Photo: Hessam Bakhtiarzadeh
MetalMiner’s monthly Automotive MMI® registered a value of 97 in July, on par with June’s value, driven mainly by platinum, palladium and LME copper prices.
Consolidation and process efficiencies are reducing costs in the automotive industry and that has allowed major automakers to flatten their metals costs as well, meaning larger profit margins. An example of this is the three-way alliance between Germany’s Daimler-Benz, Japan’s Nissan and France’s Renault: once rivals, they have realized that working together far outweighs competitive drawbacks.
The Economist’s analysis explains that Renault and Nissan first paired up in 1999, with Daimler making it a ménage à trois in 2010 after it divorced Detroit’s Chrysler. The original goals of the expanded alliance were modest: create just three joint ventures. That number has now reached 10. But last month Nissan and Daimler went a step further when they announced they would jointly build an assembly plant worth about $1.4 billion in Aguascalientes, Mexico. The factory will make 300,000 cars a year when it reaches full capacity in 2021 and employ about 5,700 people.
The plan is to produce compact luxury vehicles that will be sold under both Nissan’s Infiniti brand as well as a Mercedes-Benz marque. Some industry observers could not believe that Daimler-Benz would help Nissan, the company that produces the second-tier luxury Infiniti brand, a potential competitor to its Mercedes-Benz, but Daimler CEO Dieter Zetsche poo-pooed such talk, saying the brands did not directly compete at the announcement of the factory venture.
The two partners intend to benefit from economies of scale and cut development and manufacturing costs in half. Infiniti and Daimler’s models will share a “platform,” meaning that they will use a common design for such things as the power train and the steering mechanism.
By purchasing steel and component metals together, they can also achieve bulk purchasing cost savings. Infiniti expects to launch production at the new plant in 2017; Daimler won’t start building its first model there until a year later.
What’s helping steel prices stay as flat as Nissan and Daimler’s costs is the price of steel, which was actually down this month. Steel manufacturers are still heavily investing in automotive, particularly the burgeoning Chinese market. ArcelorMittal built an $832 million joint-venture automotive steel plant in China last month.
Chinese analysts have said opening the Chinese steel market to foreign investment could be a “game changer,” and part of a wider push by China’s leadership to boost foreign investment and open up its state-owned industries. Another factor is that even the Chinese don’t seem to want Chinese cars.
Key Price Drivers
After rising 3.5 percent, US platinum bar finished the month at $1,482 per ounce. The price of US palladium bar closed the month up 1.1 percent at $840.00 per ounce. On the LME, the 3-month price of copper increased 0.4 percent to $6,932 per metric ton.
US HDG prices decreased by 1.9 percent this month, ending at $772.00 per short ton. The cash price of primary copper finished the month at $6,954 per metric ton after dropping 0.6 percent on the LME. The price of Chinese lead ended the month at $2,252 per metric ton, down from $2,252.
At a price of $3.84 per kilogram, Korean 5052 coil premium over 1050 sheet did not budge the entire month.
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.