EU automotive industry braces for 2H slowdown
Semi-conductor supply shortages seem to have largely subsided in the EU automotive industry for now, but logistical disruptions, high inflation and macroeconomic headwinds could present challenges to the industry later this year.
European carmakers have strong order books heading into the second quarter, and by the third quarter demand and supply are expected to realign following the normalisation of supply-side issues. The abatement of these logistical and supply chain obstacles, coupled with an anticipated slowdown in orders, is seeing some automakers ready themselves for increased competition.
Easing supply boosts first quarter
Sentiment in the automotive industry was overall positive in the first quarter, with vehicle registrations showing significant signs of improvement and inventories returning to normal levels after a multi-year period of materially constrained supply. Car registrations in the EU increased by 18pc year on year to 2.7mn units in January-March, data from the European automobile manufacturers association show.
In the meantime, car manufacturing group Stellantis had 1.3mn units in inventories at the end of the first quarter, a 21pc increase on the previous quarter and a 61pc increase year on year.
But automotive producers are bracing themselves for increasing competition and a slowdown in demand in the second half of the year. Stellantis has a healthy order book for the next three months but has "seen some relative slowdown in order intake", a spokesperson told Argus.
German carmaker BMW Group's first-quarter automotive sales inched lower to 588,000 units, weighed down by tepid demand, as high inflation in Europe and the lingering effects of Covid-19 policies in China weighed on overall demand, but the company expects 2023 sales to be stable on 2022 at 2.4mn units.
Rival German carmaker Volkswagen Group boasts a 1.8mn unit order book in Europe for the first quarter, which should carry the company through the second quarter. But the group is anticipating that competition will intensify as the demand outlook for the second half of 2023 weakens.
The auto industry is also grappling with inflated raw material costs, including lithium, copper and steel. Increased competition in the sector later this year will likely make it more difficult to pass on inflated costs to consumers.
But carmakers anticipate that costs will come down when compared with surging prices in the fourth quarter of 2022. The Argus assessed northwest European hot-rolled coil index averaged €657.79/t ex-works in the fourth quarter of 2022, which rose to €778.52/t ex-works in the first quarter of this year. The index is averaging €788.22/t ex-works so far this month, but has fallen by €73.50/t since its peak on 5 April.
Decarbonisation and electrification
Steel demand could receive a boost from the growing number of electric vehicles (EVs) that will be produced in the coming years. WorldAutoSteel, the automotive group of the World Steel Association, estimates that an EV could require up to 260-280kg more steel than an internal combustion engine vehicle, which Argus estimates requires around 900kg of steel.
There is an expectation that EVs will make up a quarter of all new car sales by 2025, according to European steelmaker ArcelorMittal. In March, the EU saw a surge of 58pc in new registrations of battery electric vehicles (BEVs), reaching 151,573 units. This equates to a 14pc market share.
Hybrid electric vehicles also had a strong month in March, with sales up by 38pc to 264,694 units.
BMW's first-quarter EV sales increased by 83pc year on year to 65,000. The company indicated that sales in China would drive the growth of its EV segment, which will reach 9pc as a share of total sales in 2023. And VW plans to increase the percentage of BEV sales from 7pc to 10pc, with Stellantis also targeting a "significantly higher" mix of EV sales by 2024/2025. But an intensifying price war across the EV space has seen car manufacturers planning to focus more heavily on margins in upcoming quarters — automakers will be more eager than ever to secure cheaper steel contracts.
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Tata Steel UK unions vote to strike
Tata Steel UK unions vote to strike
London, 9 May (Argus) — Workers at Tata Steel's Port Talbot plant in south Wales have voted to strike in response to the company's plan to stop iron-making and cut thousands of jobs. Over 3,000 members of Community Union have been balloted, with more than 85pc in favour of industrial action — this is despite the company threatening to withdraw its proposed support package in the event of strikes. "It should be noted this resounding mandate has been delivered in spite of the company's bullying and unacceptable threats to slash redundancy payments," Alun Davies, Community's national officer for steel, said. He urged Tata to "get back around the table" to prevent a major industrial dispute. Workers at Unite the union have already voted in favour of strike action, which is set for 30 May. Unions — and the Syndex consultancy that has represented them in talks with Tata — have called the company's agreement with the government a "bad deal". They have requested more financial support to help Tata with decarbonisation, and for a blast furnace to be maintained. The government is giving Tata £166/t towards its decarbonisation — less than many European competitors receive from their governments. The low level of state support played into Tata's decision to move to one large electric-arc furnace, which has been roundly criticised by unions. By Colin Richardson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Jakarta forum calls for exploring Ni price references
Jakarta forum calls for exploring Ni price references
