Articles in Category: Automotive

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In a late December report, the Indian government said it forecast the Indian automotive sector to attract between U.S. $8 billion and $10 billion in local and foreign investment by 2023.

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The Year End Review 2018 by the Ministry of Heavy Industries & Public Enterprises pointed out the sector had attracted $16.5 billion in foreign direct investment (FDI) between April 2000 and December 2016.

But the 2023 target may not be met if the government does not resolve the contentious issue of steel import rules soon.

Last August, the Indian Steel Ministry announced import rules for high-grade steel products, stipulating that foreign steelmakers must get Indian certification for high-grade steel products being used by Indian manufacturers. The Feb. 17 is fast approaching, but automakers have already registered their protests, saying they will not comply as they needed more time to do so.

The auto industry has dubbed the import rules as stringent, and though it is for specific high-grade steel products coming in from Japan and South Korea, they are used for vital auto components.

A Reuters report said India’s Heavy Industries Minister had written a letter in early January to his Steel Ministry counterpart, pointing out that the shipments of the auto component industry had started getting impacted. He voiced concerns in the letter that this “posed a significant risk of production stoppage of the whole automobile industry in the immediate future.”

Another issue which the minister pointed out was that if the government were adamant about imposing the new tax, auto manufacturers would simply stop importing steel and import the entire component itself, which would be detrimental to the “Make In India” plans of the government.

At a meeting mid-January between automakers’ representatives and government officials, the former pointed out that the new steel import norms were “a unrealistic protectionist measure” aimed at encouraging local steelmakers that could slow down manufacturing. Indian steelmakers did not manufacture special-grade steel, which is why Indian auto companies looked to other countries to fulfill this need.

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Indian automakers are seeking a year’s extension to comply with the new norms; now the ball is in the government’s court.

It is not just the stock market that is having a wobble — firms are asking if now is the right time to be investing in new capacity or raising production.

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2018 was a stellar year for the U.S. jobs market, but recent figures suggest part of that may have been the sugar rush of the president’s tax breaks.

That effect is beginning to wane now. Investors are looking at slowing growth in China and Europe, trade wars and a shaky U.S. housing market and asking: what does 2019 hold?

A New York Times article is robustly upbeat, reporting Labor Department data showing December was one of the strongest months of job gains in the last decade, with employers adding 312,000 to payrolls. After years of slow wage growth, the tightness of the labor market may finally be influencing wages, which the article states also showed impressive gains at 3.2% year over year. Unemployment is exceptionally low at 3.7%, yet inflation has remained benign.

Some would suggest the economy is in Goldilocks territory — growing not too fast and not too slow.

So why did the stock market crash in December, posting its worst monthly loss since the financial crisis and the worst December since 1931 and the Great Depression (as another article by The New York Times states)?

It would seem investors took fright at a number of converging factors. Those factors included the Fed’s raising of rates in the month (when many thought they had tightened enough already in 2018), the still unresolved trade war with China and weak housing market data.

All of that is leading many to ask if the bull run come to an end.

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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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It’s a new world across all industries, as companies grapple with changing consumer tastes, ever-shifting market conditions and new technological developments.

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Of course, the automotive industry is no different, as automakers strive to adapt to the electric vehicle (EV) wave while simultaneously keeping an ear to the ground when it comes to what their customers want.

For Ford Motor Co., adapting meant ditching its lineup of sedans in the North American market, instead focusing on its popular SUVs and pickup trucks.

Other types of adaptation to a changing business world include simply partnering up with an industry colleague and pooling resources, if you will.

In that vein, this week Ford announced a partnership with Volkswagen, which it called “the first formal agreements in a broad alliance that positions the companies to boost competitiveness and better serve customers in an era of rapid change in the industry.”

According to the company announcement, the automakers plan to collaborate on production of commercial vans and medium-sized pickups for the global market as early as 2022. The alliance between the two companies will be led by a joint committee, which will include Ford CEO Jim Hackett, Volkswagen CEO Dr. Herbert Diess and other senior executives from the two companies.

“Over time, this alliance will help both companies create value and meet the needs of our customers and society,” Hackett said. “It will not only drive significant efficiencies and help both companies improve their fitness, but also gives us the opportunity to collaborate on shaping the next era of mobility.”

In addition to collaboration on vans and trucks, the automakers could work together on electric vehicles.

