Home of such influential rockers as the White Stripes, Electric Six, the Detroit Cobras, and the Raconteurs, Detroit was also rocking and rolling with the North American International Auto Show last week. The show will remain open to the public until January 27. Not the biggest, maybe not even the most-loved auto show around, the Detroit show is still well-known as the first international auto show to begin each year. The season begins when Detroit says ready, set, and GO.

There were more than a few highlights from this year’s show, ranging from the Corvette ZR1’s debut  into high society (the only place a car like that can travel, with its $100,000 price tag!) to a country-western star unveiling the Ford F-150 and a cattle drive complete with 120 longhorns  accompanying a Dodge Ram  near Detroit’s Cobo Center. Here’s the new song for cowboys: Save a horse; ride a pickup. The green theme of the Detroit show was also pleasing to the crowd ” as were several new cars from Asian manufacturers.

Why is the Corvette ZR1 of any interest to metals fanatics? Because of the wide array of metals which are used to make this high-performance sports car so incredibly lightweight. Light weight is necessary when you intend for your car to hit more than 200 mph. First the basics: Based on the original ZR-1 (note the hyphen, which is now missing), the car is very simple in appearance ” but the car is clearly built to fit its $100,000 asking price. The supercharged V-8 engine is capable of 620 horsepower, and will make its mark as the most powerful Chevrolet in existence. According to the New York Times, the front fenders, front splitter, lower rocker moldings, roof panel, roof bow, and the hood were constructed with carbon fiber, while the chassis’ frame rails are hydroformed aluminum.  Magnesium is used to make the fixed-roof frame and steering column bracket. The Times also notes that the monstrous brakes are created with carbon-ceramic rotors, which saves 11 pounds per corner over iron rotors.

Although the environmentalists couldn’t be too fond of the cattle drive Chrysler let loose on Detroit ” after all, cows supposedly emit more air polluting gases than even cars  ” the green theme of the show inspired those looking out for nature, and shamed some of the more ecologically reckless. While muscle cars and big trucks aren’t disappearing anytime soon (and I’ll admit that I’m an avid environmentalist who secretly adores old muscle cars), the future looks green for many consumers. Although the Corvette ZR1 boasts a powerful V-8 engine, it has  been reported that interest in the V-8 engine is sputtering.  Instead, it seems that smaller engines and alternative-fuel vehicles have been promoted at the show. Hybrid cars have been growing in popularity for quite a while. But despite the interest, writer Jerry Garret asks, Where is that next generation of vehicles capable of meeting those federal mandates, lowering greenhouse gas emissions and pioneering uses of alternative forms of propulsion? They seem to exist, for the most part, still somewhere over the rainbow and in television commercials. The green-themed Detroit auto show, however, is a clear move to help people who ”  to quote Garrison Keeler  ” hate something, change something, and make it better.  Metals can play a clear role in this search for the perfect environmentally-friendly vehicle, as this blog explains. Lighter metals lead to lighter cars, which can lead to less fuel consumption. Various cars may have the limelight this month at the show, and the cattle may keep downtown Detroit busy, but lightweight metals are playing their own starring role at the North American International Auto Show.

— Amy Edwards

Just days after making our metals and currency predictions for 2008 I read that many notable commentators are supporting our comments on the Chinese currency. Driven by stubbornly high inflation, Beijing looks set (unofficially) to let the RMB appreciate significantly in the coming year in an attempt to dampen exports and reduce demand for imports, hoping this will cool the economy. With inflation running at 11.5% last year driven by growing exports and China’s foreign currency reserves just shy of $1,500B the government is desperate to bring growth back into single figures. Our call was from 7.3 to 6.7 over the year but Stephen Green of Standard Chartered Bank is predicting the RMB could rise to 6.17 per USD by year end. The effect for importers of Chinese product could be a 9% increase in prices on top of recent changes in export taxes export taxes and VAT rebates.

We have long said that China’s role as the low cost country of first choice is on a slow decline and for many commodities this is increasingly becoming reality. A weakening US dollar and rising efficiencies have made many US companies competitive in the international market place where they were once hopelessly over priced. Not that we would recommend devaluing the US dollar as a remedy for US competitiveness, as Britain found in the 1970’s and 80’s it is at best a short term solution, but as China’s dollar costs rise we may at least see the flow of more labor intensive jobs to China slow from the flood a few years ago.

From a personal point of view I will find it interesting during the coming year to see to what extent the currency and tax changes impact China’s consumption and exports of metals. As we have previously posted, the Chinese government has taken deliberate steps to try and reduce exports of basic steel products and certain non ferrous metals while at the same time increasing incentives for imports of other metals. The currency movements will amplify that process as imports appear cheaper to Chinese consumers but exports less attractive. Where Chinese consumption has been the main driver of price for certain commodities, like Copper, this could see the resurgence of Chinese demand and support for prices in the year ahead. The recent abolition of import taxes on refined Copper has already seen renewed buying interest.

So whatever your particular metal interest is 2008 is likely to see China continue to play a significant role in determining price and availability. We now have the additional dynamic of currency on top of supply and demand to increase the volatility.

–Stuart Burns