US auto strike set to cut metals consumption

Spanish Market: Metals
08/09/23

A possible strike by US automotive union workers against the Big 3 auto companies would curtail metals consumption.

A strike by the United Auto Workers (UAW) union against Ford Motor, General Motors (GM) and Stellantis could begin as early as next week when the current contract expires the night of 14 September. Negotiations have remained contentious as the UAW pushes for more than 40pc pay increases and Ford and GM have countered with proposed pay hikes of less than half that level. UAW president Shawn Fain has said any auto company without a new contract by the current deadline will be threatened with strike.

The three companies sold an average of 552,800/month vehicles in the second quarter, when each posted profits above $1.9bn.

Based on these sales, US consumption of flat steel could shrink by as much as 409,000 short tons (st)/month with an additional 138,200st/month of other steel consumption and 134,300st/month of aluminum consumption, according to an Argus analysis of vehicle composition data. Copper consumption would be curtailed another 13,800st/month.

The consumption data was calculated using the three auto company's quarterly sales figures and data from the American Iron and Steel Institute on average aluminum and steel weights contained in each vehicle. Figures for copper consumption came from the Copper Development Association.

The lost steel consumption would ripple into an already oversupplied steel market, where at least two companies, integrated steelmaker US Steel and electric arc furnace (EAF) steelmaker Steel Dynamics (SDI), combined to produce an estimated 972,000st more steel than they shipped in the first half of the year.

While US Steel's extra production is all flat steel products, SDI's is likely a mixture of flat and long products.

US steel consumers have been so concerned by the possibility of a strike that many have held off buying additional steel for weeks, cutting into their inventories as they await the results of the labor negotiations.

A short strike could lead to whiplash in the steel market, with inventories low and overall demand remaining steady in the market, potentially forcing some buyers back into the market.

A more extended strike could curtail large amounts of steel consumption and lead steel mills to make tough decisions about whether or not they keep steel production running, or idle it to cut costs and supply.

The impacts would primarily hit automotive-heavy integrated steelmakers Cleveland-Cliffs and US Steel, with some impacts rippling to the EAF steelmakers Nucor and SDI.

By Rye Druzin

Metals impact of auto strike				short tons (st)
Companies	Monthly vehicle estimate (US)	Estimated steel consumption	Estimated aluminum consumption	Estimated copper consumption

Vehicle production and metals consumption
Ford	177,221	175,449	43,065	4,431
GM	230,659	228,352	56,050	5,766
Stellantis	144,883	143,434	35,207	3,622
Total	552,763	547,235	134,321	13,819
American Iron and Steel Institute, Copper Development Association, auto company quarterly sales figures
Figures are likely an underesimate based on scrap generation

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