“In addition, Volkswagen and Ford have signed a memorandum of understanding to investigate collaboration on autonomous vehicles, mobility services and electric vehicles and have started to explore opportunities,” a Ford release stated. “Both companies also said they were open to considering additional vehicle programs in the future. The teams will continue working through details in the coming months.”

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Ford is scheduled to announce its fourth-quarter 2018 and full-year results during a conference call at 4:15 p.m. ET on Wednesday, Jan. 23.

In other news, Volkswagen this week announced it would build its North American electric vehicle manufacturing base in Chattanooga, Tennessee.

“Strengthening the company’s commitment to an electric mobility future, this expansion of Volkswagen’s U.S. footprint will include an investment of $800 million into the Chattanooga facility and create 1,000 jobs at the plant, plus additional jobs at suppliers,” a Volkswagen release stated. “EV production at the site will begin in 2022.”

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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 stories here on MetalMiner:

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The Automotive Monthly Metals Index (MMI) fell 3.2% to a value of 92 this month, its lowest level in 17 months.

After riding high during mid-2017, above the baseline of 100, the Automotive MMI sub-index — tracking a basket of industrial metals and materials crucial to the automotive sector — has been in a continued overall downtrend since mid-summer of last year.

With both the commodities and base metals sectors ending 2018 on sustained downtrends, and a weak U.S. dollar, there don’t appear to be any immediate signs of the Auto MMI’s slide letting up.

Actual Metal Prices and Trends

The sub-index’s overall descent, however, hasn’t stopped palladium’s scorching rise. Platinum’s ‘little brother’ is in a solid two-month uptrend, beginning the new year at $1,252 per ounce, by far the best single-metal performer.

All other constituent price points that comprise the Automotive MMI — including U.S. HDG steel, LME copper, and the Korea price of 5052 coil premium over 1050 aluminum — fell over the past month.

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Auto Sales Trends

G.M. recently named Mark Reuss, the company’s former “product development guru,” as its new president, but that was couched in a near-simultaneous release of Q4 2018 sales figures — which weren’t great, according to an article in Industry Week.

The U.S. automaker announced that fourth quarter sales were down 2.7% from the same time last year, the article stated. Ford and Toyota also lost ground in December, while Fiat Chrysler posted a double-digit percentage gain for last month.

Overall, preliminary expectations put the overall 2018 U.S auto sales number at about 17.2 million vehicles, according to the WSJ (paywall), which would be about even with 2017’s total and “marks the fourth straight year of at least 17 million vehicles sold, a resilient showing for an industry prone to boom-and-bust cycles.”

However, in China, the latest available data show that “a total of 2.55 million vehicles were sold in November, down 13.9 percent year-on-year, according to the China Association of Automobile Manufacturers (CAAM),” cited in China Daily — which, as Reuters reported, is the steepest plunge since 2012.

Automotive Demand Outlook: 2019 and Beyond

So where does this leave the future of automotive demand?

Certain industry watchers, such as former Reuters European automotive correspondent Neil Winton, expect 2019 to be the year that the growing interest and investment in the EV market squeeze traditional automakers and the sales of their product.

Writing in Forbes, Winton notes that Morgan Stanley “expects global auto sales to slip 0.3% in 2019 to 82.1 million. The Center for Automotive Research in Duisberg-Essen, Germany, puts 2019 sales slightly higher at 82.9 million. Fitch Solutions does still expect some growth in sales – a [minuscule] 2.0%.”

However, the tiny slips could give way to bigger sea changes down the line. The days of healthy profitability for the makers of traditional gas-powered cars are numbered, he writes. “Demand for autos is at a dangerous tipping point, according to Morgan Stanley, as buyers put off purchases waiting for the new technology in the form of electric cars to take the stage,” writes Winton.

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This morning in metals news, the aluminum price slides to a 16-month low, Liberty House could be looking to expand its presence in the Middle East and the mid-February deadline for the Section 232 auto investigation draws nearer.

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Aluminum Drops Post-Sanctions Delisting

The aluminum price continued to fall Monday after last week’s announcement on the delisting of previously sanctioned Russian companies.

According to Reuters, the LME aluminum price dropped 0.5% Monday, continuing the decline after the price hit a 16-month low last week.

Liberty House Continues on the Acquisitions Trail

As we noted last week, Liberty House recently acquired miner Rio Tinto’s Dunkerque aluminum smelter, as Sanjeev Gupta’s GFG Alliance continues to snap up assets.

According to a report in The National, the steel tycoon could now be turning to the Middle East, specifically the U.A.E.

