“Steel Imports Into US Surge” – Wall Street Journal, 26 January 2014

Due to a global oversupply and an increase in demand by automakers, importing steel has become the cheaper option for some US steel buyers. The price difference between domestic steel and international steel is widening—the US is becoming more expensive—and has spurred a jump in the number of imports into the US. The average gap between US and China’s steel has risen to $159 per ton. In January 2014, imports reached 3.2 million tons, compared to 2.6 million tons in January 2013, a 23% increase.

Last spring, due to the demand of steel by car manufacturers and the growing construction market, US steel producers increased prices—previously, costs had been fairly low. For example, the current average price for a roll of benchmark hot-rolled coil in the US is $676, while China’s current average for the same product is $540. Steel production in China rose by 7.5% from 2012 to 2013, nearing 780 million tons, seven times more steel than the world’s number two manufacturer, Japan, generated in the same year.

The surplus of steel provoked a surge in prices for big steelmakers, such as the US, Brazil, and Germany. While US manufacturers have been profiting from increased pricing, the mounting number of imports will likely cause these prices to fall.

More producers on the East Coast are now importing steel. Two years ago, a major East Coast steel mill—operated by RG Steel LLC—closed as a result of steep labor costs and reduced demand. Conversely, buyers in the South and Midwest are not importing as much steel, and still purchase their supplies from neighboring mills, which allows them to bypass expensive shipping costs.

The US has always depended on imports; however, that dependency might increase this year. America uses almost 108 million tons of steel per year—25% of that is imported from abroad, while the rest is produced domestically. If it remains cheaper to buy foreign steel, then imports are expected to increase to approximately 30% by the end of 2014. Imports will be the main factor in why US steel prices drop this year. Yet, analysts expect US pricing to still cycle through.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

May 2, 2014

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

Social Share Toolbar

“Fuel-Efficiency Rules Are Already Raising Costs in Detroit” – Wall Street Journal, 22 January 2014

Even though GM and Chrysler have paid off their auto-bailout loans, they are still under the thumb of Uncle Sam; elements of Obama’s Climate Action Plan do not only extend towards power plants, but automakers as well. According to the Climate Action Plan, car companies’ products have to average 54.5 miles per gallon by 2025. This, however, requires huge design changes that are going to be a big blow to profit margins.

America’s best-selling vehicle, the Ford F150, is getting a complete redesign. from the inside out. It will be the first truck and large-volume vehicle to have an all-aluminum body, which will lower its weight and increase its fuel efficiency. Obama’s Climate Action Plan requires full-size trucks to have a better fuel efficiency, up to 30 mpg from the current 20 mpg.

Switching to aluminum, though better for the environment, is an expensive move. As we reported last month, converting to aluminum means higher material costs and new manufacturing machinery. While the price tag is high, Ford can’t fight the new regulations, and is instead doing all it can to effectively market the innovation behind its newly redesigned products, the F150 and Mustang—the latter redesign offers a never-before-seen turbocharged four-cylinder engine. Each sale of the redesigned F150 contributes an additional $10,000 to Ford’s bottom line.

GM, on the other hand, is creating a whole new midsize truck to meet Obama’s requirements, which they believe will be less costly. Chrysler, instead, is spending more on nine-speed transmissions and diesel engines.

Obama had hoped that the market for electric cars would increase; as a bid in that direction, an element of the Climate Action Plan allows automakers to acquire mpg credits for manufacturing zero-emission vehicles. However, the demand for electric vehicles is still low, proving that that kind of car is still a niche product. Pricing for electric cars start at $40,000 and only increase from there.

While it is always painful to have a winner and loser, the “materials selection war” (steel vs. aluminum) is a long-term societal consideration and climate change mitigation, where aluminum is the ultimate winner. These trends will force America to increase the recycling of post-consumer aluminum products—as opposed to landfill and scrap export—and to also increase the design and manufacturing of recycle-friendly alloys.

There is simply not enough expensive and energy-intensive primary aluminum capacity available to meet higher aluminum demand of 100 million, and growing, cars per year.

See also:
Will All-Aluminum Cars Drive Metals Industry?
A Clean Car Boom
GM Planning Strict Diet for New Pickup Trucks

Developed and Written by Dr. Subodh Das and Tara Mahadevan

February 12, 2014

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

Social Share Toolbar