The monthly Automotive MMI® took a step backward this February, as a significant portion of the United States froze (both literally and business-wise) due to the current nom-du-jour for brutal winter weather – the Polar Vortex.
At least that’s what General Motors claims as the major reason for the company’s 12-percent drop in January sales, although they still expect total annual sales for 2014 to break the 16-million-light-vehicle mark. (Ford Motor Co. blamed the Polar Vortex as well, and their sales dropped 7 percent over last January.) Overall, the seasonally adjusted annual sales rate clocked in at 15.2 million, about the same as this time last year and lower than December 2013.
Even the ISM’s January PMI suffered, dropping to 51.3 from 56.5, due to the weather.
So how were corresponding metals prices – and the smallest US-based automotive OEM – affected?
The February reading was mainly driven by drops in US HDG, LME 3-month copper and Korean aluminum coil premium prices. The US shredded scrap price on the MetalMiner IndX℠, however, rose over the month.
Fleet sales suffered – down 14 percent at Ford, 18 percent at GM and 45 percent at Toyota – and some speculated that was due to a tax change; even though January was the first month after which federal depreciation allowances had expired, Ford’s John Felice played that down as a factor, reverting back to the weather. But Chrysler’s sales grew again (as we reported last month), which is a bright spot for US OEMs.
So what should we expect in the auto industry moving forward, and how could it affect metal prices?
Auto Market Outlook 2014
We’d be hard-pressed to say that this one-month downward trend will continue, especially since the weather likely was the major driver of the dip. Novelis Inc. and Alcoa are still pumping out auto-grade aluminum sheet and OEMs are still keeping their orders up (even though Ford’s F-series sales dropped 1 percent in January, they did unveil the aluminum F150 last month).
On the steel side, producers such as ArcelorMittal are still bullish on US growth, as high-strength steel in cars won’t be going anywhere anytime soon.
With the European car market in slow but sure decline, and with China’s 2013 car sales having tripled since 2008, metal producers will be looking primarily to the US and Chinese auto markets for some time.
Key Price Drivers of Auto Metals Index
Copper 3-month prices fell 4.2 percent on the LME to $7,062 per metric ton after rising the previous month. After also rising the previous month, primary cash copper prices dropped 4.0 percent on the LME to $7,090 per metric ton. The price of Chinese lead ended the month down about $50 per metric ton.
US HDG prices fell 1.0 percent after rising the previous month. The value of US palladium bar weakened by 0.7 percent this month as well. Korean 5052 coil premium over 1050 sheet fell slightly.
Meanwhile, US platinum bar finished the month up 2.0 percent per ounce.
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.