Automakers Are Slashing Prices To Sell Off Excess Inventory

• High interest rates are weighing on car sales.
• Automakers have slashed prices in order to help clear out rising inventories. 
• More and more U.S. vehicle manufacturers like Ford are turning their attention to EVs.

Via AG Metal Miner 

The Automotive MMI (Monthly MetalMiner Index) rose slightly higher than in previous reports. Month-over-month, the index went up by 5.08%.

Automobile inventories may be rising, but consumers are much more reluctant to purchase than they were six months ago. With interest rates still climbing, more and more consumers continue to steer away from vehicle purchases. In response, many automobile distributors have begun lowering prices or offering large discounts/rebates to help clear out inventory.

Hot dipped galvanized prices are also rising along with numerous steel forms. This had a significant impact on the index’s jump. Combined with the recent spike in copper prices, it is no surprise that the index climbed more than expected. That said, there were also negative factors. The largest factors pulling the index down were palladium and platinum. As palladium prices continued their downward decline, platinum prices began tumbling from their long-term resistance levels.

Electric Vehicle Manufacturing Skyrockets, Affecting Lithium Price

More and more U.S. vehicle manufacturers like Ford are turning their attention to EVs. This should come as little surprise considering the demand for electric vehicles has risen steadily in recent years. However, the car manufacturing industries globally are changing to meet this demand head-on.

For instance, Ford recently announced that it would carry out a large layoff of its European employee base. Around 3,800 employees will be cut from Ford’s workforce as it refocuses its efforts on EV manufacturing. However, the zero-carbon emission push is more than just a U.S. phenomenon. European companies like Volvo, BMW, and Volkswagen have also stepped up their EV game in recent years. Indeed, Volkswagen has even taken it upon itself to create its own EV battery recycling facilities to recycle lithium-ion batteries.

The result of these efforts is a changing global auto industry. As car manufacturers see opportunity in producing more electric vehicles, more experts predict the market will change in that same direction.  

Lithium Price Index Drops in Short-Term, but Remains Bullish in Long-Term

Metals like cobalt, lead, and nickel should enjoy solid long-term demand as the world attempts to manufacture more EV batteries. Despite this, short-term lithium and cobalt prices dropped at the end of December. Lithium, in particular, managed to drop by 13% – 20%, depending on the source. According to reports, this occurred largely due to the market being woefully undersupplied.

The market saw another sharp drop in the lithium price index at the beginning of February. Fortunately, lithium was not hit quite as hard by China’s high post-zero-COVID infection rate as steel and other metals. This is mainly due to most of the world’s lithium coming from Chile and Argentina. Unfortunately, this only accounts for raw lithium materials. China remains a top producer of the actual lithium-ion batteries. Thus, the price index still saw some impacts from the high COVID numbers.

Nonetheless, lithium remains at an all-time high, as illustrated in this chart showing the five-year price trend. As with many commodities, cool-down periods typically follow rallies of this type. The lithium price index soared in 2022, and while prices could continue to cool down, lithium enjoys numerous long-term bullish pressure points which could keep prices elevated.

By Jennifer Kary

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