Articles in Category: Automotive

The U.S. Department of Commerce. qingwa/Adobe Stock

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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The U.S. Department of Commerce. qingwa/Adobe Stock

This morning in metals news, the Department of Commerce launched another Section 232 investigation, the Section 232 auto probe hearings kicked off earlier this morning and Turkish steel production increased during the first six months of the year.

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Commerce Launches Uranium Investigation

As the Department of Commerce prepared to host hearings related to its automotive probe, the DOC announced yesterday that it was launching an investigation of uranium imports.

“Our production of uranium necessary for military and electric power has dropped from 49 percent of our consumption to five percent,” Secretary of Commerce Wilbur Ross said in a release. “The Department of Commerce’s Bureau of Industry and Security will conduct a thorough, fair, and transparent review to determine whether uranium imports threaten to impair national security.”

In January, U.S. uranium mining companies, UR-Energy and Energy Fuels, formally petitioned the DOC, asking it to initiate a Section 232 investigation into imports of uranium ore and products.

Section Auto Hearings Underway

Speaking of the automotive and automotive parts probe, public hearings began earlier this morning.

Those interested can check out the live stream of the hearing on the DOC website, www.commerce.gov.

Turkish Steel Production on the Rise

Steel production in Turkey through the first six months of the year jumped 3.7%, according to a report from the Anadolu Agency.

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Production through the six-month period hit 18.9 million tons, according to Turkish Steel Producers’ Association data cited by the report.

The U.S. Department of Commerce. qingwa/Adobe Stock

The U.S. Department of Commerce launched a new investigation, under the aegis of the little-used but now ubiquitous Section 232 of the Trade Expansion Act of 1962, this time investigating imports of automobiles and automotive components.

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Unsurprisingly, while no decisions have been made as of yet regarding the imposition of new tariffs, the investigation in and of itself has led to outcry from automakers. In fact, as part of the Department of Commerce review process, more than 2,300 public comments were submitted in relation to the Section 232 automotive probe.

So, now that all parties involved are all revved up, what’s next?

The Department of Commerce will hold public hearings on the issue, beginning Thursday, July 19, and concluding Friday, July 20.

The first day of the hearing will kick off at 8:30 a.m. and include testimony from individuals “representing domestic and international companies, industry groups, labor, and foreign countries.”

The full agenda can be found here.

Jennifer Thomas, vice president of federal governments affairs for the Alliance of Automobile Manufacturers (AAM), will be the first speaker Thursday. The AAM released a statement late last month in response to the Trump administration’s decision to look into auto imports.

“While we understand that the Administration is working to achieve a level playing field, tariffs are not the right approach,” the statement read. “Tariffs on autos and auto parts raise vehicle prices for all customers, limit consumer choice and invite retaliatory action by our trading partners. Automakers support reducing trade barriers across the board and achieving fairness through facilitating rather than inhibiting trade.”

The Association of Global Automakers (AGA) will be represented by President and CEO John Bozzella. In May, the AGA released its own statement.

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“Contrary to the assumption underlying the investigation on import vehicles, the U.S. auto industry is thriving,” the statement read. “To our knowledge no one is asking for this protection. If these tariffs are imposed, consumers are going to take a big hit because they will have fewer vehicle choices and higher car and truck prices. This course of action will undermine the health and competitiveness of the U.S. auto industry and invite retaliation by our trading partners.”

The Automotive Monthly Metals Index (MMI) fell one point this month for a July reading of 103.

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U.S. Auto Sales

Nonetheless, June was a good month for the top U.S. automakers.

General Motors, which this year announced it would only report sales on a quarterly basis moving forward, reported its Q2 sales were up 5% year over year. Chevrolet and GMC sales were up 6% and 7%, respectively, while Cadillac sales were up 3% year over year.

“Customers are buying with confidence because the economy is strong and they expect it to remain strong,” said Kurt McNeil, U.S. vice president of sales operations. “GM is in a fantastic position with so many new crossovers at all four of our brands, the industry’s only three-truck pickup strategy and clear leadership in large SUVs.”