According to the report, which cites a Liberty House official, the company is in talks to buy steel and aluminum assets in the country.

Section 232 Auto Probe Deadline Inches Closer

The Trump administration’s Section 232 investigation of steel and aluminum import levels came to a close in the spring with much fanfare, yielding blanket tariffs of 25% and 10%, respectively.

However, the administration didn’t stop using Section 232 then and there, as it launched yet another 232 probe in May, this time looking into imports of automobiles and automotive parts.

The law requires Secretary of Commerce Wilbur Ross to present a report to the president within 270 days after the launching of a 232 investigation, making for a mid-February deadline.

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In an interview with the Financial Times, Ross said his report is still a “work in progress” but also noted the president’s flexibility in terms of what he can do with respect to potential automotive tariffs.

The recently signed United States-Mexico-Canada Agreement (USMCA), inked during the Group of 20 summit in Argentina, included stricter auto content rules for tariff-free vehicle trade. The new trade agreement bumps the automotive content threshold from 62.5% to 75%. In addition, USMCA included a provision that 40-45% of auto content must be produced by workers making a minimum of $16/hour.

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The issue of automotive tariffs has often been cited by President Donald Trump and others in his administration when framing the the U.S.’s trade relationship with other countries.

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Earlier this month, on the heels of the Group of 20 (G20) summit meeting in Argentina — during which Trump and Chinese President Xi Jinping met for a working dinner on trade — Trump said China would “reduce and remove” its 40% tariff on imported U.S.-made automobiles.

Following the G20 summit, the Alliance of Automobile Manufacturers expressed optimism about a then-potential decrease in China’s tariff rate on U.S. automobiles entering the world’s largest automotive market.

“Tariffs are a direct hit to the wallets of consumers, so taking more time to achieve a U.S.-China agreement is good news and shows movement in the right direction,” the industry group said in a release. “We appreciate the Administration’s efforts to de-escalate trade tensions with China, and we look forward to reviewing the details. Ultimately, consumers, auto workers and the auto sector win when trade barriers are lowered.”

Fast forward to late last week: China’s Ministry of Finance announced it would temporarily reduce its tariff on U.S. automobiles from 40% to 15%, according to Reuters, beginning Jan. 1, 2019.

Just before the G20 summit, United States Trade Representative Robert Lighthizer released a statement on China’s automotive tariffs.

“As the President has repeatedly noted, China’s aggressive, State-directed industrial policies are causing severe harm to U.S. workers and manufacturers,” Lighthizer said. “We are continuing to raise these issues with China. As of yet, China has not come to the table with proposals for meaningful reform.

“China’s policies are especially egregious with respect to automobile tariffs. Currently, China imposes a tariff of 40 percent on U.S. automobiles. This is more than double the rate of 15 percent that China imposes on its other trading partners, and approximately one and a half times higher than the 27.5 percent tariff that the United States currently applies to Chinese-produced automobiles. At the President’s direction, I will examine all available tools to equalize the tariffs applied to automobiles.”

U.S. automaker Ford Motor Co. applauded China’s announcement of a reduction in the tariff on imported U.S. automobiles, which, at least for now, marks a de-escalation of trade tensions that have intensified between the two countries this year.

“As a leading exporter of vehicles from the U.S., we are very encouraged by China’s announcement today to reduce tariffs on U.S. produced vehicles to 15 percent,” said Joe Hinrichs, Ford’s executive vice president and president of Global Operations. “We applaud both governments for working together constructively to reduce trade barriers and open markets. Last year, Ford exported nearly 50,000 U.S. built vehicles to support the growing auto market in China.”

China’s 2017 imports increased 16.8% from the previous year, reaching 1.21 million automobiles. Meanwhile, total automotive sales in China hit 28,879,000 units in 2017, according to the China Association of Automobile Manufacturers, making imports less than 5% of the market.

In its recent November sales report, Ford touted the importance of the Chinese market.

“China is absolutely essential to Ford globally,” said Anning Chen, president and CEO of Ford Greater China. “The management team of Ford China is focusing on our China Turnaround Plan. We are building a robust management team and efficient organizational structure to drive the business forward.

“To win against the competition in China, we must better understand the Chinese customer, respond to market changes quickly, introduce more products that customers like and want, streamline the organization, improve the capability of our team, speed up decision-making, and strengthen our relationships with dealers.”

