| Global auto appetite seen shoring up aluminium, PGM demand Aluminium and platinum group metals will rely on Chinese, Indian, South American and Middle Eastern appetite for new vehicles to keep the metals' demand strong
Automakers aren't the only industry banking on the demand for cars in emerging markets to save them amid dropping sales in Europe and the US. The markets for two of the key inputs in auto production, aluminium and platinum group metals, are also relying on Chinese, Indian, South American and Middle Eastern appetite for new vehicles to keep the metals' demand strong. The transportation industry accounts for a third of aluminium usage, therefore a large portion of demand for the metal hinges on a strong auto industry. "Anything we're losing in the United States is being offset in the emerging markets," a trader said. Car demand from the BRIC countries - Brazil, Russia, India and China – should keep aluminium demand robust, supporting prices, analysts said.
"Vehicle sale decreases in the US will have implications for aluminium," said BNP Paribas metals analyst David Thurtell. "But the thing to focus on is that even though vehicle sales in the US look sick, China still looks strong." Thurtell said he estimates aluminium prices traded on the London Metal Exchange will stay around $3,000 a tonne over the next six months. The BRICs already account for 20 per cent of global car sales and are expected to grow by 10 per cent a year in the medium term, according to Standard & Poor's, a division of McGraw-Hill Companies.
In China for example, sales of locally made passenger vehicles in the January-to-June period rose 17.07 per cent from a year earlier, the China Association of Automobile Manufacturers, the agency authorized by the government to release national auto sales data, said. Foreign companies are also profiting abroad, with the likes of Audi AG, the premium brand of German car maker Volkswagen AG (VLKAY), posting a 23 per cent rise in there during the first six months of 2008. That could be enough to offset declining sales in the west where US auto sales fell by 18 per cent in June on the year and West European sales by 8.8 per cent, analysts said. The US auto industry is under severe pressure," said Frank Lesh, broker and futures analyst with Future Path Trading.
Meanwhile, "the real growth is in Asia where new vehicle registration is skyrocketing," said Andrew Fairlie, business development manager at independent metals and mining consultants CRU. Fairlie said about 130-150 kg of aluminium goes into a car. Aluminium has also been benefiting by automakers attempts to make vehicles lighter - the metal is being used in place of heavier steel in some cases, he said. Steel accounts for about 62 per cent of the average light vehicle, but the amount of aluminium used in cars has more than doubled in the past two decades.
In India alone, there is a middle class of around 250 million people, and they are the economic group fuelling the increase in car sales in the emerging markets, said UK-based analyst Julian Kettle of Brook Hunt. "There's a natural consumer progression from bicycle to scooter to motorbike to car," Kettle said.
In addition to appetite from China, India and the Middle East, demand for platinum group metals is also being supported as higher gasoline prices lead to more efficient vehicles, said Jim Steel, senior vice president and metals analyst with HSBC. More of the white metals will be needed as catalysts to help remove pollutants, as appetite for cleaner-burning fuels rises amid tightening worldwide emissions standards, Steel said. On top of the sheer numbers of auto orders in emerging markets, places like China, South America and India are demanding more diesel-powered autos, and substitution of cheaper palladium for platinum isn't possible with those like it is with gasoline engines.
But with differing environmental standards, new-automobile demand may not generate proportionally the same demand for PGMs as it would in the US or Europe, says Stephen Platt, analyst with Archer Financial Services.
"Their increases may not translate into as high demand as it would in other areas," Platt says. Aluminium could be in for a realty check because of a couple of factors. Rapidly growing middle classes in emerging-market nations could begin to feel the strain of high oil prices, and the slowing growth currently plaguing consumer spending in more developed countries may dent car sales there, analysts said.
While a growing middle class in countries like China is good news for demand, there is a concern that a drop in fuel subsidies there and some of its fellow emerging markets will lead to a slowing in vehicle purchases. In India, Tata Motors Ltd. for example, posted a 3.4 per cent rise in vehicle sales in the first quarter of their fiscal year that began April 1.
However, the company said while truck and bus sales rose, that of cars and SUVs declined. Back to More Stories |
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