Ford’s sales were up 1.2% overall, with the breakdown of individual vehicle categories reflecting the transition away from traditional cars. Ford’s sales of trucks and SUVs were up 3.2% and 8.9%, respectively, while car sales were down 14% year over year.
Through the first six months of the year, however, Ford’s sales are down 1.8% compared with the first six months of 2017.

Fiat Chrysler boasted an 8% year-over-year increase in June sales, marking its best June for retail sales since 2004. The automaker’s Jeep and Ram Truck brands led the way, with sales increases of 19% and 6%, respectively.

Section 232 Auto Probe

As readers might recall, the U.S. Department of Commerce once again invoked Section 232 of the Trade Expansion Act of 1962, this time to investigate imports of automobile and automotive parts. The DOC launched the investigation in late May.

During a Senate Finance Committee hearing June 20, Commerce Secretary Wilbur Ross could not offer much in the way of specifics related to the investigation, claiming it was still too early in the process to make statements about what could happen vis-a-vis tariffs.

Hearings on the Section 232 probe are scheduled for later this month. As part of the process, interested parties could submit public comments for consideration; more than 2,300 comments were submitted.

Unsurprisingly, GM and other automakers submitted comments asking the administration to decide against imposing tariffs.

“If import tariffs on automobiles are not tailored to specifically advance the objectives of the economic and national security goals of the United States, increased import tariffs could lead to a smaller GM, a reduced presence at home and abroad for this iconic American company, and risk less—not more—U.S. jobs,” GM’s comment reads. “The threat of steep tariffs on vehicle and auto component imports risks undermining GM’s competitiveness against foreign auto producers by erecting broad brush trade barriers that increase our global costs, remove a key means of competing with manufacturers in lower-wage countries, and promote a trade environment in which we could be retaliated against in other markets.”

In response, the European Union has threatened to impose an additional $300 billion in tariffs on U.S. goods should the Trump administration elect to slap duties on auto imports, calling the potential auto tariffs a “tax on the American people,” The Guardian reported.

MetalMiner’s Stuart Burns earlier this week offered his commentary on the situation and, in his view, the negative impact tariffs would have on the market.

“Automotive manufacturers are not going to rush to build new production facilities in the U.S. in the short term, but if tariffs become a permanent feature then it’s likely to encourage the car industry to accelerate the shift towards regional production,” he wrote. “Those with scale will cope better and as such we could see further consolidation in the sector if tariffs become a permanent feature — not just in the U.S., but internationally, as trading partners retaliate against U.S. action.”

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Actual Metal Prices and Trends

U.S. HDG steel dropped $1 to $1,111/st. U.S. platinum fell 5.9% to $852/ounce (its lowest level since it hit $847/ounce as of July 1, 2017). Palladium bars continue to trade at a premium to platinum, but palladium also fell this month, dropping 3.5% to $948/ounce.

LME three-month copper fell 2.8% to $6,645/mt.

U.S. shredded scrap steel picked up a dollar to reach $371/st.

Chinese primary lead jumped 1.3% to $3,193.51/mt.

There will be significant winners and losers to the current U.S.-E.U. trade war, but none more so than in the automotive sector.

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Size matters when it comes to reshuffling production among plants to avoid import tariffs. According to the Financial Times, larger companies like Toyota, Volkswagen, and the Renault–Nissan–Mitsubishi Alliance (RNM), all of which make roughly 10 million vehicles a year, have the capacity to move production between plants.

Toyota is probably the best placed, with two-thirds of its cars sold in each region already made within the borders of that region. The VW group, with 122 factories around the world, has considerable flexibility and, like Toyota, has been a pioneer in flexible manufacturing systems that allow it to make a range of vehicles at each site.

