Articles in Category: Automotive

Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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This morning in metals news, the zinc and copper prices made gains this week, automakers expressed criticism of the U.S.’s steel and aluminum tariffs, and Shanghai rebar prices fell.

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Zinc, Copper Prices Rise

Both metals made gains this week on concerns of supply tightness, Reuters reported.

Per the report, LME copper was up 1.8% on the week.

MetalMiner’s Take: Copper prices are behaving like most base metals. Base metals are currently being moved by two drivers: the Chinese economy and tightening supply.

The Chinese economy seems to have slowed down recently and analysts’ main concern has been how that would affect demand for metals. In addition, supply is tightening, which usually drives prices up.

LME prices are currently balancing between these two drivers. The Chinese economy may be the decisive indicator for prices to move down or to continue increasing slightly.

Automakers Critical of Metals Tariffs, Potential Auto Tariffs

Groups representing the automotive industry were intensely critical of the Trump administration’s steel and aluminum tariffs, in addition to the specter of possible additional tariffs on imported automobiles, the Detroit News reported.

Groups made the comments during a U.S. International Trade Commission (USITC) hearing Thursday morning on the United States-Mexico-Canada Agreement (USMCA), the trade deal agreed upon by the three countries that is to supersede the North American Free Trade Agreement (NAFTA).

MetalMiner’s Take: Manufacturers can expect their trade associations to continue putting pressure on the Trump administration to remove or adjust the steel and aluminum tariffs, particularly for Canada and Mexico.

Mexico has previously indicated it would not approve the deal if the tariffs are not addressed. The real question involves what a Democratically controlled house might do about USMCA; however, many of its provisions support labor more than the existing NAFTA agreement.

Will the new House of Representatives view USMCA as a piece of legislation that crosses partisan boundaries, or will it use USMCA as its first opportunity to obstruct the president’s legislative agenda?

Only time will tell.

But rest assured the Trump administration won’t move on tariffs until it absolutely needs to.

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Shanghai Rebar Price Drops

The Shanghai rebar price dropped to close the week, Reuters reported, down 0.4%.

Amid rising trade tensions this year, automotive sales in China have been trending downward, a point emphasized by Ford Motor Co.’s recently released China sales figures for October.

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The Detroit automaker on Tuesday released its October sales numbers for the Chinese market, showing total sales of 58,204 units. The October sales total marked a 45% year-over-year decline.

The October marked marked the second-straight month of sales dropping in excess of 40% year over year (sales fell 43% year over year in September). August sales dropped 36% year over year.

“As part of our 2025 Plan, Ford is rolling out its first wave of our exciting new vehicles, designed especially to meet the needs of Chinese customers,” said Anning Chen, president and CEO of Ford Greater China, in a release. “The all-new Ford Focus and new Escort hit showrooms this month and the all-new Territory will follow soon. We believe our future product line-up will help us to regain our sales momentum in this important market and serve as a testament to our commitment to China.”

The down October sales total continued what has been a down year in the Chinese market.

In the year to date, the automaker has sold 642,593 units, marking a 31% decline from the January-October 2017 period.

Broken down further, the Changan Ford Automobile brand — a 50:50 joint venture between Ford and Changan Automobile — saw its October sales fall 58% year over year and drop 43% in the year to date. Jiangling Motors Co. saw its October sales fall 17% year over year and 8% in the year to date.

Meanwhile, the Lincoln brand, while down in October, has come in on the positive side of the ledger for Ford this year.

Lincoln sales were down 6% year over year in October, but are up 3% in the year to date. Earlier this year, Reuters reported Ford’s Lincoln brand plans to build as many as five new vehicles in China by 2022.

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Last month, Reuters reported automotive sales in China fell in September by the greatest amount in nearly seven years. September sales in China fell 11.6% year over year, according to the report.

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This morning in metals news, North American aluminum associations wrote a joint letter asking for quota-free tariff exemptions for Canadian and Mexican aluminum, European automakers plan to try out new LME steel contracts launching next year, and the LME copper price has dropped ahead of the U.S. midterm elections.

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Aluminum Associations Seek Quota-Free Tariff Exemption

Earlier this year, Canada and Mexico received temporary exemptions from the U.S.’s tariffs on steel and aluminum; however, those exemptions eventually were allowed to expire.

