Steel Prices Flatten, Vehicle Sales Up, Inventories Return
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Steel Prices Flatten, Vehicle Sales Up, Inventories Return

Apr 09, 2024

Jennifer Kary | Posted on May 5, 2023 |

April saw a welcome boost in sales within the U.S. automobile market. New vehicle inventories are now in healthy shape. However, interest rates are still high, as are new vehicle prices. Moreover, the Automotive MMI index still has several factors working against it. Steel prices, notable HDG traded not only sideways, but completely flat. In general, most index components held a pretty steady sideways trend. For instance, lead, aluminum 5052 coil, and shredded scrap steel all held sideways with little price movement.

Overall, the Automotive MMI (Monthly Metals Index) traded sideways, edging down by just 1.15%.

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Presently, the average cost of a new car is nearly $50,000, while the average cost of a used car is nearly $28,000. Elevated annual percentage rates, which can be as high as 11%, are also driving up monthly payments dramatically. In addition to the chip shortage and strong inflation, 2022 and 2023 will see record-high prices for both new and used cars.

New car prices continue to rise largely as a result of the hawkish Fed’s decision to boost interest rates in an attempt to stagger and stop inflation. Indeed, as of March 22, 2023, the Fed’s revised target range for the federal funds rate is 4.75–5 percent. However, it has yet to declare it will stop raising interest rates. As of March 2022, the Fed has increased interest rates by an additional 4.5 percentage points. According to Bankrate data, four and five year loans for new and used cars have also increased.

Used car prices are already high, leaving people more inclined to choose used automobiles over new ones. Therefore, the used car market will likely see further shortages due to increased pressure on used car inventories.

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Hot-dipped galvanized steel costs recently leveled off and flattened for U.S. HDG supply. Given that zinc prices are close to support levels, a potential reversal downward is not entirely implausible. Since zinc baths are required to galvanize steel, changes in the price of zinc also affect HDG steel prices.

The current state of the world economy has also had a massive influence on the fluctuation of HDG prices (like many metals). Another factor is raw material shortages and rising demand. As a result, hot-dipped galvanized steel prices – primarily imported from China – fluctuated significantly between March and May of 2023. However, due to its strength and affordability in the automobile market, hot-dipped galvanized steel continues to be a preferred option despite volatile market conditions. A price reversal is indeed possible, but the most likely short-term trend seems to be a sideways one.

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Filed under: Automotive, Carbon Steel, Commodities, Ferrous Metals, Imports, Inventory Stock Levels, Metal Prices, Metal Pricing, Supply & Demand

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