US auto sales remain the bright spot in the drivers of the monthly Automotive MMI®.
The Real Steel Story
Seasonally adjusted annual rate of sales for light vehicles rose to 17.8 million compared with 17.3 million a year earlier and was the highest since July 2005, according to researcher Autodata Corp. August was the fourth consecutive month that adjusted sales remained above the 17 million mark.
The Automotive MMI® still registered only a value of 73 in September, a decrease of 3.9% from 76 in August. Weak prices for most of the base metals that make up the index (HDG, copper, aluminum and lead) abound despite strong end user sales in the US. In China, auto sales are falling with the rest of the domestic economy there.
Chinese auto sales fell by 7.10% in July 2015 compared to July 2014, the largest fall since February 2013 and such a large economy’s fall is dragging down the prices of automotive metals just as it is dragging down the prices of oil and other commodities.
Major iron ore producers, Rio Tinto PLC, BHP Billiton, Vale SA and Fortescue Metals Group Limited have ramped up production again despite massive iron ore and steel oversupply. Zacks.com believes they intend to continue exploring for iron ore in Australia despite lower growth forecasts from China and weaker iron ore prices, betting on continued strength in iron ore demand over the long term.
What This Means For Metal Buyers
This is normal behavior from major miners such as the Big Three (Rio, BHP and Vale) and almost-there cousin Fortescue. They can make a profit by squeezing volume out of their mines at low prices based on scale, alone, but iron ore investment is coming from non-traditional miners, as well.
India’s Essar Steel is making a $1.9 billion investment in the steelmaking ingredient in Minnesota, of all places. It’s difficult to imagine how such an investment makes long-term sense for Essar without a turnaround in both iron ore and steel prices. Since high-strength automotive steel alloys are one of the best-performing steel products on today’s market, it’s even more difficult to imagine those prices turning around without continued strong auto sales in the US and Europe and a turnaround in China and other emerging markets.
This Month’s Prices and Trends
The price of Korean 5052 coil premium over 1050 sheet fell 5.0% to $2.95 per kilogram. US HDG closed the month at $567.00 per short ton after dropping 2.9%. On the LME, the 3-month price of copper decreased by 2.8% this month, ending at $5,076 per metric ton. With a 2.4% decline on the LME, the cash price of primary copper closed the month at $5,094 per metric ton. US palladium bar fell a slight 1.5% over the past month to $600.00 per ounce.
US platinum bar gained 2.5% to finish the month at $1,007 per ounce. At $2,103 per metric ton, the Chinese lead price increased 0.9%.
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.