Automotive MMI: After May Reverse, Index Moves Forward in June

After sustaining a one-point drop last month, the Automotive MMI regained lost ground during the one-month period ending July 1. The Automotive MMI — our sub-index of industrial metals and materials used by the automotive sector — increased by one point, from 86 to 87, via a 1.1% boost.
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Although the increase was small, the one-point jump is an encouraging sign, as it marked the first increase for the sub-index since early this year, when it jumped from 82 to the February reading of 92. After that 92 mark, the sub-index posted four straight months of decreases.
Overall, U.S. auto sales continue to drop after a record 2016. Auto sales to the midway point of the year were down 2.1% compared with the same point last year, according to Autodata Corp data released earlier this week. Standard passenger cars took a nosedive in the year to date, with an 11.4% drop in sales (from 3.64 million units to 3.22 million).
However, the news isn’t all bad. Consumers have taken a liking to trucks this year — trucks have seen a 4.6% increase in sales in the year to date (compared to the same point last year).
In the year to date, General Motors (GM) sales fell 1.8% (but leads the way with nearly 1.44 million units sold in the calendar year to date), Ford‘s fell by 3.8% and Fiat Chrysler fell by 6.7%.
On the positive end, Nissan sales were up 2.7%, Volkswagen sales were up 7.6% and Mitsubishi sales were up 5.1%. As for Tesla, the electric car manufacturer, sales were up 42.7% after a jump from 16,500 units sold to 23,550 units sold in 2017 to date.
Meanwhile, growth in Chinese auto sales is slowing, partially due to lower tax breaks for compact cars, according to the Nikkei Asian review.
GM, however, reported a strong June, according to a Reuters report Wednesday. After two consecutive months of sales drops, GM reported a 4.3% sales increase in June compared with June 2016, according to the report. However, GM’s year-to-date sales are down 2.5%.
Total vehicle sales from January-May are up 3.7%, according to Reuters, lower than the anticipated 5% growth predicted by the Chinese Association of Automobile Manufacturers.

The Political Backdrop: Section 232

The Trump administration was expected to announced the result of its Section 232 investigation of steel imports late last week. That announcement never came, but many in the U.S. steel industry expect the administration to introduce tariffs or quotas in an attempt to strike at Chinese excess capacity.
Those policies would lead to domestic steel producers to raise prices, which would, of course, have an effect on automobile prices.
President Trump is headed to Germany this week for a Group of 20 (G20) summit, where Section 232 is likely to come up.
Whatever the administration ultimately decides, the steel and aluminum industries — and by proxy, the automotive industry — are watching closely.

Actual Metal Prices

As for the materials that make these vehicles, U.S. hot-dipped galvanized (HDG) steel prices shot up 2.2% to $795 per short ton. U.S. platinum bars fell by 3% to $918 per ounce, while U.S. palladium rose by 3.8% to $847 per ounce. U.S. shredded scrap steel fell 0.3% to $295 per short ton.
Chinese primary lead rose by 1.1% to $2,608.83 per metric ton.
LME copper rose 5% to $5,920 per metric ton.
The price for Korean aluminum coil fell 2.9% to $3.37 per kilogram.
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