The Automotive MMI bounced 1.4% this month but we would caution metal buyers to wait a bit longer before calling this anything close to a market bottom.
As MetalMiner co-founder Stuart Burns adroitly pointed out this week, no two metals’ bottoming out experiences will be the same. Some will be sharp and some, particularly steel, could be fat and flat. It should come as no surprise to our readers that steel and aluminum were, again, the laggards in our automotive metals index.
A mini-surge from copper and relative strength in platinum and palladium were able to collectively raise the index to its small gain this month. Therein lies the true problem for long-term Automotive MMI growth: there are signs that PGM prices will not be able to hold the modest gains they’ve made in recent weeks.
Platinum- and palladium-backed exchange-traded funds tracked by Reuters were facing their biggest monthly outflows at the end of October since the data series began in 2010.
Platinum flowing out of ETFs is good news for the dollar and bad news for dollar-denominated commodities, such as precious metals. The bulk of the selling was seen from the Johannesburg-listed NewPlat ETF operated by Absa Capital, which saw its holdings fall 134,000 ounces in October, according to Reuters.
While the Volkswagen scandal did not cause the price losses some expected for exhaust system metals such as platinum and palladium, the muted market reaction may still be growing. ETF outflows have also pushed gold to 4-week lows, too, and we would expect more losses for automotive metals as aluminum and steel have very little upside right now and the rug very much looks like it’s finally being pulled out from under PGMs.
Actual Automotive Metal Prices
- Hot-dipped galvanized steel cost $545 per short ton this month, a decrease of 3%.
- Platinum bar climbed to $984 this month, a jump of 8.6%.
- Palladium also saw an increase surging to $674 from $651 in October, an increase of 3.5%