Articles in Category: Automotive

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

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This morning in metals news, LME copper bounced back Thursday after a down Wednesday, Saudi steel producers are happy about a cut in export tariffs and Volvo made a major announcement regarding the future of its vehicle inventory.

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Copper Rebounds Slightly After Hitting One-Week Low

After a Wednesday that saw a 0.9% drop for LME copper, the metal bounced back Thursday, ticking up by 0.1%, Reuters reported.

The metal moved up from its one-week low, which on Wednesday stood at $5,815 per ton.

In the backdrop was the recent release of the minutes of the Federal Reserve’s June meeting, revealing “policymakers were increasingly split on the outlook for inflation and how it might affect the future pace of interest rate rises,” according to Reuters.

Saudi Steel Gets Tariff Cut Relief

Steel producers in Saudi Arabia received good news this week as the government announced it would stop export duties on steel for two years, according to Reuters.

According to the report, the government also cut cement export duties by 50%.

While Saudi stocks overall were down early Thursday, stocks in the building materials sector showed well, including Al Yamaha Steel Industries, which surged by 2.1%, according to Reuters.

Volvo Looks to Go All-In on Green Rides

The traditional combustion engine took a hit this week when automaker Volvo announced it would build only electric or hybrid vehicles beginning in 2019, The New York Times reported.

While the “green” vehicle market is still relatively small, it is growing. As Autodata Corp numbers released this week show, sales of Tesla vehicles, for example, have surged. In the year to date, Tesla sold 23,550 vehicles, good for a 42.7% increase in sales from the same point last year.

Of course, those sales figures are tiny when compared with traditional automakers, like GM and Ford, which sold 1.41 million and 1.29 million units, respectively, in the calendar year to date. Sales for those giant automotive brands, however, are down (albeit down from a big 2016 in sales for automakers).

Clearly, battery-powered and hybrid vehicles are picking up steam. What does this green wave mean for metals? The boom presages increased demand for metals like cobalt, for example. Also, according to Seeking Alpha, the coming electric vehicle revolution bears bad news for platinum group metals (PGMs), like platinum and palladium.

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Reports of platinum’s demise have been much exaggerated — or so this month’s report from the World Platinum Investment Council (WPIC) would argue.

Sales of diesel vehicles in some parts of Europe have taken a beating in recent months over concerns that authorities will raise costs or otherwise make living with diesel engines a less attractive proposition for owners, due to negative sentiment post-Dieselgate. Total car sales have dropped in some European markets, including the U.K.. However, where sales have held up there’s been a definite swing to gasoline vehicles rather than diesel.

The markets have read this trend as meaning platinum demand will fall — but maybe not surprisingly, the WPIC is taking a more optimistic view.

Regardless of buyers’ short-term preferences, the WPIC says the auto industry has an overarching challenge in the years ahead that will support platinum demand. Automakers will face fines if they do not meet new EU CO2 targets by 2020, but the report lists the industry’s rather limited options.

First, the industry could boost sales of battery electric vehicles (BEV). However, with a consensus expectation of BEVs taking no more than 5% of the market by 2025 due to lack of charging infrastructure, it seems unlikely BEVs are the short-term solution.

Source: World Platinum Investment Council

Second, the industry could sell a higher percentage of hybrids. Recent trends, however, suggest demand for hybrids, despite Volkswagen’s Dieselgate, is still growing too slowly. Demand is certainly not growing fast enough to reach those emissions targets, which are just 2 ½ years away.

So, the third option — and to be fair to the WPIC, probably the most likely option — is for automakers to clean up diesel. The technology already exists to meet the most stringent nitrogen oxide (NOx) targets set for 2022, but the industry needs to do more than it has done in the past to prove to the buying public the performance figures they publish can be achieved in the real world.

The WPIC points to French automaker PSA, which has undertaken to publish independently certified, real-world CO2 test results for its vehicles. PSA also recently announced it will do the same for NOx results.

It is only by automakers voluntarily — or maybe by legislation — being forced to accept third-party verification of their emission figures that they will be able to rebuild consumer trust and deflect harsher government legislation on diesel engines in the future.

Not surprisingly, the attraction of the WPIC is significantly cleaner diesel engines will require increased platinum-group metal (PGM) loadings, even as the industry shifts from the current lean NOFX trap (LNT) system to the more effective selective catalytic reduction (SCR) technology. According to ExtremeTech, when announcing Ford’s switch to SCR, it reported that SCR is more costly, but it’s also generally considered more effective than LNT.

