Light vehicle sales in the US skyrocketed in May to a seasonally adjusted annualized rate of 17.8 million units. This is the strongest pace in almost 10 years. Auto sales were 7.4 million in April and rose to 8.1 million in May. Light trucks rose from 9.1 to 9.7 million. Imports in May were 3.8 million and domestic 14.0 million. Year-to-date sales averaging 16.9 million units are in line with the expectations for the full year.
Driving forces behind the strong demand are steadily improving employment and wages and improved financing terms. Ford has announced its intention to shorten its annual two-week summer shutdown to one week (at five of its North American plants) and FCA has canceled its usual seasonal shutdown at four factories in the US and Mexico.
Total light vehicle (LV) production in NAFTA in May was at an annual rate of 17.655 million units, down from 17.905 in April. On average since 2004, May’s production has been 3.2 higher than April, this year May was down by 1.0 percent, (Figure 1). Note: these production numbers are not seasonally adjusted, the sales data reported above are seasonally adjusted. History predicts that production will increase by 0.8 percent in June.
On a rolling 12 months basis y/y LV production in NAFTA increased by 3.9 percent through May. LV production in NAFTA is now well above the pre-recession peak of Q2 2006 and is heading for the all-time high of mid-2000, (Figure 2).
On a rolling 12 months basis y/y the US is up by 4.2 percent, Canada is down by 6.0 percent and Mexico is up by 10.4 percent, (Table 1).
The US has gained production share in the most recent 3 ½ years, (Figure 3) and so far in 2015 that gain has accelerated at the expense of Canada. In May on a rolling three month basis, the US production share at 69 percent was the highest since March 2008.
Figure 4, Figure 5 and Figure 6 show total LV production by country with y/y growth rates and on each the red line shows the change in production since Q2 2006. Note the scales are the same to give true comparability and that Mexican growth is surging at twice the rate in the US and Canada continues to contract.
The decline of both the Canadian dollar and the Mexican Peso must be causing auto assemblers to look at moving production, to Mexico in particular. We believe there is spare capacity both sides of both borders for the automotive manufacturers to play this game. This isn’t happening so much in Canada, in spite of the depreciation of the Loonie, because (in our opinion) the labor relations situation in Canada is causing manufacturers in general to reduce their exposure. US steel is a case in point.
The mix of light vehicles is very different by country, (Figure 7). The percentage of autos in the Mexican mix in the last three months was 58.6 percent but only 36.6 in the US and 44.6 percent in Canada.
Ward’s Automotive reported on Wednesday that total light vehicle inventories in the US decreased by 9 days of sales from 65 at the end of April to 56 at the end of May, 4 days lower than the end of May last year. Month over month FCA (Fiat Chrysler Automotive) was down by 8 days to 70, Ford down by 11 days to 61 and GM was down 9 days to 63.
The SMU data file contains more detail than be shown here in this condensed report. Readers can obtain copies of additional time based performance results on request if they wish to dig deeper. Available are graphs of auto, light truck and medium and heavy truck production, growth rate and production share by country.
John PackardRead more from John Packard
Latest in Steel Markets
Ternium CEO sees healthy demand buoying HRC price slide
Falling steel prices at present are not a symptom of demand but of imports arriving into the US and to some parts of Mexico, Ternium’s CEO Maximo Vedoya said this week.
GrafTech to curtail electrode capacity on weak demand, pricing
Weak demand and pricing for graphite electrodes combined with higher costs are forcing GrafTech to implement cost-cutting procedures and reduce production across its facilities.
CRU: Iron ore steady amid Chinese holidays
The iron ore market has been largely calm, with China observing the Chinese New Year (CNY) holiday period, while demand in Europe and JKT has been slow to pick up. Supply has been somewhat weaker, but overall, the price has held steady. Supply from Port Hedland remained unchanged w/w despite Roy Hill having no shipments […]
January import licenses at six-month high
Based on initial license data for January, steel imports appear to have risen to a six-month high, and flat-rolled steel imports to a seven-month high.
Imports decline for a second consecutive year in 2023
2023 was the third-lowest year for steel imports in the last decade, according to an SMU analysis of data from the US Department of Commerce.