US Auto Sales Fall, the Broad Metals Correction Felt in Automotive

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U.S. Automotive sales for May came in at 17.45 million. Down from April but also down from 17.8 million a year earlier. In May 2015, vehicle sales were a record 17.47 million vehicles, according to Autodata Corp. There were two fewer sales days this year vs May 2015. Having one less weekend was also a factor in the drop.

Two-Month Trial: Metal Buying Outlook

Some analysts are taking the drop as a sign that the historically strong growth that automotive sales have enjoyed since the end of the recession is over. For the full year, auto sales are still historically strong but General Motors, Ford Motor Co. and Toyota reported sales that fell more than analysts had estimated, while Nissan matched predictions with a 1%. Fiat Chrysler Automobiles surprised forecasters with a small gain by making more sales to fleet customers.

End of Automotive Growth?

If the strong period of automotive sales is truly over, then that would have a huge impact on steelmakers, aluminum smelters and other metal producers who have relied on the automotive market to provide both strong sales and a home for higher-priced, value-added products since 2011. Auto sales leveling off could also factor into whether the Federal Reserve raises interest rates this summer, or even if the Fed considers two rate hikes in the next three months.

Automotive_Chart_June-2016_FNL

If the U.S. dollar strengthens and the unemployment rate continues to fall the Fed would be hard-pressed to forego rate hikes even if automotive sales level off. Bolstering the case that this is merely a sales blip thanks to two important lost days, our Automotive MMI still held its value, 76, from May and automotive metals such as hot-dipped galvanized still posted strong price increases over the last month.

Automotive Metals Demand

Demand for specialty automotive metals continues to outpace base metals and provide a boost to the bottom lines of the steelmakers that produce them. So much so that U.S. Steel and the International Trade Commission brought a convincing case, this month, that Chinese hackers stole the formula and production setup of high-strength automotive alloy dual-phase 980 to give to Chinese steelmakers such as Baosteel that are now offering the product.

Compare Prices With The May 2016 MMI Report

If U.S. consumer demand really is leveling off, we have not seen it in sales of automotive metals.

Actual Automotive Metals Prices

U.S. HDG increased to $816 per short ton from $682/st in May, a jump of 20%. U.S. Palladium bar fell to $545 an ounce this month from $621 an ounce in May, a drop of 12.2%.

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