Of course, the platinum price has more drivers than just the demand for the catalysts in the automotive market. Investor demand in the form of ETFs, physical demands in the form of jewelry, and chemical and catalyst demand from the chemicals industry are all significant drivers on the demand side.

But much of recent negative sentiment toward platinum has been due to controversy over the diesel engine’s ability to meet emission targets.

And in that sense, platinum’s fortunes will in part ride on the coattails of the auto industry’s ability to re-establish the diesel engine as an environmentally acceptable propulsion unit.

The Automotive MMI, our sub-index of industrial metals and materials used by the automotive sector, dropped by one point for a June reading of 86. The Automotive MMI has not seen an increase since early this year, when the figure accelerated from a January reading of 82 to 92 in February.

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Overall, consumers seemed to pass on auto purchases in May, continuing the slowdown from January-April. Car and light truck sales — checking in at a total of 1.52 million in May — were down for the third month in a row. Automakers reported a 1% drop in sales from the previous year, according to a Reuters report.

While Ford Motor Company’s sales are down by 3.5% in the calendar year to date compared with the same point in 2016, it had a good May, edging out GM and others, according to data from Autodata Corp.

Ford sold 240,250 vehicles in May, a 2.3% increase from its May 2016 total sales.

GM, meanwhile, sold 237,156 vehicles in May 2017, a 1.4% drop from May 2016.

As for Chinese auto sales, those are down, too, despite a strong first quarter. Reuters reported a 2.2% drop in April sales after a 5% rise in March. The decline was the largest in China since August 2015, according to the report.

So how does that related to the metals side of the story?

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Ford Motor Company has bet the farm on electric and driverless cars, to borrow a phrase from an article this week.

The appointment of Ford’s new boss, Jim Hackett — who previously headed Ford’s Smart Mobility subsidiary from March 2016 but prior to that, was boss of Steelcase, a business furniture company — illustrates more graphically than words that Ford has read the runes for the internal combustion engine and the current automotive business model, and decided it needs a radical shake-up in its thinking and approach.

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A rethink of where the industry is going over the next 10 years has prompted not just the hiring of this talented outsider, but also, earlier this year, Ford’s $1 billion investment in Argo AI, an artificial intelligence company that, it is hoped, will produce the software needed for a new generation of self-driving cars.

Self-driving cars, though, are dependent not just on developing new technologies but a host of legal, insurance policy and regulatory changes that will take time to evolve.

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You should credit them for trying. As one of the first foreign multinationals to invest in the Indian market, General Motors has been persevering for over 20 years.

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This month, however, it has finally pulled the plug, announcing that it will stop making cars in India for the Indian market by the end of this year. That doesn’t mean it will cease all manufacturing. Although the firm has already stopped its production in Gujarat, it will continue with its manufacturing foundry at Talegoaon in Maharashtra, making parts and cars for export to the Asian and South American markets.

As part of a wider re-structuring aimed at improving profitability, the BBC reported, GM has put a $1 billion investment plan for India on hold, while also pulling back in South and East Africa. The firm plans to sell a 57.7% shareholding and grant management control to Isuzu in its East African operations, as well as stop selling cars in South Africa and sell its Struandale plant there to the Japanese firm in a re-structuring aimed at creating savings of $100 million per annum.

To be fair, minor successes aside, GM has struggled in India and failed to make much impact on a market originally dominated by domestic brands but latterly by Japanese and Korean firms. Even after more than 20 years, GM’s Chevrolet brand only has 1% of the market.

Commenting on the earlier plan to invest $1 billion in the market to develop its product range in what is forecast to become the world’s third largest car market, GM’s International president Stefan Jacoby is quoted as saying, “We determined that the increased investment required for an extensive and flexible product portfolio would not deliver a leadership position or long-term profitability in the domestic market.” Read more

This doubtful week, a Stanford economist made the bold proclamation that electric vehicles will completely displace their petrol and diesel counterparts by 2025, and India’s plan to triple steel production by 2030 was met with more than a few raised eyebrows.

Grand Plans

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Speaking of India, its ascent as a promising market for renewable energy has been truly impressive. Consultancy EY recently published its 2017 Renewable Energy Country Attractiveness Index (RECAI), and India took the number two spot, beating out the U.S., which slipped to third place.

India had been number nine in 2013, before Narendra Modi, who views developing renewable energy to wean India off coal as a top priority, became prime minister. Modi aims to boost India’s renewables capacity to 175 GW by 2022 (currently capacity stands at 57 GW).

India has similarly high ambitions for steel, as Sohrab Darabshaw reported earlier this week. The country aims to triple its steel production capacity by 2030, which would mean adding 182 million tons of capacity. Read more

The headline of this article from The Telegraph provocatively reads “The end of petrol and diesel cars? All vehicles will be electric by 2025, says expert.”

However passionately the argument is made, the 2025 deadline that comes from a report entitled “Rethinking Transportation 2020–2030” by Stanford University economist Tony Seba is almost certainly wildly optimistic. Nevertheless, it makes a good headline, and The Telegraph loves nothing better than good attention grabber.

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Seba is well known for his challenging and — some would say — self-publicising proclamations. But the basic logic of his argument that a combination of trends and converging technologies will have a transformational effect on the energy and transportation markets sometime in the next decade is probably out only in terms of timing.

Long a vocal advocate for renewable technologies, the professor has repeatedly pointed to the falling cost of solar power supported by wind, hydro and, in some cases, geothermal and biomass as sounding the death knell for conventional carbon fuels such as coal, oil and natural gas. In that respect, his case is hard to argue against.

As an outlier, the British government remains stubbornly committed to subsidising a nuclear power station at Hinckley Point at a cost of around £92.50/MWh ($120/MWh) — when even in the overcast U.K., solar was being won at £71.00/MWh in 2015 and prices have fallen further since.

Wind power can be even cheaper, at least in windy Britain. Although it is widely acknowledged that the power delivery from both wind and solar is intermittent, renewables can be made increasingly viable through a combination of improving storage technology and greater integration of power grids and smart technologies allowing transmission companies to partially even out the generation and consumption over a wider area. Read more

Earlier this decade, there was no lack of hype around electric and hybrid cars. Sales were expected to take off, driving demand for lithium, nickel, cobalt and a host of rare earth elements above supply.

That was, in part, motivation for a rare earths bubble, but demand have remained manageable as high sales of electric vehicles have failed to materialise. In reality, electric and hybrid cars have gained traction only gradually as the range of EVs grew and as hybrids struggled to make dramatic improvements in fuel efficiency resulting from advances in internal combustion, particularly diesel engine technology.

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Sooner or later, however, a combination of improving technology and pressure from legislation forcing changes in buyer choices should result in electric vehicles merging into the mainstream. A sure sign that the day is drawing nearer would be when established main brands set targets for themselves.

Well, this week Volkswagen did just that. The Financial Times covered an announcement made by Herbert Diess, head of the VW brand (the largest part of the VW Group), that the brand would sell one million electric cars by 2025 and leapfrog Tesla as the world’s premier volume EV manufacturer. As part of VW’s central plan, the FT reports, the firm is going to sell electric cars at the price of today’s diesel models and intends the entire electric fleet to be profitable from day one. Read more

Source: Gildor Elendill. Licensed under CC-BY

Now that Black Sails has signed off and Long John Silver is on to new adventures, it’s time to turn our attention to a different type of silver — one type of material that Silver himself spent many of his buccaneer days trying to amass.

But whereas Silver and his crew may have preoccupied themselves with coins, bars and doubloons (the former two are still big in 2017; doubloons? not so sure), we here at MetalMiner like to see how the precious metal factors into industrial end-use sectors and applications.

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Turns out that one of those applications — solar panel installations, specifically — made quite a splash in the Silver Institute’s World Silver Survey 2017, produced by the GFMS team at Thomson Reuters and released just this morning.

But first, a quick high-level overview.

Topline Takeaways

Global silver mine production declined by 0.6% in 2016 to a total of 885.8 million ounces — the first such decline since 2002, according to the report.

In addition, although primary silver production increased 1% last year, silver scrap supply, despite higher silver prices, fell to 139.7 million ounces in 2016. This is a level that has not been seen in 20 years, according to the Silver Institute’s press release for the report.

“If we look forward, we don’t think [this overall mine production drop] will be a one-off, either,” said Johann Wiebe, lead analyst of metals demand at the GFMS Team/Thomson Reuters in London, in an interview. “It’ll be a prolonged drop in supply until 2019-ish. Not large, but maybe a 2% drop annually. That’s quite a shift.”

It’s not surprising, Wiebe added, if one has seen the capital expenditures retreating over the past few years, with miners looking to protect their margins. Other non-precious metal production of base metals such as lead, zinc and copper, among others, affects the silver market — the link between precious metal and base metal commodities, in other words, is tighter than at first glance when it comes to production trends. Read more