EU automotive industry braces for 2H slowdown

Spanish Market: Metals
15/05/23

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.

By Lizzy Lancaster and Brendan Kjellberg-Motton

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01/04/25

Mexican peso weakness may partially offset US tariffs

Mexico City, 1 April (Argus) — Volatility in the peso/dollar exchange rate may help to partially offset any tariffs that US President Donald Trump decides to impose on imports from Mexico as the ensuing peso depreciation would make its exports more competitive, said analysts from US bank Barclays. President Trump will announce Wednesday his next decision related to the threat to impose a 25pc tariff against imports from its commercial partners Mexico and Canada. Trump has delayed the decision twice, and it is likely that he will do so again, given the serious repercussions the tariffs could cause to the US economy, said Latam chief economist at Barclays, Gabriel Casillas, during a webinar held Monday. The base scenario for Barclays is that Trump's administration will finally step back from imposing tariffs on Mexico and Canada and rather go for an early renegotiation of the (US Mexico Canada Free Trade Agreement (USMCA) this year, said Casillas. In this scenario, the Mexican peso would strengthen to between Ps19.5 to Ps19.00 to the greenback, he added. However, if Trump's administration decides to impose the 25pc tariffs on all Mexican imports as he has threatened to do, then the peso would weaken to Ps24/$1, said Erik Martinez, foreign exchange research Analyst at Barclays during the same webinar. "If tariffs were imposed, 25 percent on all imports, we think a good portion of this would be absorbed by the exchange rate," said Casillas. A weaker peso makes Mexican exports more competitive abroad. The Mexican peso on Tuesday was trading at around Ps20.30 to the dollar, and has weakened by 18.5pc in the past year from about Ps16.6 to the dollar a year ago. If President Claudia Sheinbaum's administration avoids the tariffs, the peso may strengthen to around Ps 19.00/$1 in upcoming days, said Martinez. If the tariffs are applied during a brief period or only for the automobile sector, the exchange rate could range between Ps21.00-22.00 per dollar, said Martinez. However, even without any tariff being applied, Mexico's economy is expected to grow only by around 0.7pc this year, less than the estimates made late in 2024 of around 1.4pc, due to the deceleration of the US economy, Mexico's main trading partner, said Casillas. The US economy is showing signs of slowing down, specially in the industrial sector, which will impact Mexico's growth for the year. Also, this uncertainty is directly affecting any upside expected from so-called nearshoring as companies would now lose interest in moving their manufacturing lines to Mexico if there is no clear benefit in using the USMCA to avoid tariffs, said Casillas. By Édgar Sígler Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US manufacturing contracts in March: ISM

01/04/25

US manufacturing contracts in March: ISM

Houston, 1 April (Argus) — Economic activity in the US manufacturing sector fell back into contraction in March after a brief expansion as businesses braced for US president Donald Trump's threatened tariffs on imports. The manufacturing purchasing managers' index fell to 49 in March, down from the 50.3 in February, the Institute for Supply Management reported Tuesday. That followed three months of expansion — above the breakeven threshold of 50 — following 26 months of contraction. The new orders index contracted for a second month in a row, falling to 45.2, down by 3.4 points from the prior month. Production fell to 48.3 from 50.7. New export orders fell to 49.6 in March from 51.4 the prior month. "Demand and production retreated and destaffing continued, as panelists' companies responded to demand confusion," ISM said. "Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth." The prices index surged to 69.4, up from 62.4 in February and the highest since mid-2022. Employment fell by 2.9 points to 47.6. The supplier delivery index fell by 1 point to 53.5, indicating ongoing slowing in deliveries and slowing demand. Trump plans to unveil sweeping "reciprocal" tariffs on major foreign trade partners on 2 April after previewing or announcing multiple tariff actions since taking office, including a 20pc tariff on all imports from China and a 25pc tax on all imported steel and aluminum that both took effect last month. Trump last month also announced a 25pc tariff on all imported cars, trucks and auto parts, scheduled to go into effect on 3 April. The measures, together with mass federal government layoffs and spending cuts, spooked US equity markets, which last month posted heavy losses. Comments focus on tariff confusion Comments from survey participants highlighted uncertainty over how Trump's tariff plans would effect operations and the economy. "Acute shortages continue to impact supply chain continuity," a transportation equipment executive said. "Chinese restrictions on critical minerals such as germanium have caused major shortages, resulting in all supply needed in 2025 already assumed — and, not surprisingly, significant price increases as a result." "Customers are pulling in orders due to anxiety about continued tariffs and pricing pressures," according to a computer and electronic products executive. "Business condition is deteriorating at a fast pace," a machinery executive commented. "Tariffs and economic uncertainty are making the current business environment challenging." "New order levels have increased and are better than expected," a fabricated metals executive said. "We suspect that our customers are trying to build inventory at current prices to get ahead of expected tariff and related cost increases." By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

