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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Lynas to produce heavy rare earths in Malaysia by 2025
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China, EU launch talks ahead of EV provisional duties
China, EU launch talks ahead of EV provisional duties
Beijing, 28 June (Argus) — China and the EU have launched talks on the EU's anti-subsidy investigation on battery electric vehicle (EV) imports from China ahead of the planned start of provisional duties for early next month, according to China's ministry of commerce. The European Commission on 12 June announced provisional duties on Chinese battery EV manufacturers, setting an additional rate of 17.4pc for BYD, 20pc for Geely and 38.1pc for SAIC, as well as 21pc for other producers that co-operated in the investigation, from the current 10pc duty. "Minister Wang Wentao held video talks with the European Commission's executive vice-president and trade commissioner Dombrovskis on 22 June," said the ministry's spokesperson He Yadong. "The working teams of the two sides have maintained close communication and stepped up consultations." When asked for comments regarding industry discussions on whether the two sides are likely to set minimum import prices and volumes to replace the duties, similar to the approach taken in the EU-China photovoltaic dispute in 2013, He Yadong did not answer directly, saying "We hope that the EU will push for positive progress in the consultation as soon as possible and reach a solution acceptable to both sides so as to avoid the adverse impact of escalating trade frictions on China's and EU's economic and trade relations." The European Commission said on 12 June that if talks with the Chinese government do not lead to an "effective" solution, the provisional countervailing duties will start from 4 July and definitive duties would be published before November, it said. China's main economic planning agency the NDRC on 17 June said the EU's punitive duties on battery EV imports from China will increase the EU's dependence on fossil energy . But many industry participants remain hopeful that the duties can be negotiated down via the talks before the duties are imposed. The EU, China's largest trade partner since 2020, has introduced more protectionist moves against China in recent years, especially in the EV and battery raw materials sectors, including anti-subsidy duties on EVs and the Critical Raw Materials Act. China's exports of battery EVs to Europe fell by 15pc in January-May from a year earlier and by 22pc in May, according to data from the China Passenger Car Association (CPCA). Exports to main European destinations during January-May consisted of 115,318 units to Belgium and 67,956 units to UK. Chinese EV producers complained that the EU was requiring them to provide far more information than they needed for an anti-subsidy investigation. "Chinese EV and battery companies were required to provide information such as their battery components and chemical formulations, EV production costs, EV parts and raw material procurements, sales channels and pricing methods, customer information in Europe, and their supply chains," He Yadong said. China has taken up more than 60pc of the world's EV sales, driven by its decarbonisation targets and ambition of making up for its slower development of internal combustion engine vehicles. But it is facing more geopolitical restrictions from the US, EU and some other western countries. The US has raised its duty on China's EVs to 100pc from 25pc. Canada will also launch a consultation on 2 July for a potential punitive duty on China's EVs. Turkey has also imposed a 40pc duty on all Chinese vehicle imports. China exported 519,000 new energy vehicles during January-May, up by 14pc from a year earlier, according to data from the China Association of Automobile Manufacturers (CAAM). But exports in May fell by 9pc from a year earlier and by 13pc from the previous month to 99,000. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US House panel advances waterways’ projects bill
US House panel advances waterways’ projects bill
Houston, 27 June (Argus) — A Congressional committee on Wednesday advanced a bill to authorize a bundle of US port and river infrastructure projects for the US Army Corps of Engineers (Corps). The Water Resources Development Act (WRDA) biennially authorizes projects handled by the Corps' civil works program aimed at improving shipping operations at the nation's ports and harbors, and along the inland waterway system. The traditionally bipartisan legislation also approves flood and storm programs, and work on other aspects of water resources infrastructure. The House of Representatives' Transportation and Infrastructure Committee on Wednesday passed the bill by a 61-2 vote. The Senate Committee on Environmental and Public Works passed its own version of the bill on 22 May by a 19-0 vote. Neither the full Senate nor House have yet voted on the bills, which will need a conference committee to sort out different versions. A key difference is that the House bill did not include an adjustment to the cost-sharing structure for lock and dam construction and major rehabilitation projects. The Senate measure adjusted the funding mechanism so that 75pc of costs would be paid for by the US Treasury Department's general fund, with the rest coming from the Inland Waterways Trust Fund. The 2022 version of the bill made permanent an increase to 65pc from the general fund and 35pc from the trust fund, which is funded by a barge diesel fuel tax. The House committee's decision not to include the funding change drew disappointment from shipping interests. The Waterways Council was "disappointed that the House did not include a provision to modernize the inland waterways system", but was hopeful that conference negotiations would result in its inclusion, Tracy Zea, chief executive of the group, said. The latest House version of the bill authorizes 12 projects and 160 new feasibility studies. Among the projects receiving approval were modifications to the Seagirt Loop Channel near the Baltimore Harbor in Maryland. The federal government would pay $47.9mn towards an estimate $63.9mn project to widen the channel, which would help meet future demand for capacity within the Port of Baltimore. That would include increased container volume at the Seagirt Marine Terminal. The project was in the works before the 26 March collapse of the Francis Scott Key Bridge temporarily diverted freight from Seagirt and many other port terminals. The committee also authorized $314.25mn towards a resiliency study of the Gulf Intracoastal Waterway. The study would consider hurricane and storm damage and identify ways to improve navigation, reduce the maintenance requirements, and provide resiliency. The waterway connects ports along the Gulf of Mexico from St Marks, Florida, to Brownsville, Texas. The House version of the bill also includes provisions to strengthen flood control, wastewater, and stormwater infrastructure. "Critically, WRDA 2024 will help communities increase resiliency in the face of climate change," representative Rick Larsen (D-WA) said. By Abby Caplan and Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Bolivia coup attempt exposes instability
Bolivia coup attempt exposes instability
Montevideo, 27 June (Argus) — Bolivia's government quickly thwarted an attempted coup on Wednesday, but the military action deepened the country's economic and political problems. President Luis Arce fired the commander of the joint chiefs of staff, army general Juan Jose Zuniga, who was subsequently arrested. The government claimed that an "anti-democratic network" in the armed forces involved around 10,000 troops. While the coup failed, it added to the instability that has gripped the country as it transitions away from being a major natural gas supplier and tries to monetize its vast lithium resources. The administration attempted to calm fears as long lines remained at banks and retail fuel stations the day after the coup. The hydrocarbons and energy ministry released a statement on 27 June that everything was normal with fuel supply around the country. It called on the population to refrain from panic buying. State-owned oil and natural gas company YPFB reiterated the message. The company had already been dealing with a strike by truck drivers and road blockades around the country that slowed distribution of gasoline and diesel, as well as 10kg LPG cylinders for household use. Bolivia has seen a sharp decline in natural gas and oil production, with the country now importing close to 80pc of diesel. Crude production was 21,780 b/d in March, down from 50,170 b/d in 2025. Natural gas production is now hovering around 40mn m³/d, down from a peak of 56mn m³/d in 2006, according to YPFB. Gas exported through pipelines to neighboring Argentina and Brazil has been an economic mainstay, but that is changing. Bolivia will stop exports to Argentina in September, and it has a deal to export up to 20mn m³/d to Brazil. Gas exports to Argentina earned Bolivia $223 mn in the first four months of 2023, falling to $164mn this year; it exported $423.5mn to Brazil between this January-April, down from $518mn in 2023. The government wants to replace gas revenues with those from lithium. It has signed direct lithium extraction deals with Chinese and Russian companies, but production is not expected for several years. Bolivia has an estimated 23mn short tons of lithium resources, the largest in the world, according to the US Geological Survey. By Lucien Chauvin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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