Since then, the Aluminum Association in the U.S. has continued to petition for the imposition of quota-free tariff exemptions for the U.S.’s neighbors to the north and south.

Aluminum associations in the three countries penned a joint letter to President Trump this week reiterating the call for quota-free tariff exemptions.

“On behalf of the North American aluminum industry, we the undersigned association leaders congratulate you on reaching an initial agreement on the United States-Mexico-Canada Agreement (USMCA),” the letter states. “We support a modernized, trilateral agreement that recognizes the importance of the integrated North American supply chain and enables the aluminum industry to meet growing demand year over year.

“We are now asking that you work together expeditiously with the other North American leaders to resolve the national security concerns related to the Section 232 tariffs on aluminum products within North America, and to ensure the United States reinstates the exemptions from the aluminum tariffs for Canada and Mexico.”

MetalMiner’s Take: Aluminum-buying organizations face significant material shortages within the U.S. market. Canada and Mexico will likely keep up the pressure to advocate for quota-free imports to the U.S., particularly since all three countries have come to an agreement via the USMCA (the successor to NAFTA).

In the meantime, buying organization should expect continued tightness.

Copper Price Slides

The LME copper price has slipped ahead of the U.S. midterm elections and a Federal Reserve meeting later this week, Reuters reported.

The LME copper price fell 0.4% Tuesday, according to the report.

MetalMiner’s Take: LME copper prices have increased so far in November. Despite some analysts claiming a bearish call for LME copper prices, the base metal seems to be moving up again.

Fed interest rate rises have not impacted LME copper prices or the U.S. dollar that much. The U.S. dollar tends to react for a couple of days, only to then follow its previous pace; LME copper shows the same behavior.

The important driver for copper is Chinese demand, which has not yet softened. That could make the difference in LME copper pricing. So far, LME copper prices may continue increasing in the upcoming months.

European Automakers to Try Out LME Steel Contracts Next Year

European automakers will be looking to tap into new LME steel contracts that are scheduled to be launched early next year, Reuters reported.

According to the report, the LME is planning to launch three hot rolled coil steel futures contracts next year.

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MetalMiner’s Take: Buying organizations could get excited about new LME steel contracts if they had the support of steel producers. It has taken the CME years to build up liquidity in its HRC contract.

Assuming the LME has identified multiple European steel producers willing to participate (a big question), then buying organizations will have another regionalized solution to mitigate steel-price volatility.

The Automotive Monthly Metals Index (MMI) fell 2.1% this month, down to an MMI reading of 94 for November.

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U.S. Auto Sales

It’s quarterly earnings reports season once again.

Last week, General Motors reported its third-quarter earnings, posting third-quarter revenue of $38.5 billion, up 6.4% compared with Q3 2017. It also reported EBIT-adjusted income of $3.2 billion, up 25% year over year, and income of $2.5 billion.

GM saw North American sales of 833,712 units. Meanwhile, within the U.S. GM delivered 700,000 vehicles at an average transaction price of $36,000, up about $800 year over year and $4,000 above the industry average. The North American sales total for the quarter, however, was down 9.8% compared with Q3 2017.

Ford Motor Co. also recently reported its Q3 results, posting net income of $1.0 billion. In October U.S. sales, Ford saw a 3.9% year-over-year decline, even seeing a 4.9% drop in its truck sales. However, SUV sales rose 6.7% year over year.

Like GM, Ford saw an increase in average transaction prices. Ford’s overall average transaction price reached $36,800 in October (up $1,400 from last year).

Last week, Ford announced a two-year autonomous vehicle project with China’s Baidu, Inc.

“Working with a leading tech partner like Baidu allows us to leverage new opportunities in China to offer innovative solutions that improve safety, convenience and the overall mobility experience,” said Sherif Marakby, president and CEO of Ford Autonomous Vehicles LLC, in a release. “This project marks a new milestone in the partnership between Ford and Baidu, and supports Ford’s vision to design smart vehicles that transform how we get around.”

Fiat Chrysler this week reported U.S. sales of 177,391 vehicles in October, up 16% year over year.

Honda saw its total sales drop 4.1% year over year in October. Honda truck sales in the U.S., however, jumped 6.5% year over year, while cars fell 14.5%.