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Andrey Kuzmin/Adobe Stack

This morning in metals news, thyssenkrupp CEO Heinrich Hiesinger said European lawmakers need to protect the steel industry from China, copper plummets to a seven-month low and President Donald Trump responded to a European threat of retaliatory tariffs (in response to potential U.S. tariffs on auto imports).

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Protecting European Steel

In comments to CNBC, thyssenkrupp CEO Heinrich Hiesinger said European lawmakers need to protect the European steel industry from Chinese imports, particularly on the heels of the U.S.’s imposition of a 25% tariff on steel.

“We are much more concerned about the likelihood that a lot of the volume (of steel) which cannot come in to the U.S. market might be re-directed to Europe and further increase the already really high imports here,” Hiesinger was quoted as saying in the interview.

Copper Drops

The copper price fell to a seven-month low on Monday, Reuters reported.

The metal fell 1.6% on Monday, hitting its lowest price since early December, according to the report, as a result of weaker demand in China.

Trump, the WTO and Europe

The saga of trade tensions, manifested by both a war of words and actions, continued on this week.

After Europe threatened to impose retaliatory tariffs should the U.S. impose tariffs on automobiles (as a result of its recently initiated Section 232 investigation on automobiles and automotive parts), President Trump decried the World Trade Organization’s (WTO) treatment of the U.S.

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Claiming that the U.S. has a “big disadvantage” at the WTO, he added “we’re not planning anything now, but if they don’t treat us properly, we’ll be doing something,” according to a Reuters report.

The U.S. Department of Commerce. qingwa/Adobe Stock

The Trump administration’s Department of Commerce announced in May that it would be using Section 232 once again, this time to investigate imports of automobiles and automotive components.

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Secretary of Commerce Wilbur Ross testified before the Senate Finance Committee on June 20, a hearing during which he was asked about the Trump administration’s trade policies, both enacted and proposed.

Members of the committee could not get much in terms of specifics out of Ross with respect to the relatively fresh Section 232 auto probe. Ross said it was still too early in the investigation to make definitive statements about tariffs (or anything else related to the case).

Of course, that does not mean that industry groups and brands aren’t lining up to share their opinions.

The Department of Commerce extended the deadline for public comments on the issue by one week, giving those interested until Friday, June 29 to submit their comments (public hearings are scheduled for July 19-20).

By Friday afternoon, over 2,100 comments had been submitted.

In a comment filed Friday, General Motors decried the negative impacts it argues broad tariffs would have on the company and its global status.

“If import tariffs on automobiles are not tailored to specifically advance the objectives of the economic and national security goals of the United States, increased import tariffs could lead to a smaller GM, a reduced presence at home and abroad for this iconic American company, and risk less—not more—U.S. jobs,” GM’s comment reads. “The threat of steep tariffs on vehicle and auto component imports risks undermining GM’s competitiveness against foreign auto producers by erecting broad brush trade barriers that increase our global costs, remove a key means of competing with manufacturers in lower-wage countries, and promote a trade environment in which we could be retaliated against in other markets.”

In addition, GM warned of the impact on the consumer, particularly when considered in tandem with the Section 232 steel and aluminum duties, plus the duties on Chinese goods related to the Section 301 investigation (the first round of tariffs worth $34 billion is scheduled to go into effect July 6).

“At some point, this tariff impact will be felt by customers,” the GM comment states. “Based on historical experience, if cost is passed on to the consumer via higher vehicle prices, demand for new vehicles could be impacted. Moreover, it is likely that some of the vehicles that will be hardest hit by tariff-driven price increases—in the thousands of dollars—are often purchased by customers who can least afford to absorb a higher vehicle price point. The correlation between a decline in vehicle sales in the United States and the negative impact on our workforce here, which, in turn threatens jobs in the supply base and surrounding communities, cannot be ignored.”

GM’s full comment — in addition to the thousands of other comments — can be viewed by visiting regulations.gov and searching DOC-2018-0002-0001.