Singapore, 9 May (Argus) — The global nickel market should explore different price references for nickel products to reduce price uncertainty, panellists said at the Third Nickel Producers, Processors and Buyers Conference in Jakarta, Indonesia. The London Metal Exchange (LME) nickel price, which is the global benchmark for class 1 nickel products, has been volatile for years now since LME suspended nickel trading in early March 2022, when prices surged above $100,000/t overnight. There were hopes late last year that prices would become more stable this year. But the price outlook has been uncertain since the turn of the year, with class 1 prices on the London Metal Exchange (LME) slumping to a four-year low of $15,877.50/t on 6 February on expectations of weak Chinese stainless steel and electric vehicle demand, before rebounding to a six-month high of $19,387.50/t on 26 April because of a delay in Indonesian RKAB mining right approvals and a reviewed forecast suggesting a significant smaller surplus for this year. There should be a new reference to counter price volatility, some conference participants said, while others suggested decoupling class 1 and 2 nickel prices. "[Prices are volatile now because] most prices are referenced to class 1, so maybe we can explore further with more price references, like class 2 nickel pig iron (NPI) and mixed hydroxide precipitate (MHP)," Ray Gunara, president-director of Indonesian coal producer Harum Energy, said on 7 May. Harum Energy this year bought a majority stake in an Indonesian nickel processing and refining business. Most conference participants agreed that a different price reference would help maintain nickel price stability. "[NPI prices now are] difficult to predict because the class 1 [prices] are no longer linked to the product we are selling," Indonesia miner Trimegah Bangun Persada (Harita Nickel)'s president-director Roy Arman Arfandy said. Indonesia is the world's largest nickel producer. The correlation between the monthly average of the LME class 1 cash official price and Argus ' NPI ex-works China index has fallen to close to 0.41 between January and May, from 0.91 in 2023. The correlation between the LME class 1 cash official price and Argus ' class 2 nickel benchmark Indonesian Nickel Index (INI) for 10-14pc NPI fob Indonesia was 0.52 between January and May. Market participants at the conference also expressed hope for more government support. "Currently there is an imbalance between local and foreign investments, so we are hoping that the government can give more support to local players like us," one producer said. Another conference participant said that they would aim to build a precursor cathode active material plant if given more support. Argus ' class 2 nickel INI for 10-14pc NPI fob Indonesia stood at $118.70/mtu on 3 May. The INI for 37pc MHP was at $142.80/mtu fob Indonesia and 70pc matte was at $148.90/mtu fob Indonesia on the same day. By Sheih Li Wong Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japan’s scrap export tender extends gains for May
Japan’s scrap export tender extends gains for May
Shanghai, 9 May (Argus) — The monthly export tender of Japanese scrap dealer co-operative Kanto Tetsugen continued its upwards trend in May, propelled by a favourable currency exchange rate. The May tender was concluded at ¥52,590/t fas for 20,000t of H2 scrap on 9 May, an increase of ¥1,503/t from April. This brought the fob price to an equivalent of ¥53,590/t or $344.60/t. Two cargoes were settled on 9 May, one of 15,000t and another of 5,000t, both at the same price. Some market participants anticipated the first would go to Bangladesh, as in recent months, while some market discussions were suggesting both were destined for Vietnam. The Vietnamese domestic steel market has shown more signs of a recovery since mid-April. The renewed increase in the export tender was mainly driven by the depreciation of the yen. Despite the significant increase in the tender result, the equivalent price in US dollars only rose by around $1/t compared with the previous month. The yen weakened to ¥155.70 to the dollar from ¥151.80 on 10 April. The Argus H2 fob Japan assessment was ¥50,800/t on 8 May, while the April monthly average was ¥50,757/t fob Japan. Tokyo Steel following the Kanto tender raised the collection price at its Utsunomiya plant by ¥1,000/t and maintained prices at other plants. The increase in the tender result and domestic prices in the Kanto region will raise suppliers' target levels for export business. But overseas buyers may require more time to absorb the gain and await further rises in steel sales prices, a market participant said. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Hybrid vehicles spur Toyota’s record 2023-24 profit
Hybrid vehicles spur Toyota’s record 2023-24 profit
Tokyo, 9 May (Argus) — Japan's largest car producer Toyota reported a record profit for the 2023-24 fiscal year ending 31 March, partially because of strong sales of hybrid electric vehicles (HEVs). Toyota nearly doubled its profit for 2023-24 to ¥5.3 trillion ($34bn), its highest ever for a fiscal year. It sold 11mn vehicles globally, including its luxury brand Lexus, up by 7.3pc from a year earlier. The sharp rise in profit partly resulted from higher demand for HEVs that Toyota sold 3.6mn units of globally, up by 32.1pc from the previous year. North America was the leading market for its HEV sales, said the company's chief financial officer Yoichi Miyazaki, but a further breakdown was undisclosed. Firm demand for HEVs, for which Toyota has both technological and commercial advantages given its long history of development and experience, has largely been prompted by a global slowdown in battery electric vehicle (BEV) sales. HEVs consume significantly less battery materials compared with BEVs, as their battery size is normally 10pc of a BEV. Toyota is accelerating HEV production during 2024-25, as it plans to increase sales by 24.5pc from a year earlier to 4.5mn units. This accounts for 43pc of the company's total sales projection and is up by around 8 percentage points from a year earlier. The global slowdown in BEV sales could mean customers are being sceptical about the overstated view that BEVs are the only solution for decarbonisation, said Toyota's chief executive Koji Sato, adding that the infrastructure necessary for driving BEVs, including charging stations, has not yet adequately developed. But he was unclear on whether Toyota will slow its EV strategy that it announced last year to sell 1.5mn/yr of EVs by 2026 with 10 new models. The company plans to sell 171,000 BEVs during 2024-25, accounting for 1.6pc of its total sales projections. This is up by 46.2pc from a year earlier but the projection is based on "conservative estimations", according to Sato. By Yusuke Maekawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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