Articles in Category: Automotive

After news of Toyota’s recent supply chain troubles, so ably covered by my colleague Lisa Reisman last week, news from the US car industry, by contrast, couldn’t be better.

Free Download: The February 2016 MMI Report

General Motors reported $9.7 billion net income for 2015 as it was bolstered by buoyant US light-truck sales. Results for the fourth quarter more than tripled from $1.99 billion to $6.27 billion although, admittedly, benefiting from $4 billion in favorable special items.

Even so, the underlying figures were also boosted by the strong sales for the core North American operations, where earnings before interest and tax adjusted for special items rose 25% to $2.77 billion, on revenue up 9.5% to $27.7 billion. The company said low fuel prices boosted sales of more profitable pickup trucks and sport-utility vehicles.

Sales Surging

A rising tide lifts all boats, they say, and a strong North American market has also benefited Ford Motor Co. whose sales of SUVs and pickups soared last year. Ford announced a 13.6% rise in SUV sales for its Ford and Lincoln brands and a 13% rise for pickups. GM’s GMC premium light-truck brand recorded 13% year-on-year sales growth, while Fiat Chrysler’s growth came nearly entirely from a 42% surge in sales for its Jeep SUV brand. All manufacturers finished the year on a high, but for Fiat Chrysler sales were its strongest in the month of December since Chrysler was founded in 1925.

Car Sales

Source: Wall Street Journal

The US car industry has been a major bright spot for metals consumption in recent years with rising volumes driving demand for both steel and aluminum. Indeed, for aluminum, so strong has the demand been many manufacturers have made investments in dedicated automotive-grade production facilities to meet demand.

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Almost everyone, by now, has heard of the deadly Zika virus which has prompted the World Health Organization to declare a global public health emergency. But this virus has felled another unlikely victim: a car in faraway India. You heard right.

Free Download: The January 2016 MMI Report

India’s leading automobile manufacturer Tata Motors never saw this one coming. Its newest hatchback, the Zica, is about to be officially launched, yet, the name, which matches with that of the virus if you ignore the spelling, sent the company into a public relations tizzy.

Tim Leverton and Mayank Pareek at the official unveiling of the new Tata Zica at an auto show in Goa last December. Source: Tata Motors

Tata Executives Tim Leverton and Mayank Pareek at the official unveiling of the new Tata Zica at an auto show in Goa last December. Source: Tata Motors

For months, the marketing division spent thousands of dollars on Zica’s promotional activities until the virus Zika came along. Now, Tata Motors has announced a name change, though at press-time, the new name is not officially out yet.

Zika vs. Zica: Bad Timing

Auto analysts are now wondering whether the change has come too little, too late since the hatchback is to be launched at the Auto Expo in New Delhi on Wednesday. Zica, by the way, stood for “zippy car.”

Sadly, what also turned out to be “zippy” was the rapid spread of the Zika virus.

Zica’s marketing campaign included advertisements featuring football legend Lionel Messi. In another messy coincidence, Zica’s brand ambassador, too, hails from Argentina where the first case of a Zika-infected person, who reportedly contracted the disease after being bit by a mosquito, was from.

New Name But Not Yet

In a statement announcing the rebranding, Tata said: “Empathizing with the hardships being caused by the recent Zika virus outbreak across many countries, Tata Motors, as a socially responsible company, has decided to rebrand the car.”

Tata has said for the time being, though, the compact car will still carry the Zica label. At least until the auto show ends. The new name will be announced in a few weeks.

For auto lovers, the Zica was Tata Motors’ first hatchback offering after the globally famous Nano, billed as the cheapest car in the world. And for those of you out there who love to get your hands greasy with vehicular details, Zica is said to have a 1.2-liter petrol (gasoline) engine or a 1.05-liter diesel engine, both with three-cylinders. The petrol engine will be a new all-aluminum one. Both the engines are paired to a five-speed manual transmission.

Last Week For The January 2016 MMI Report

Along with the Zica, Tata Motors will be showing off a slew of new models including two forthcoming SUVs. Over 80 vehicle launches are expected at the Auto Expo 2016, with Fiat-Chrysler-owned Jeep making its India debut.

 

This week, the Bank of Japan introduced negative interest rates in the latest attempt to goose the Pacific nation’s stalled economy.

Free Sample Report: Our February Metal Buying Outlook

Essentially penalizing people for saving money seems like a curious thing to do to try to turn around a struggling economy, but it’s not the first time banks have gotten a push to force them to lend. The European Union has done it, too, in recent memory.

Shorter supply chains for in-demand products could benefit retailers around the holidays. Source: Adobe Stock/cacaroot.

Boy does Toyota Motor Corp. ever wish it had a bigger supply chain this week. Source: Adobe Stock/cacaroot.

My colleague and metal price analyst Raul de Frutos wrote that, “negative interest rates mean that depositors must pay regularly to keep their money in the bank. This measure encourages people and businesses to spend, invest and lend money rather than pay a fee to save it and keep it safe.” Read more

Toyota Motor Corp. said on Saturday it may halt production at its domestic plants early next month due to a steel shortage, following an explosion at a steel plant operated by one of its affiliates.

Free Download: The January 2016 MMI Report

The blast at an Aichi Steel plant has curbed production of steel parts, which may impact output at the world’s best-selling automaker which produces around 40% of its global output in Japan.

“At the moment, there is enough supply inventory to keep our domestic plants running until Feb. 6,” a Toyota spokesman told Reuters, adding that overtime and weekend shifts for next week had been canceled.

“After that, we will be monitoring our supply situation on a day-by-day basis and decide accordingly.”
Free Sample Report: Our January Metal Buying Outlook

Aichi Steel said that the Jan. 8 explosion at its Chita plant in central Japan dented production of specialty steel parts. It added that it aimed to resume operations in March.

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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