Nissan’s October sales were down 10.6% in October year over year, with a 15.4% jump in INFINITI sales and a 13.0% drop in Nissan division sales.

Toyota’s October U.S. sales rose 1.4% by volume, but fell 2.2% on a daily selling rate basis.

Overall, auto sales in October were up 0.4% year over year, according to Automotive News.

Sales in China

GM’s sales were also down in China, where it sold 835,934 units, down 14.9% year over year. Chevrolet sales in China, however, were up 10% year over year, GM reported, “led by higher content crossovers including the Equinox, which saw 29 percent growth compared to a year ago.”

However’s GM’s Cadillac brand also performed well in China. Cadillac sales were up 4% year over year in the third quarter and are up 20% in the year to date.

In September, auto sales in China fell by the greatest amount in seven years, Reuters reported.

Electric Vehicle Developments

According to a phys.org report, an E.U.-funded project has developed an alternative heating system for electric vehicles (EVs) that would help reduce energy consumption and improve EV range.

“To warm up the cabin, energy must be extracted from the car’s batteries, which greatly affects the electric vehicle’s range,” Ute Maxi, coordinator for the E.U.-funded MAXITHERM project, was quoted as saying. “This limited range – especially in cold weather – is a significant roadblock to the mass uptake of electric vehicles in Europe.”

Actual Metal Prices and Trends

U.S. HDG steel fell 1.9% down to $1,003/st.

Meanwhile, the platinum-palladium spread narrowed slightly this past month. U.S. platinum bars rose 2.6% to $835/ounce, while palladium bars fell 0.3% to $1,067/ounce.

U.S. shredded scrap steel dropped 2.3% to $342/st.

Following last month’s surge, LME copper retraced, dropping 2.6% to $6,180/mt.

Chinese lead rose 0.5% to $2,692.21/mt.

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Korean aluminum coil dropped 4.2% to $3.61/kilogram.

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

Need buying strategies for steel? Request your two-month free trial of MetalMiner’s Outlook

MetalMiner’s Annual Outlook provides 2019 buying strategies for carbon steel

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Automaker General Motors shared news of a strong third quarter Wednesday when the company released its third-quarter financial results.

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“Our third-quarter performance demonstrates our determination to manage risks and deliver strong business results while continuing to advance the future of mobility,” Chairman and CEO Mary Barra said in a release.

GM reported third-quarter revenue of $38.5 billion, up 6.4% compared with Q3 2017. It also reported EBIT-adjusted income of $3.2 billion, up 25% year over year, and income of $2.5 billion.

In addition, the automaker reported EBIT-adjusted earnings per share (EPS) of $1.87, up from an expected EPS of $1.25, CNBC reported.

Earlier this year, GM announced it would begin reporting sales on a quarterly basis, as opposed to monthly. In the third quarter, GM saw North American sales of 833,712 units, 700,000 of which came in the U.S. (at an average transaction price of $36,000, up about $800 year over year and $4,000 above the industry average). The North American sales total for the quarter, however, was down 9.8% compared with Q3 2017.

Sales were also down in China, where GM sold 835,934 units, down 14.9% year over year. Chevrolet sales in China, however, were up 10% year over year, GM reported, “led by higher content crossovers including the Equinox, which saw 29 percent growth compared to a year ago.”

“Despite challenging market conditions, GM China achieved record third-quarter equity income, driven by a strong mix of vehicles in popular segments, led by record Cadillac sales and strong Chevrolet deliveries,” the GM earnings report states. “GM China is introducing 10 new or refreshed models in the second half of 2018.”

Cadillac sales were also up in China. GM reported Cadillac sales in the third quarter were up 4% year over year and were up 20% in the year to date.

Overall, total sales for the quarter were down 14.7% year over year, and are down 12.4% in the year to date. Sales in the year to date were down 1.8% in North America and 2.5% in China.

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GM shares were up 9.78% as of Wednesday afternoon following the morning’s earnings announcement.

