Through half of 2015, US auto sales are on track to hit record levels not seen in 15 years. After climbing more than 4% through July annual sales could approach the previous annual record of 17.4 million if they stay on this pace.
Yet, none of that demand seems to be helping automotive metal prices.
As robust as the US automotive market is, it can't entirely make up for sluggish sales elsewhere that are depressing demand for metals such as steel, aluminum and copper and pushing our index further down. Even the exhaust system metals, platinum and palladium, saw a deep dive this month.
Chinese New Car Sales Barely Growing
New car sales grew just 1.2% in China this May. Further complicating matters, is the fact that the nation of 1.37 billion is starting to develop a used car market and it's looking very much like Chinese consumers like paying less for a used car, rather than paying more for a new one. What a shock?
This is, of course, bad news for raw materials suppliers as the massive Chinese auto market only recently transitioned to automobiles being the main form of transportation. Less-metals intensive bicycles and motorbikes had filled that role until recently.
Chinese steel and aluminum manufacturers had been counting on more robust growth from the domestic new car market and a strong used market could stunt the advances many were planning to reap from new car sales.
Bearish Market Hits Home
The monthly Automotive MMI® registered a value of 82 in July, a decrease of 3.5% from 85 in June.
As we have documented liberally, the strong US dollar has created a bearish environment for all metals and automotive inputs are no exception. The steep fall observed this month in palladium, a metal that had previously held our automotive index up, was an example of just how much the bearish market is affecting even metals with strong demand. Palladium hit a two-year low this month and the bottom, subsequently, fell out of an already listing price index.
Copper, zinc and lead also fell significantly.
What This Means for Automotive Metal Buyers
The drama surrounding Greece's debt is compounding the bear market and, while it hasn't yet caused strong currencies such as the dollar to see significant gains, its potential to do so threatens all commodities.
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The Automotive MMI® collects and weights 7 metal price points used in automotive production to provide a unique view into automotive metal trends over a 30-day period. For more information on the Automotive MMI® constituent metals and their exact price movements, log in or register below!