US auto workers launch strikes at three plants

The United Auto Workers (UAW) union began a historic strike early this morning targeting three assembly plants in the Midwest, positioning US steel prices for potential downside.

The strikes started at midnight at one plant across each of the Big 3 automakers, including the final assembly and paint portion of the Ford assembly plant in Wayne, Michigan; the General Motors (GM) Wentzville, Missouri, assembly plant; and the Stellantis Toledo, Ohio, assembly complex. The three sites represent 13,000 workers total of the UAW's 150,000 members.

The UAW's "stand up" strike strategy is systematically focused on targeting a rolling list of facilities while other union members continue to report to work — a tactic aimed at spurring negotiations rather than paralyzing each of the automakers.

Plants targeted in the first round make midsize pickup trucks, SUVs and vans, some of the companies' most profitable products but are not critical component plants that would shut down production entirely across the companies. But the union intends to strike at additional plants if negotiations stall.

The duration of the strikes is difficult to determine as the parties remain far apart on their terms, but the scale could be economically devastating for the automakers and industries feeding the auto supply chain. All three contract counter proposals presented to the UAW late last night were rejected.

Steel price sentiment mixed

Many market participants surveyed by Argus expect to see steel prices drop relatively quickly in reaction to the strike, as soon as within the next 1-2 weeks for automotive-grade bar and flat-rolled steel products.

For hot-rolled coil (HRC), some expect spot prices to fall in the low $600/st range, levels heard recently for larger-tonnage volumes.

Still, others do not think prices have much further room to go down because of how compressed margins are now.

HRC prices have been gradually falling in recent months with HRC at $690/st earlier this week, down by 43pc from their peak in April.

Meanwhile, ferrous scrap prices will also likely be negatively impacted as tighter mill margins and any further decrease in demand will prompt mills to pass through drops. That said, obsolete grade scrap supply in the US has been thinly balanced and export activity in recent month has been robust, which could help shield these grades from as much downside as primes.

In the September US domestic trade primes fell $40-50/gt while obsolete grades were sideways, bringing #1 busheling and shred pricing in some major markets including Detroit and Birmingham in parity.

But if primes fall too much it will likely leave obsolete prices exposed to downside risk until the strike ends.

If a new deal is reached and confidence in the auto industry is restored, prices could see a spike like those seen in 2021 after post-Covid-19 led to a brief stop in production, followed by a surge in demand.

Duration uncertain

It is difficult to estimate the length of the strike or workers' resolve to remain on the picket lines. Like the Writers Guild of America strike that has been going for 130 days, the UAW dispute with the automakers seeks to address major industry shifts due to technology — namely the shift to building more electric vehicles.

The union is also calling for a 40pc increase in wages, which automakers' are no where near offering in their counter-offers.

The last major US auto worker strike was in 2019, when UAW workers at General Motors went on a six-week-long-strike. That was the longest for the auto industry in 50 years, the UAW said at the time.

In Canada Unifor, the union representing auto workers in the country, has chosen Ford as its strike target, following the more traditional path of targeting a single automaker during contract negotiations. That union's current contract expires at 11:59pm ET on 18 September.

By Brad MacAulay