the entire episode ended up in US courts as at least 5 automobile dealers from the US filed a lawsuit accusing M&M accusing it of fraud, misrepresentation and conspiracy.

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Neither palladium nor platinum had a good start of the year. Within the first three weeks, palladium prices have fallen 17%, hitting a new five-year low.

Palladium hits 5-year low

Palladium hits a five-year low. Source: @StockCharts.com.

Platinum prices are not performing any better. The precious metal is down 7% so far in January and it’s at the lowest levels in seven years, just above the lows of 2009.

Platinum hits 7-year low

Platinum hits a sevn-year low. Source: @StockCharts.com.

Car Sales Didn’t Help

Auto sales in US hit a new high in 2015, with sales topping 17 million units. In Europe, where diesel powered cars dominate the market, vehicle sales were also strong, growing by 9.3% in 2015 to 13.7 million vehicles. Lower oil prices in 2015 helped the increase in car sales, but it still didn’t move the needle for catalysts such as platinum and palladium.

Free Sample Report: Our January Metal Buying Outlook

Meanwhile, China, with the largest vehicle market in the world at 24.6 million vehicles sold in 2015, saw a 4.7% rise year-on-year in auto sales, marking another all-time high.

Chinese Car Sales Not All That They Seem

Despite China’s vehicle sales hitting a new record in 2015, the world’s biggest car market decelerated in 2015. The annual growth rate in 2014 was almost 10%. Moreover, the Chinese market grew thanks to a strong last quarter, which came from a 50% tax cut for small cars, serving as a stimulus measure rather than a sustainable longer-term demand increase.

Free Download: New! The January 2016 MMI Report

If it wasn’t because of those inflated numbers, China’s auto market would have probably seen its first down year in 2015.

Palladium and Platinum: Victims of China’s Market Slump

The recent stock market selloff in China, which caused global tumult, is what’s really hurting palladium and platinum. A strong dollar is not helping matters, either. Despite analysts calling again for deficits in palladium and platinum markets this year, it’s hard to imagine these two metals rising while China keeps driving everything down.

Just like Oprah giving out cars, our January Metal Price Trends report was generous with the dead cat bounces this month. You get a dead cat bounce, copper! You get one, too, aluminum! You get a dead cat bounce, raw steels! Everyone gets a dead cat bounce!

Free Sample Report: Our January Metal Buying Outlook

Okay, not everyone. Construction, stainless steel, renewables and rare earths all lost ground and automotive was merely steady.

MM-IndX_TRENDS_Chart_January2016_FNL-TOPVALUE100

Still, it’s the most positive movement we’ve seen for many of these metals since early last year. We say they’re dead cat bounces — a cruel-sounding investment term for a temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend (sorry, kitties) — because there is little reason to be optimistic that any of these gains will continue.

Stop Me Before I Bounce Again!

The main driver of commodity, and now stock market losses, has been the slowing Chinese economy and it’s looking worse this year than it did at the end of last. Financial institutions such as RBS are even advising clients to sell everything, save bonds, that’s not tied down.

This is great news for buyers but exactly what metal producers don’t want to hear. What’s worse, for them, is that everything the Chinese government is doing to try to turn their economy around, including a panic button system for its stock markets that actually caused more panic, isn’t working. My colleague Raul De Frutos also pointed out that purposely devaluing the yuan actually hurts metal prices.

How Low Can it Go?

The other big driver of the commodity price rout, the price of oil, shows no signs of turning around, either. Oil hit $30 per barrel this week stoking bankruptcy fears among US energy companies and it even temporarily created some nervousness among OPEC nations who clamored for an emergency meeting.

So don’t expect these price increases to continue as transportation and production costs follow oil’s race to the bottom. My colleague at our sister site Spendmatters, Kaitlyn McAvoy, reported that Goldman Sachs is predicting $20 per barrel for oil this year.  It’s not a very happy new year for metal producers… or cats.

US car sales in 2015 jumped to a record level last reached 15 years ago as cheap gasoline, employment gains and low interest rates enticed Americans to buy new vehicles.

Free Sample Report: Our Annual Metal Buying Outlook

Automakers sold 17.5 million cars and light trucks in the US last year, a 5.7% increase, and, on average, they paid more for each one. Americans overall spent about $570 billion on new vehicles, fueling an industry revival putting more money in the pockets of auto workers, dealers and executives.

Automotive_Chart_January-2016_FNL

In China, a tax cut helped auto sales as new car sales became one of the few bright spots of China’s sputtering economy.

The Hold Steady

The gains couldn’t help our Automotive MMI do any more than hold its value from last month, as the index began the year 68, exactly where it ended 2015.

Low steel, copper and aluminum prices are another driver of discounts on automobile prices as automakers have seen their material costs plummet in 2015. Many dealers have been authorized to discount the already low prices of new cars, accordingly. Global surpluses of steel, aluminum and copper have not yet seen a significant dent despite a recent rally in aluminum.

It will take a sustained recovery in its component metal prices for the Automotive MMI to start seeing significant gains. The Justice Department also filed a civil suit against Volkswagen AG this week, signaling that the ongoing emissions scandal there will continue to affect platinum and palladium prices. Justice is pursuing $48 billion in fines against VW and any settlement for the embattled automaker would be in the billions.

Steady as she goes is not all bad news for automotive metals. The Commerce Department recently slapped tariffs of 255% on Chinese anti-corrosive steel, meaning that hot-dipped galvanized and other US automotive metals will be competing on a more even playing field with subsidized Chinese imports.

January Monthly Metal Price Outlook

Perhaps 2016 will finally be the year that the tide of cheap imports is finally stemmed.

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We wrote recently about the rapid inroads (if you will excuse the pun) aluminum has made into the automotive market, particularly for body parts that have been almost the sole domain of steel since before the Model T.

Free Sample Report: Our Annual Metal Buying Outlook

Then we wrote more recently on the fight back being made by steel, spearheaded by the major steelmakers such as ArcelorMittal to develop high-strength alloy steels that can be used in ever thinner gauges without sacrificing rigidity or strength, and the use of hot stamping that reduces spring back and die wear.

NKOTB

Well now it is with some trepidation that we report both aluminum and steel are facing a new kid on the block, the new contender is not even a metal, it’s carbon fiber.

BMW is investing heavily in carbon fiber production research. Source: Adobe Stock/ GordonGrand.

BMW is investing heavily in carbon fiber production research. Source: Adobe Stock/ GordonGrand.

Ahh, but you will say carbon fiber has been around for at least a couple of decades. Goodness, aren’t half the world’s largest airliners made out of the stuff? And isn’t it dreadfully expensive and time consuming to make anything out of it? Read more