ArcelorMittal raises NW EU HRC offer to €700/t

01/04/25

ArcelorMittal raises NW EU HRC offer to €700/t

London, 1 April (Argus) — European market leader ArcelorMittal has raised its hot-rolled coil (HRC) offer to €700/t base in the north. Its previous offer was €680/t base. The producer recently has seen an increase in enquiries and bookings, aided by the steel safeguard review. This trend has been most prevalent on HRC in the north, as well as cold-rolled and hot-dip galvanised across Europe. European mills have been in no rush to sell, with delivery performances under pressure from some as a result of low utilisation rates and issues at some producers causing backlogs. At the same time, mills expect import arrivals to fall in the coming months, although there could be some overhang this quota period, after the safeguard review and imposition of provisional anti-dumping duties on Egypt, Japan and Vietnam. In the futures market today, a fourth-quarter strip traded at €670/t, broadly in line with the settlement on 31 March. The physical market is largely quiet, as participants wait to see how much material clears today and what tariffs are announced by US president Donald Trump. North EU mill margins have nearly reached a year-long high in recent days, with the spread for NW EU HRC over blast furnace costs having reached €181/ on 31 March, the highest level since €189/t on 5 April. By Colin Richardson Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

EU stainless safeguards, metal plan meet mixed reaction

31/03/25

EU stainless safeguards, metal plan meet mixed reaction

London, 31 March (Argus) — Europe's stainless steel industry has had a mixed reaction to the European Commission's safeguard steel review and its action plan to protect the bloc's metals industry, both announced on 11 March. Steelmakers have welcomed greater commitment from policy makers to support the sector, but are still concerned at a lack of concrete commitment to significant protectionist measures, while traders, service centres and scrap suppliers are worried the most radical proposals could severely damage their businesses. The European Commission's review of definitive safeguard measures on imports of certain steel products identified no new import pressure for stainless cold rolled sheets and strips, and left tariff rate quotas for the next 15 months virtually unchanged even as carryovers and unused quota access were removed. And the commission's European Steel and Metals Action Plan included proposals to curb imports of finished steel and exports of scrap alongside the extension of the Carbon Border Adjustment Mechanism (CBAM) to potentially include raw material exports and downstream products. European stainless steel flat producers — battling weak medium-term demand and a high cost structure — expressed disappointment on the absence of protectionism in the safeguard review through to July 2026, but told Argus they were encouraged by proposals in the Action Plan that acknowledge the need to to curb imports for domestic industry's long term health. "The industry remains threatened by global excess capacities and by global distortions from China and other countries that artificially support their domestic industries or circumvent the current measures," Finnish producer Outokumpu told Argus . "These challenges need to be mitigated with more assertive solutions, including replacing current safeguards with more effective measures from July 2026." European trading groups surveyed by Argus welcomed the stability offered by the unchanged import quotas as the industry navigates other pressures — such as high energy prices and US tariffs — but said they expect lobbying by producers to drive a wave of new measures in the fourth quarter of this year, with stainless steel-specific safeguards likely to be implemented from next year. "Current quotas will only last this year, if you ask me," a trader said. "We expect new regulation to be announced in September/October." A key area of focus for the industry is the possible introduction of the melt-and-pour clause, which determines the origin of goods by the location at which the metal is originally melted, and disregards third countries where further processing may take place for circumvention of anti-dumping duties. The EU stopped short of immediately implementing this clause as part of the Action Plan, and will conduct further assessment of the action. But market participants expect [consultation](https://direct.argusmedia.com/newsandanalysis/article/2670486] on the policy will start after the current safeguard period ends. Several large European stainless steel producers are heard to be importing slab from Asia, and traders told Argus they were relieved that melt and pour is not coming into play this year. A Spanish trader said the clause will level the playing field for European producers, but a hasty implementation this year would have simply added to costs for both producers and consumers in the near term. Outokumpu said it welcomes the melt-and-pour proposals as part of a wider anti-circumvention drive that it said is required in Europe. The EU's Action Plan also calls for the need to address carbon leakage of exported steel through a potential extension of the CBAM to include exports. 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US consumer confidence down on policy angst

28/03/25

US consumer confidence down on policy angst

Houston, 28 March (Argus) — The University of Michigan's gauge of consumer sentiment fell in March to the lowest level since November 2022, led by a slump in expectations over the "potential for pain" from US economic policies introduced by the new administration. Sentiment fell to 57, down from 64.7 in February and 79.4 in March 2024, according to the University of Michigan's consumer sentiment survey released Friday. The final reading for March was lower than the preliminary reading. The sentiment index fell to a record low of 50 in June 2022 on inflation concerns. The index of consumer expectations fell to 52.6, the lowest since July 2022, from 64 in February and 77.4 in March last year. The expectations index has lost more than 30pc since November last year. "Consumers continue to worry about the potential for pain amid ongoing economic policy developments," the survey director Joanne Hsu said. The decline "reflects a clear consensus across all demographic and political affiliations: Republicans joined independents and Democrats in expressing worsening expectations … for their personal finances, business conditions, unemployment and inflation," Hsu said. Current economic conditions slipped to 63.8 in March from 65.7 in February and 82.5 last March. Two thirds of consumers expect unemployment to rise in the year ahead, the highest reading since 2009. Year-ahead inflation expectations jumped to 5pc this month, the highest reading since November 2022, from 4.3pc last month. The University of Michigan survey comes three days after The Conference Board's preliminary Consumer Expectations Index fell in March to its lowest in 12 years, to below a threshold that "usually signals" a recession. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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