Other automakers submitting comments included Toyota, Mitsubishi and Volvo.

“Volvo Cars strongly believes that imports of automobiles and auto parts do not pose a threat to the U.S. national security,” Volvo’s comment said. “Section 232 is intended to ensure that the U.S, military can obtain resources and products in a timely fashion. Importers of automobiles or automotive parts like Volvo Cars cannot reasonably be viewed as threatening U.S. national security.”

OFII Says Auto Probe is ‘Misguided and Unnecessary’

The Organization for International Investment (OFII) on Friday released its letter to the administration, in which it criticized the idea of auto tariffs against key allies and challenged the notion that international automakers’ products pose a threat to the U.S.’s national security.

“The Department’s Section 232 investigation into whether, ‘imports of automobiles, including SUVs, vans and light trucks, and automotive parts into the United States threaten to impair [U.S.] national security,’ is misguided and unnecessary,” OFII’s formal comment to the Department of Commerce reads.

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OFII represents international business subsidiaries headquartered outside the U.S.

The president’s assertion that trade wars are easy to win is — at this stage, at least — looking a little less certain than it was at the outset.

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Not surprisingly, exporters to the U.S. impacted by actual and proposed import tariffs are threatening to retaliate with tariffs of their own.

The Financial Times reports comments from global automakers warning that plans to impose tariffs on auto imports could raise prices of imported vehicles by as much as $6,000 per car and raise the cost of locally made cars, most of which include some foreign content.

The most alarmist comments are, not surprisingly, from the Alliance of Automobile Manufacturers, which is quoted as saying that buyers of imported vehicles would face an average $5,800 price rise from a 25% tariff.

“Nationwide, this tariff would hit American consumers with a tax of nearly $45bn, based on 2017 auto sales. Not included in this figure are costs from tariffs on auto components,” the industry group said.

In reality, such a significant price increase on imported cars would push the market in favor of domestic manufacturers. So, 2017 auto sales are probably not an exact benchmark; however, even the cost of the Honda Odyssey produced in the U.S. would rise by $1,500-$2,000 because of its imported content, the Financial Times reports.

Should, as seems likely, overseas markets impose retaliatory tariffs, this could have a significantly negative impact on U.S. auto exports, which totaled $99 billion last year.

Not surprisingly, figures vary widely as to the likely impact on U.S. vehicle production and the potential for loss of American jobs.

The Alliance of Automobile Manufacturers, citing data from the Peterson Institute, suggests a 25% tariff on imported vehicles and components would result in a 1.5% decline in U.S. vehicle production and a loss of 195,000 American jobs over a period of one to three years; if other countries retaliate, job losses could increase to 624,000.

Economists at Oxford Economics, on that other hand, said new U.S. auto tariffs would have a modest direct impact on the economy, suggesting a 0.1% reduction in GDP in 2019 and 0.2% in 2020, representing 100,000 job losses in the first year.

Either way, outside of political circles there seem to be few suggesting it will be good for jobs or auto production in the short to medium term. Should tariffs remain in place in the medium to long term, they would almost certainly boost prospects for domestic automakers and hasten the realignment of supply chains to domestic component suppliers.

So far, of course, it is unclear if the president really intends tariffs to be a long-term feature or rather a tactic he has deployed as part of a negotiating strategy to force changes in the terms of trade with America’s partners. Should the strategy be successful, it’s possible some tariffs will never be applied or could be rescinded within a matter of months. Businesses, of course, can only afford to sit and wait so long before they have to take action after the point at which tariffs are actually applied.

After the president’s unprecedented tariffs on steel and aluminum, few are doubting his resolve. Component suppliers throughout the supply chain are no doubt busy evaluating the implications for their business.

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Tariffs or no tariffs, that process alone will encourage the reshoring of component supplies over the coming years.

Supply chain vulnerability has taken on a whole new urgency.

gui yong nian/Adobe Stock

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? Try two free months of MetalMiner’s Outlook

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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:

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel