Articles in Category: Manufacturing

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Numerous companies have expressed concern over the U.S.’s tariffs over the last year and change, in many cases citing the tariffs when referring to gloomy earnings forecasts or workforce reductions.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

From beverage can makers to automobile manufacturers, numerous sectors have bemoaned the impact of the Trump administration’s tariffs on their bottom lines (whether it’s the Section 232 tariffs on steel and aluminum or the vast series of Section 301 tariffs on goods from China).

That tariff pain has also been felt by the electronics sector, according to recent survey results from the IPC.

In IPC’s recent research report titled “Tariff War Fallout: U.S. Electronics Manufacturers Worried About Higher Tariffs and Laboring to Mitigate Impacts,” 86% of manufacturers surveyed between Sept. 25 and Oct. 2 were concerned about tariffs.

“On average, companies report they have seen tariff increases on approximately 31 percent of the total dollar value of the products they import,” the IPC report said. “Twenty-five percent of companies report over half of the dollar value of the products they import are facing higher tariffs.”

Some respondents indicated the tariff climate had an impact on their decisions regarding investment. According to the IPC, 21% of survey respondents indicated they are reducing their investments in the U.S.

In addition 30% reported sales were down as a result of the tariffs.

“Some companies may choose to absorb the higher costs associated with tariffs to maintain sales levels,” the report states. “But this approach results in higher costs, which will inevitably hurt margins. Moreover, some companies report that even raising prices is not stopping margin compression and weaker sales.”

In terms of supply chains, the tariffs have also prompted a shift out of China.

“Some 51 percent of responding companies report they are sourcing from countries outside of China as a result of increased tariffs on Chinese imports,” the report notes. “Nearly one in five companies (19%) report they are moving manufacturing and potentially other business interests outside of China.”

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The full report is available on IPC’s website.

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This morning in metals news, this week’s MetalMiner-Avetta webinar is fast approaching, global steel industry groups demand action on steel excess capacity, and Anglo American released its third-quarter production results and full-year guidance revisions.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Sign Up for Thursday’s MetalMiner-Avetta Webinar

MetalMiner and Avetta are hosting a free webinar this Thursday, Oct. 24, on manufacturing and the sector’s challenges vis-a-vis finding the right talent in today’s  labor climate.

The event is free to attend, but registration is required — reserve your spot now.

Steel Groups Rally Against Excess Capacity

Amid a backdrop of sliding steel prices, steel industry groups around the world renewed a call asking for new efforts aimed at tackling steel excess capacity.

“We are grateful for the efforts made to date by the G20 and OECD governments to address excess capacity, and to support a level playing field at the G20 Global Forum on Steel Excess Capacity and OECD Steel Committee,” the industry groups said. “Unfortunately, effective reductions in capacity and concrete actions to remove government measures that distort markets, including raw materials markets, have not been adequate to date. Efforts by governments to eliminate practices that lead to excess capacity should be redoubled.

“We are hopeful that the diligent efforts of Japan, the current G20 Chair, are successful in extending the G20 Global Forum on Steel Excess Capacity beyond 2019, and we urge all G20 and OECD steelmaking economies to pursue all vigorous means to obtain substantive results on the critical problem of steel excess capacity.”

Anglo American Releases 3Q Results, ’19 Guidance

Miner Anglo American revised its 2019 copper guidance downward, down to a range of 630,000 tons to 650,000 tons (from a range of 630,000 tons to 660,000 tons), partially as a result of drought conditions in central Chile.

Third-quarter copper production reached 159,000 tons, down 8% from 172,000 tons in Q3 2018. For the year to date, the firm’s copper production dipped 1% to 479,000 tons.

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Palladium production in the third quarter was flat on a year-over-year basis, while platinum production fell 1% to 527,000 ounces.

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This morning in metals news, an upcoming MetalMiner webinar will explore the challenges manufacturers face in talent acquisition, the nickel price continues to fall after a hot summer and miner BHP released its production results for the quarter ending Sept. 30.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Webinar to Explore Manufacturing ‘Skills Gap’

If you haven’t already done so, there’s still time to sign up for MetalMiner’s free Oct. 23 webinar, “The War For Contractor Talent: How Manufacturers Can Find the Workers They Need (and Fast).”

The webinar is free to attend, but registration is required.

MetalMiner Executive Editor Lisa Reisman will be joined by Matt Runfola, founder of the Chicago Industrial Arts and Design Center, and Brett Armstrong, director of business development at Avetta.

Nickel Price Slides

It was a hot summer for nickel, which surged from below $12,000 per ton in June to nearly $18,500 per ton in early September, according to MetalMiner IndX data.

However, the nickel price has started to come back down to earth over the last six weeks.

The three-month LME nickel price reached $16,260/mt as of Friday, down 4.07% on a month-over-month basis.

BHP Releases 3Q 2019 Results

Miner BHP released its quarterly production results for the quarter ending Sept. 30, showing copper production fell 3% from the previous quarter due to planned maintenance.

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Meanwhile, metallurgical coal and energy coal production fell 21% and 24%, respectively.

“We delivered a solid start to the 2020 financial year through ongoing strong operational performance across our portfolio,” BHP CEO Andrew Mackenzie said. “While Group production for the quarter decreased slightly due to the expected impacts of planned maintenance and natural field decline in Petroleum, guidance remains unchanged and we are on track to deliver slightly higher volumes than last financial year. The South Flank iron ore project is 50 per cent complete, with all our major projects on schedule and budget. We achieved further encouraging exploration results in Petroleum and at the Oak Dam copper prospect.”

Manufacturers today are grappling with a shortage of people.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Much ink has been spilled about the contemporary skills gap, which has forced manufacturers to go to new lengths to fill positions in their operations.

Given the shrinking labor pool for manufacturers, who continue to need tech-savvy workers to keep their operations humming, what can they do to find them in a world in which they’re increasing harder to find?

An upcoming MetalMiner webinar will delve into that very topic; those interested can register for the free webinar here.

Scheduled for 10 a.m. MDT on Oct. 24, MetalMiner Executive Editor Lisa Reisman will be joined by Matt Runfola, executive director and founder of the Chicago Industrial Arts and Design Center, and Brett Armstrong, director of business development for Avetta, for a webinar titled “The War For Contractor Talent: How Manufacturers Can Find the Workers They Need (and Fast).”

Those interested in participating in the free webinar can register online here.

In the free webinar, Reisman will delve into what companies should do to address the aforementioned talent gap, while Runfola will share his insights regarding what changes need to be made to facilitate a workforce that fits the modern manufacturing climate.

Earlier this year, MetalMiner visited the CIADC to chat with Runfola about the CIADC’s mission.

“High-value manufacturing is flexibility, it’s being able to change product lines quickly and efficiently and you’ve got people that can adapt very easily,” Runfola said in August. “In our small way, I feel that’s what we’re equipping people that come out of our classes with, that versatility.”

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Armstrong will weigh in on how businesses can find 100% compliant contractors, thus mitigating risk and improving productivity.

As global supply chains twist and turn amid economic pressures, including the ongoing U.S.-China trade war, much attention has been paid the phenomenon of reshoring.

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.

Simply put, reshoring is the practice of bringing manufacturing back to a country — in this case, the U.S. — from overseas.

Whether as a result of trade deals (e.g. NAFTA) or the rise of China as an economic power, U.S. politicians and labor groups have long bemoaned the loss of manufacturing to other countries.

The U.S.-based Reshoring Institute, which advocates for manufacturing in the U.S., has chronicled reshoring trends in recent years, most recently in its 2019 Reshoring Survey.

“For more than three decades, moving production offshore was a relatively easy decision,” the Institute said in its annual survey document. “With an almost endless supply of low-cost labor, the decreasing costs of transportation, low currency exchange rates, and significant foreign-government incentives, hundreds of thousands of jobs left the U.S. for lower cost nations like China. The once overwhelming cost advantages, however, are not what they once were. A growing number of businesses have rethought their global manufacturing strategies and made the decision to reshore at least some of their production to the United States.”

According to the report, more than half of the executives surveyed said they were planning or considering reshoring efforts, while 97% said they would consider domestic sources if the price and quality of those products were competitive with those of foreign suppliers.

The survey included questions regarding reasons U.S. companies might seek to reshore, challenges related to offshoring and factors that might be preventing companies from reshoring.

In terms of incentives to reshore, the top three reasons came were: international logistics costs (69.74%), proximity to customers and markets (55.26%), and total cost of ownership evaluation (51.32%).

Delays in shipping, production schedule delays and inconsistent quality were the most-cited examples of challenges U.S. companies face when sourcing from overseas.

As such, while many of the executives surveyed indicated they were at least considering reshoring initiatives, there are several factors preventing them from following through.

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According to the executives surveyed, high labor costs were the No. 1 reason behind not proceeding with reshoring, followed by the lack of an existing facility in the U.S. and lack of skilled workers.

GDP figures may be holding up well, but metal consumption in China suggests the global slowdown and the ongoing trade war with the U.S. are taking their toll on China’s manufacturing sector.

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Reuters reported top state primary aluminum producer Chalco is quoted as filing an 8% fall in output, with primary aluminum output of 1.89 million tonnes in the first half of the year, down from 2.06 million tons compared with the first half of 2018.

Overall, revenue actually rose 15% to 94.9 billion yuan, despite a 10% drop in the primary aluminum segment, helped by rising alumina output. Alumina output increased 3.2% year-on-year to 6.82 million tons, fueling a trading revenue increase of 23%.

But higher primary metal costs and weak prices in the primary sector hit profits. In the second quarter alone, Chalco’s net profit dropped 52.7% from a year earlier, while revenue was up 11.3% year on year.

In a separate Reuters article, the news source reported exports have also been hit, falling 4.3% in August from the previous month despite a weaker yuan. Unexpected production outages at two key smelters meant there was less metal available for overseas shipments following flooding at Hongqiao’s premises earlier last month and a separate outage in Xinjiang.

Last month, China exported 466,000 tons of unwrought aluminum, including primary metal, alloy and semi-finished products. The total was the lowest since February and was also down 9.9% from August 2018.

Supporting the aluminum picture, imports of unwrought copper — including anode, refined and semi-finished copper — products into China stood at 404,000 tons last month, Reuters reported, down 3.8% from the 420,000 tonnes in July and also down 3.8% year on year. The article went on to state the decline came despite copper prices in China being mostly high enough in August for traders to make a profit by buying on the London Metal Exchange, the global price benchmark, and selling on China’s Shanghai Futures Exchange (encouraging bookings of physical copper imports into China).

The blame for the drop in demand is laid at China’s bruising trade war with the United States, driving a fourth straight month of contraction in factory output in August, according to an official survey.

China is not alone, of course.

U.S. manufacturing output has remained positive, albeit slower than a year earlier. However, early indicators, like the Institute for Supply Management survey, showed a contraction in August — the first since 2016, according to Bloomberg. That suggests at least parts of the manufacturing landscape are facing rising headwinds; we would be complacent to think the consequences of the trade war are falling solely on China.

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Western Europe is also slowing fast. German manufacturing is arguably already flirting with recession as a consequence of a slowing Chinese economy.

Just as a rising tide lifts all boats, falling global GDP correspondingly depresses prospects for all.

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

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Standing on an otherwise quiet stretch of Ravenswood Avenue on Chicago’s North Side — with a green barrier of vegetation obscuring the Metra tracks on the other side of the street — one can hear faint sounds of hard work being done.

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The Chicago Industrial Arts and Design Center, located at 6433 N. Ravenswood Ave. in Chicago’s Rogers Park neighborhood. Fouad Egbaria/MetalMiner

In a building that was once home to the Chicago Radio Laboratory in the 1920s, 6433 N. Ravenswood Ave. in Chicago’s Rogers Park neighborhood is now home to the Chicago Industrial Arts and Design Center (CIADC).

Inside, one finds a variety of work being done by a diverse group of people: teenagers, retirees, artists, and individuals simply looking to learn how to make things or try something new.

Under the watchful eyes of instructors, high school students busy themselves in the welding shops, wielding welding torches as sunlight peeks cautiously into the workspace on a pleasant August morning.

On the second floor, students of all ages work with wood, carving and cutting and measuring amid the pervading aroma of sawdust.

Another floor up and one finds students learning the tricks of casting, with the results of that work scattered about the workspace: a defiantly clenched fist, stately busts and metallic chicken feet.

Founded in 2015 by Matt Runfola — a self-proclaimed steel guy who says his motto is “fabrication, fabrication, fabrication” — students come to the CIADC from as far north as the Illinois-Wisconsin border and as far south as western Indiana to learn how to weld, cast and woodwork under the tutelage of experts.

The workspace at 6433 N. Ravenswood Ave. houses tools like a CNC router, an English wheel, and casting molds of varying shapes and sizes.

In short, it is a place of innumerable possibilities, brought into the world by innumerable creative and technical decisions.

Chicago’s North Side is not exactly known for its industrial character — so how did this workspace across the street from Metra tracks come to be?

The CIADC’s creative missions finds its roots in the art of disassembly.


CIADC founder Matt Runfola shows off the nonprofit’s CNC router. Fouad Egbaria/MetalMiner

As a child growing up in rural upstate New York — “farm country” he notes, populated by “mechanical stuff galore” — Runfola enjoyed taking things apart.

“I just had an affinity for having my hands on stuff taking things apart,” Runfola said. “I raced motorcycles when I was young. Part of racing dirt bikes is you’re constantly breaking them, so it’s a lot of opportunity to pull them apart.

“I think it was with that the realization [came] that someone, somewhere designed everything on that motorcycle. I was very intimately involved with tearing that motorcycle apart and putting it back together week in and week out.”

That love of tinkering inspired a curiosity about design, eventually leading him to the Rochester Institute of Technology, where he got his bachelor’s degree in mechanical engineering.

Runfola wasn’t satisfied with “typical engineering” — he gravitated toward jobs that gave him access to shops where things are made, working on designing and prototyping.

“I started to whet my appetite with creativity,” Runfola said. “It was like ‘hey, design can be used to make things that I want to make, not just make things that other people made.”

That interest led him to the world of custom furniture and sculpture, which he worked in on the side. He also worked as a manufacturing engineer for a company that designs skateboards and snowboards.

But that experience prompted him to reconsider the best outlet for his passion.

“I realized at that time that the engineers, as much as we were making everything happen, we weren’t the creative geniuses behind the product,” he said. “It was marketing, and in that industry it’s very much marketing-driven.”

That realization brought him to Chicago, where he worked on the marketing side for Brunswick Corporation. Eventually, he moved on, pursuing a position as an introductory metal sculpture teacher.

“I really never looked back from that point,” he said. “I left the corporate world and focused for a number of years on my own product line of custom furniture … while I was teaching.”

That experience led him to open the CIADC as an outlet for those interested in metalworking, woodworking or casting, something he said was a “void” in the Chicagoland area.

In short, he founded the nonprofit to give people an “easier opportunity to explore the industrial arts.”

“People in high school, people outside of a university setting, do not have access to, not just working with their hands but working with their hands with these industrial processes,” he said.


During a tour of the facility, Runfola talked excitedly amid the clanging of metal and cutting of wood, lighting up when asked to explain the difference between TIG and MIG welding.

“We really go to great lengths to make it comfortable for people to cross the threshold to enter into our facility,” Runfola said. “We feel very strongly that once people are in a class and learning, 99% of people are going to fall in love with this type of work.”

Many younger students come into the shop not exactly knowing what they’re getting themselves into, Runfola said, but once they realize they can safely handle material to produce something of their own creation, it gives them satisfaction.

Cam White, 15, a high school student, is relatively new to the CIADC.

“In Chicago, it’s really hard to find places to do woodworking and metalworking,” she said during her third day of classes at the CIADC. “I was researching it because I wanted to do more hands-on things.”

Student Cam White, 15, concentrates in the metalworking shop. Fouad Egbaria/MetalMiner

White said woodworking was her primary interest, but she opted to take metalworking class to try something new. White said she isn’t sure if she would want to pursue a career using the skills she’s learning in the shop, but she does want to have her own home shop someday.

White said that among her friends, her interest in this type of work is unique.

“They’ll say ‘oh that’s cool,’ but they’re not interested in it,” she said. “They’re more interested in me doing it than actually them doing it.”

White said she’s not a “technology person,” adding that the type of “old school” work done in the shop might not appeal to other people in her age group.

“Now with all the industrial stuff and all the gaming and coding and stuff you can do in that realm, more of my friends lean to that side and less of woodworking and shop-type things,” she said.

Meanwhile, Tom Bittman, 70, retired after a career in commercial banking, first took classes at the CIADC in the fall of 2018.

“I enjoy making things,” he said. “I have a lifelong hobby of woodworking. I’ve taken some classes in woodworking at other places as well.”

While surfing the Internet, Bittman came across the CIADC and decided to check it out. Like White, he decided to try something new — after taking woodworking classes last fall, he delved into metalworking this spring.

“It’s a learning thing for me,” he said. “It’s entertainment, it’s learning, it’s a little adventure doing something new someplace new with new people.”

Last year, Bittman said he learned about all the ins and outs of woodworking, including cutting and shaping, in addition to use of the various machines in the shop.

“It’s the same thing with metal — just very different,” he said, laughing.

Of course, without dedicated, competent instruction, some students’ desire to learn could wane.

A bust on display in the third-floor casting shop. Fouad Egbaria/MetalMiner

Olivia Jade Juarez, 27, works as an instructor and manager of CIADC’s welding and forging shop.

Jade Juarez studied sculpture during her time in art school using a wide range of materials, but did not work with metal much at that time.

Out of school, however, she worked at the Anderson Ranch Arts Center in Colorado, which had a sculpture department largely focused on metalworking tools.

Working as an assistant there, she had to quickly familiarize herself with the tools and techniques of metalworking.

Fortunately, she picked it up quickly.

“There’s this perception that metalworking is really rough and tumble and everything is super heavy,” she said. “I quickly realized there is a little bit of that, but it is more than anything precision and patience.”

She later worked as an assistant for metals sculptor Vivian Beer for a year, after which she decided to move back to her hometown Chicago.

She heard about the CIADC based on a recommendation from someone at Anderson Ranch, admitting that she first came to the center to use the space for her own work. However, she decided to take a class and eventually spoke with Runfola about taking on a teaching job at the center.

Jade Juarez said her favorite type of student is one who comes in with no experience.

“I’ve had a few elderly people come in and just to see them — it’s almost as if they renew themselves a little bit just to be handling flames and fire and welding, forging,” she said. “It’s really exciting to see them realize that they can still do things like that and that it’s not that far out of reach.”

Companies in industries that need workers to do these types of things — metalworking, in particular — are hoping that more people reach that realization.


The “skills gap” is something often bandied about these days — that is, that there are not enough skilled workers to fill manufacturing jobs in the U.S.

According to a skills gap study by Deloitte and The Manufacturing Institute, 2.4 million jobs could go unfilled between 2018 and 2028 as a result of the skills gap, amounting to a potential economic impact of $2.5 trillion.

Runfola said the CIADC’s mission is not necessarily to give people the skills to move into careers in these types of fields. However, he did express hope that the pendulum will swing back in manufacturing’s direction.

“When it comes to skilled workforce and filling the voids, people are realizing that being in the trades is not because you can’t do anything else,” Runfola said. “I think that’s an important thing that people are realizing again.

“It’s almost like we knew that mid-2oth century and the latter part of the 20th century, but somehow we started forgetting that.”

In an increasingly tech-driven world, part of that drive to remember will depend on drawing interest from younger people, like White.

Whether it’s kids in the city or the suburbs, Runfola argued very few of them have the opportunity to do this type of work, at home or in school. To that end, Runfola noted the center offers a scholarship program based on financial need, through which qualifying families can receive 80% off tuition.

“That’s one way that we’re trying to remove roadblocks and get as many teens as possible in here,” Runfola said. … “Right now it’s about piquing their curiosity so at least it’s on their radar.”

Jade Juarez said the idea of making things is perhaps being lost among people in her generation.

“There’s a lot of things you buy that are already made,” she said. “There isn’t much critical thought or questioning about how things are made anymore.

“There’s a really deep disconnect between what you end up having or using and what the raw materials started out as. I think the culture is very different now — it’s just ordering stuff.”

While the modern consumer culture allows for ease of purchasing items at a click, the result is a dwindling self-sufficiency, she argued.

“Not many people know other people who are welders or carpenters or just people in the trades,” she said.

She argued one simple way to help reverse the decline of the skilled labor workforce is to reintroduce shop classes into high schools (she noted she did not have a shop class at her high school).

“Then you have that seed or a memory of having built something, so that later on when it’s more of a financial decision, you’re not going in completely blind,” she said. “I really hope that it shifts back.”

While craft work is not quite the same as the industrial trades, she called it a sort of “sister or brother” to it; she said a rise in do-it-yourself (DIY) projects is an encouraging sign of a general interest in making things.

“That kind of hunger for learning … could be cultivated more,” she said. “It doesn’t have to be a hobby or this quirky thing you do, it can be your career.”

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While there is no easy answer or quick solution to the skills gap in the U.S., Runfola hopes the CIADC can do its part in its own small way.

“High-value manufacturing is flexibility, it’s being able to change product lines quickly and efficiently and you’ve got people that can adapt very easily,” he said. “In our small way, I feel that’s what we’re equipping people that come out of our classes with, that versatility.”

Manufacturing trends are often discussed in large, impersonal numbers: a skills gap of 2.4 million, for example (not much less than the population of the city of Chicago).

As such, attempts at reforming the system are often placed in the context of Big Change, whether it’s government-subsidized programming, changes in high school curricula or private sector spending on professional development.

While it may be true that such changes are needed to combat the so-called skills gap, the conditions for Big Change can sometimes be produced through incremental efforts on the ground.

“I feel like I was given throughout my whole career trajectory … I was given opportunities to learn, to be exposed to new things, to have people be patient with me,” Runfola said. “I feel like that’s what we’re doing here.”

Automotive markets just about everywhere are in decline this year.

The question is: to what extent is this a cyclical downturn as opposed to a structural shift?

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The Financial Times article reported Indian passenger vehicle sales fell 31% last month from the same time a year earlier, according to the Society of Indian Automobile Manufacturers. It was the worst month since the turn of the century in a dismal spell that has seen sales fall 20% or more for four consecutive months, while sales have failed to rise for more than a year.

India’s economy is slowing, with GDP growth falling to a five-year low of 5.8% in the first quarter of 2019. In addition, a liquidity squeeze caused by a crisis in its shadow banking sector is choking off consumer demand and business expansion.

The article goes on to explain that about 40% of new car loans came from these shadow banks, making liquidity tight. Although a reduction in India’s high car taxes — the government levies a 28% goods and services tax on cars, with the effective rate including other duties rising as high as 48% for some vehicles — is a possibility, it is unlikely the new administration’s cash-strapped budget could afford it.

Significant as India’s car market is — as recently as last year, India’s motor market was thought to be on course to overtake Germany and Japan and become the world’s third-largest, the Financial Times reported – Germany’s is even larger.

Yet, declines are dramatic in Germany, too.

Source: ING Bank

Germany’s problems are more nuanced.

Domestic production has been hit by the delayed introduction of the new worldwide light vehicle test procedure, which caused severe disruption to German automotive production and shipments.

But matching the introduction of the China 6 emission standard has also caused a downturn in Germany’s largest automotive export market: China.

To underline the importance of the market, ING Bank reported that in 2018 almost one-quarter of all cars sold in China were German. BMW and Daimler recorded more than one-third of their total car sales in China. For Volkswagen, the share is even bigger (40%).

Yet new car sales in China have fallen for 13 months in a row, a slump that started in the second half of 2018 when the trade war between China and the U.S. began to heat up, according to ING.

The trade war has been a factor. U.S. customs duties on Chinese goods worth U.S. $250 billion (with U.S. $300 billion to follow Sept. 1) and Chinese customs duties on U.S. goods worth U.S. $110 billion, car and car parts from China are being taxed at 27.5% in the U.S. since July 2018. U.S. autos are subject to China’s standard tariff rate of 15%.

Given that some German car manufacturers actually export U.S.-produced cars to China, there has been a clear and direct impact of the trade conflict on the German car industry.

But that is only part of the story.

The switch to China 6 meant consumers held off buying the older models despite a major distributor push to discount old stock.

But the industry worries China could be going through a structural shift.

According to ING, China is already the largest ride-hailing market in the world, with over 459 million customers and a turnover of around U.S. $53 billion. By comparison, where it all started in the U.S. there are currently 66 million users generating U.S. $49 billion in turnover.

To put things into perspective, one-third of the Chinese population already uses alternative mobility solutions, while in the U.S. the figure is around 20% and in the E.U. it is just 18%. Further, while in the U.S. ride-hailing is used occasionally by a car owner, in China many users are not yet on the car ownership ladder; as ride-hailing becomes more widespread, those users may elect never to become car owners.

According to JustAuto, new vehicle sales in China fell by 4.3% to 1.81 million units in July from 1.89 million units a year earlier, according to wholesale data released by the China Association of Automobile Manufacturers. This includes all vehicle types, passenger vehicles and commercial vehicles, with the cumulative seven-month total at 14.13 million units – down by 11.4% from the 15.96 million units sold in the same period of last year.

Jeff Schuster, president of global forecasting at LMC Automotive, is quoted in Europe’s Autonews as saying global light-vehicle sales will decline 2.6% in 2019 to 92.2 million units. Through 2025, he doesn’t see more than 2% growth as the mature markets of western Europe, the U.S., Japan and Korea contract in volume over the next five to seven years. Only electric vehicle production as a subset — coming from a very low base — is set to rise.

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The industry’s current downturn is in part cyclical and production will recover regionally as consumer confidence and access to credit improves.

At the same time, there is a structural shift happening that will impact the industry’s long-term future and create significant challenges for global western carmakers in the years ahead.

Jaguar Land Rover’s (JLR), decision to invest hundreds of millions of pounds to enable its Castle Bromwich plant in the U.K. to build electric cars, as reported by the Financial Times, is interesting on a number of levels.

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Specifically, for JLR it underlines the drastic steps the firm is being forced to take following a collapse of sales over the last 18 months. Buyers have turned away from JLR’s diesel engine lineup — some 50% of JLR’s models are diesel-powered — amid a backdrop of wider automotive sales slumps across Europe and in China.

Switching to petrol engines is but a stopgap for a manufacturer whose range is skewed heavily to larger, less fuel-efficient models.

European environmental standards will require manufacturers to meet a fleetwide average of 57 miles per U.S. gallon by 2021 – already a demanding target with high mix of diesels and a number of electric options in its range.

But with a switch to petrol and following recent suggestions by the E.U. that the limit should be ramped up to 92 mpg by 2030, JLR could struggle to survive.

So, switching to all-electric for some of its key models — like the replacement for the XJ, the flagship Jaguar saloon— is, while immensely challenging, the only viable option.

The challenge — and the source of JLR’s reluctance to build its existing all-electric I-Pace in the U.K. — has been the lack of a U.K. supply chain.

Many of the drivetrain components, like motors, were produced by third parties but are increasingly being made in-house, according to thedrive.com. The most significant factor, however, is the lack of a significant automotive battery maker in the U.K., the Financial Times reported.

Perhaps the imposition of harder post-Brexit borders with the E.U. will encourage U.K. manufacturers to establish a major battery facility at some stage in the future — or, maybe, Castle Bromwich will be the last major automotive investment in the U.K.

Either way, for now sourcing major components from Europe is a brave move, particularly with so much uncertainty around about trade terms.

From a wider perspective, JLR’s investment suggests manufacturers do not believe politicians will carry through with such threats, despite all the current political posturing over a hard Brexit. It also suggests manufacturers believe there will be some form of a softer compromise that allows low-tariff or tariff-free trade with the E.U. and, more importantly, relatively free movement of goods. That, or some solution requiring only light touch border controls that allow just-in-time supply chains to continue to operate with levels of flexibility similar to the current regime.

All other U.K. car manufacturers are either keeping their cards close to their chests while waiting to see the outcome of the Oct. 29 deadline to leave the E.U., or are actively moving to Europe by announcing investment for new models will go into mainland European plants.

JLR’s move is against the current grain and raises the question of whether it has anything to do with the level of state financial support it has received, desperate as the government is to build momentum against the prevailing tide of lost investment to the E.U.

No automotive company invests in new facilities without going cap in hand to the government to see what help it can get; typically it is 9-10%, but it won’t be long before news leaks out of quite how much JLR has secured for Castle Bromwich.

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E.U. state aid rules set limits — but in a post-Brexit world, potentially anything could be agreed.