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner:

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  • Nucor reported net earnings of $676.6 million in the third quarter.
  • Global zinc and lead demand is forecast to rise this year and next, according to the International Lead and Zinc Study Group.
  • MetalMiner’s Stuart Burns wrote about the power dynamics currently at play between Rome and Brussels, as Italy’s new ruling coalition has markedly different perspectives on the country’s economic direction.
  • The U.S. steel capacity utilization rate hit 77.7% as of Oct. 20, according to a recent American Iron and Steel Institute (AISI) report.
  • Palladium prices continue to rise.
  • The U.S. Department of Commerce issued preliminary determinations in its anti-dumping and countervailing duty investigations of steel propane cylinder imports from China.
  • The U.S.’s metals tariffs have had ripple effects around the world — India is among the countries looking to protect its steel sector in the tariffs’ wake.
  • Sticking in India, the gold buying during the country’s festival season isn’t quite as busy as it usually is, Sohrab Darabshaw explains.
  • Ford Motor Co. released its third-quarter earnings results earlier this week, which prompted a surge in its stock price yesterday.

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Ford Motor Co. released its Q3 financial results on Wednesday, two days after President of Global Operations Joe Hinrichs said the U.S.’s tariff on steel have made U.S. steel more expensive than steel from anywhere else in the world.

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The automaker posted third-quarter net income of $1.0 billion and $1.7 billion in adjusted EBIT. Net revenue rose 3% year over year in the quarter.

Following the automaker’s release of its third-quarter earnings results, Ford shares surged Thursday, marking Ford’s biggest one-day percentage increase since 2011, according to MarketWatch.

CEO Jim Hackett highlighted the automaker’s plans with respect to its lineup.

“By 2020, we expect 75% of our lineup in the U.S. to be new or refreshed,” Hackett said during the earnings call Wednesday.

Hackett later added that during the April earnings call, the automaker said it could hit an 8% EBIT margin and an ROIC in the “high teens,” assuming “reasonable economic conditions.”

“The news today is that the current external environment has driven higher costs and uncertainty for the entire sector,” he said. “As we said last quarter, we had an unexpected deterioration in our business in both Europe and China. As a result of these factors, our current forecast shows we will not reach our EBIT margin and ROIC targets by 2020.

“However, I tell you as I told the board, we’re not standing still. We are attacking everything that is in our control.”

Chief Financial Officer Bob Shanks also walked through the financial numbers, noting that revenue was down compared to previous quarters. Revenue in the third quarter reached $37.6 billion, down from $38.9 billion in Q2 and $42 billion in Q1; Shanks attributed the decline to lower volume.

Revenue in the third quarter, however, was up 3% compared with Q3 2017, when it hit $36.5 billion.

“Some of this is seasonal, reflecting the normal summer plant shutdowns that occur in Europe and North America,” Shanks said.

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Ford’s EBIT and EBIT margins were flat in the third quarter compared with the previous quarter.

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This morning in metals, Ford Motor Co. says prices of U.S. steel are higher than anywhere else in the world, China’s alumina exports surged in September and the LME copper price dropped Tuesday.

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High Prices

U.S. automaker Ford has been vocal about what it views as the negative impact of the U.S.’s steel and aluminum tariffs.

According to a Detroit News report, Ford’s president of global operations on Monday said “U.S. steel is costing more than anywhere else in the world” as a result of the tariffs.

MetalMiner’s Take: It’s a bit difficult to understand what has driven the public complaints from Ford about steel and aluminum tariffs, particularly when most OEMs take long positions on their metal spend.

Some OEMs have locked-in contract prices that simply do not fluctuate, according to MetalMiner benchmark data. The manufacturing organizations that make stronger arguments against tariffs are those that remain subject to spot-price movements, have a corporate policy that forbids hedging or lack the buying power to demand fixed prices.

Perhaps the vocalization of the complaints have heated up because many OEMs have entered the fourth quarter contract negotiation season and the producers want to open discussions at much higher price levels. In defense of Ford’s complaints, the multi-tier extended supply chain remains far more exposed to metal price volatility than a company like Ford.

In this environment, OEMs will need to work double time to create programs and opportunities for aggregating volumes across supply chains, developing directed buy and enablement programs, aggregation opportunities and using technology to better support the entire extended global supply chain.

China’s Alumina Exports Rise in September

China’s exports of alumina hit a 2018 high in September, Reuters reported.

Exports of alumina in September hit 165,839 tons, up from 29,722 tons in August.

LME Copper Falls

The LME copper price fell 1.1% on Tuesday, Reuters reported.

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The drop comes a day after London copper had reached a one-week high.