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Ford’s Lincoln brand has made gains in 2018, with sales up 3% year over year through the first 11 months of the year. However, Ford’s overall sales in China in the year to date are down 34% compared with the January-November 2017 period.

The Automotive Monthly Metals Index (MMI) picked up one point for a December MMI reading of 95.

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U.S. Sales

General Motors reports sales numbers on a quarterly basis, rather than a monthly basis. The automaker reported sales fell 11% year over year in the third quarter, but touted an average transaction price that was up $700 compared with the same period last year (up to a third-quarter record of $35,974).

As for November reports, Ford Motor Co. reported its U.S. sales dropped 6.9% year over year, with 196,303 units sold in the month. Even trucks and SUVs, which have become the automaker’s focal points amid the deemphasis on traditional sedans, saw sales drops (2.3% and 4.9%, respectively).

Fiat Chrysler, meanwhile, posted another strong month, with U.S. sales up 17% year over year. Sales of Fiat Chrysler’s Ram and Jeep brands surged 44% and 12% year over year, respectively.

Honda reported a 9.5% year-over-year drop in U.S. sales, while Nissan sales were down 18.7%.

According to a sales forecast by Edmunds.com, total sales in the U.S. were projected to decrease 1.3% in November compared with November 2017, but up 1.3% compared with the previous month.

GM Moves to Close Plants, Slash Workforce

Among the bigger automotive developments last month came from GM, which announced the closure of several North American plants and a 15% workforce reduction.

“The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future,” GM Chairman and CEO Mary Barra said in a prepared statement. “We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.”

The move, which is projected to save the automaker approximately $6 billion, was unsurprisingly the source of sharp criticism from politicians, including President Donald Trump, who referred to the Commerce Department’s pending Section 232 probe of automobile imports in a tweet respond to the GM news.

“The reason that the small truck business in the U.S. is such a go to favorite is that, for many years, Tariffs of 25% have been put on small trucks coming into our country,” Trump tweeted Nov. 28. “It is called the “chicken tax.” If we did that with cars coming in, many more cars would be built here. and G.M. would not be closing their plants in Ohio, Michigan & Maryland. Get smart Congress. Also, the countries that send us cars have taken advantage of the U.S. for decades. The President has great power on this issue – Because of the G.M. event, it is being studied now!”

GM announced, among other facilities, three North American assembly plants would be “unallocated,” located in Oshawa, Ontario; Detroit; and Warren, Ohio.

MetalMiner’s Stuart Burns touched on the announcement last week, noting the move might simply be a harbinger in the automotive sector at large.

“What is more surprising to some is that GM is acting when results are strong,” Burns wrote. “GM’s third-quarter adjusted earnings per share were 42% higher than the same period a year ago and its underlying earnings before interest and tax rose 25% to $3.2 billion. Net revenues rose 6.4% to $35.8 billion.

“But analysts see this as GM being a first mover and acting ahead of the curve.”

Actual Metal Prices and Trends

U.S. HDG steel fell 6.9% month over month to $934/ton. Platinum bars fell 3.5% to $806/ounce, while palladium bars rose 11.7% to $1,192/ounce.

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LME copper rose 4.5% to $6,287/mt. U.S. shredded scrap steel jumped 4.7% to $358/st.

Chinese primary lead rose 1.6% to $2,734.61/mt.

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This morning in metals news, U.S. steel production through Nov. 24 was up 5.6% compared with the same period last year, copper prices fell back Tuesday and Ford’s November U.S. sales were down.

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U.S. Steel Production

According to a recent American Iron and Steel Institute (AISI) report, U.S. steel production for the year (through the week ending Nov. 24) was up 5.6% compared with the same time frame in 2017.

For the period through Nov. 24, the U.S. produced 85.6 million tons at a capacity utilization rate of 78.1%, up from 81.1 million tons at a 74.2% rate last year.

For the week ending Nov. 24, the U.S. saw 1.9 million tons of production at a rate of 81.3%, up from 1.7 million tons at a 73.3% rate for the same week in 2017.

Copper Prices Fall

After making gains Monday, copper prices fell back Tuesday, according to a Reuters report.

Three-month London copper dropped 0.2% Tuesday, while the most-traded SHFE contract fell 0.7%, according to the report.

Ford November Sales

November proved to be a down month for Ford in the U.S. market.

The automaker’s November sales were down 6.9% year over year, with 196,303 units sold.

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Even truck and SUV sales slumped, down 2.3% and 4.9% year over year, respectively.