While MetalMiner’s automotive metals index fell off a bit this month (see above; more analysis below), the biggest story in automotive circles this month has little bearing on metal prices and more to do with the untimely (and perhaps ironic) death of Fast and Furious actor Paul Walker in a fiery car crash.
But another controversy in the automotive sector has begun to brew – that of exporting US-made luxury cars to countries in which the sticker price appears 3-4 times higher than the US.
Gray Auto Market
What we find curious, however, relates to which products or exports appear “illicit,” as the Wall Street Journal suggests in its headline, “A Profitable Trade: Illicitly Shipping BMWs to China,” whereas when Apple’s products find their way to Russia, the headline appears muted (“Gray Market for iPhone Undermines Apple’s Growth in Russia“).
Though the Journal reports that federal prosecutors have begun to examine auto exports through the use of “straw buyers,” the practice remains alive and well in many industries – particularly those in which global multinational corporations price the same products differently in different markets. The classic examples of gray market goods include Levi’s jeans, watches and even golf clubs.
Automotive OEMs punish dealers that export via holdback allowances, administrative fees, charge-backs and fleet incentives. But the real problem comes down to the automotive OEMs themselves.
When they charge different prices in different countries, arbitrage opportunities emerge. Our colleague based in China always asks us the purchase price of various car models when he visits the US. He can’t believe the price differences for the same car (some might argue that American-made cars ought to have a higher price, given that they have to meet some of the most stringent safety standards).
Auto Sales Numbers Still Solid
Meanwhile, automotive numbers remain solid for November. Early reports from Chrysler suggest November’s sales put the industry on an annual sales clip of 16.3 million units. Truck sales and the new Jeep Cherokee have led to big sales increases for Ford and Chrysler, respectively.
MetalMiner’s Automotive MMI® remains the best performing of the entire metal price series, falling only one point to 99. HDG steel, shredded scrap and aluminum retained price support over the past month, while copper, platinum and palladium prices slipped.
Key Price Drivers Last Month
US shredded scrap spiked up 7.5 percent on the month. The price of US HDG closed the month up 1.3 percent.
After falling 6.6 percent, US platinum bar finished the month down. After rising the previous month, copper 3-month prices dropped 2.9 percent on the LME to $7,029 per metric ton. Primary cash copper prices fell 2.9 percent on the LME to $7,026 per metric ton after rising the previous month. US palladium bar fell a slight 2.7 percent over the past month. After rising the previous month, Chinese primary lead prices dropped 2.3 percent.
Korean 5052 coil premium over 1050 sheet remained unchanged.
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®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.