Pandemic knocks down cars and cripples steel coil prices

As some national lockdowns begin to ease, we investigate the health of the global auto industry, and the performance of a key input for the sector, steel coil.

Automobile markets saw their first quarter performance take a pounding, with existing frail demand bashed by the COVID-19 pandemic as countries around the globe reacted by going into lockdown.

General Motors suspended its 2020 profit outlook amid the uncertainty, after it added $16 billion to its cash reserves by tapping its credit lines.

April sales figures pointed to dismal showings, especially in India, where Maruti Suzuki India posted zero sales in the domestic market, with all of its plants shut due to the nationwide lockdown. Similarly, other car sales saw its April sales dive up to 91% year on year.

Amid the struggle against the pandemic, Japan’s Nissan Motor is expected to reduce its presence in Europe and widen it in China, its home country and the US, in a plan due to be announced by the end of Q2.

In the US, markets showed historic lows for car sales in April but several market participants said that, as production resumed in May, demand could begin to show a modest recovery in H2. Fiat-Chrysler cut its 2020 outlook for sales in the US market to 12.5 million units, down almost 27% from its earlier estimate of 17 million units.

US steel capacity utilization had slumped to around 50% in May from above 80% at the start of March. It has still to recover.

In line with an emerging global trend, EU manufacturing in April contracted to its lowest level since June 1997 due to the nationwide lockdowns. Germany saw its April PMI fall to its lowest in 133 months. European passenger car registrations tumbled 55% on the year to 567,308.

Italy was hit hard, with registrations falling 85% to 28,326 new cars, but the UK suffered a 97% collapse in April sales from the year before.
The Union’s H1 2020 registrations slipped 26% from the year before to 2.48 million, as the lockdowns data weighed heavily on the H1 total.
European Union’s steel production has been cut by 50% as a result of new orders falling by as much as 75%, with further losses expected, said EU steelmakers’ association Eurofer.

China’s recovery in manufacturing in March was short-lived as the manufacturing PMI published by the National Bureau of Statistics fell to 50.8 points in the following months.

China’s car-making sector reached around 75% of normal operating levels but output and sales were down 45% and 43% on 2019, as the industry remained constrained by restrictions relating to the virus.

China’s domestic steel coils (CRC) prices have slumped 19% since the start of 2020 due to the coronavirus impact and are expected to remain subdued for at least the rest of the third quarter.
Experts projected that the vehicle market would continue to recover and may get back to full capacity in H2.

OUTLOOK
Global demand could fall by 50% or more against 2020 amid market concerns of prolonged lockdowns or a resurgence of the coronavirus. Steel companies in Europe and the US have been slashing production due to the downturn in car making.

The outlook is dim as annual projections are revised to reflect the negative market sentiment. The coming months could bring more downward revisions of key industry projections, due to the second wave of COVID-19 infections.

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