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Metal Miner

Metal Miner

MetalMiner is the largest metals-related media site in the US according to third party ranking sites. With a preemptive global perspective on the issues, trends,…

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When Will High Interest Rates Impact Car Demand?

  • The automotive industry is being pulled in all directions.
  • Consumer car demand remains strong despite higher interest rates.
  • Supply chain issues pose a significant threat to the industry in the coming months.
Automakers

Via AG Metal Miner

 

The Automotive MMI (Monthly MetalMiner Index) finally broke its downward trend and traded sideways, inching up by 2.53%. Meanwhile, myriad factors continue to pressure metal prices.

The demand for vehicles among consumers remains strong. However, low inventories throughout most of 2022 placed a huge strain on the index. Without parts, the manufacturing of new vehicles could not and cannot happen.

However, now inventory levels have risen while vehicle prices have dropped. The question MetalMiner continues to ask is: when will high interest rates affect the soaring demand for cars?

Bears, Bulls, and Interest Rates, Oh My

The automotive industry is in a tough spot. Indeed, vehicle and part production struggled throughout 2022, mainly due to supply chain constraints, energy shortages, geopolitical events like the War in Ukraine, and zero-COVID. However, production did manage to edge upwards slightly month-over-month. The result was low inventories and relatively high consumer demand. Throwing metal prices into the mix only further compounds the index’s issues.  

But when will these sky-high interest rates finally impact consumer demand? A recent article by Fortune noted that high interest rates have begun impacting the power buyers have. After all, rates on vehicle loans have risen a staggering 6.6% since March, when the hawkish Fed began their steep interest rate hikes.

After the Fed hiked rates another half a percentage this past week, mortgages, car loans, and credit card debt holders finally took notice. In terms of the automotive market, this should cool down consumer demand. However, this relies on inflation continuing to cool with each rate increase.

EV Production Still Strong, But Supplies Under Threat

Automobile manufacturers continue to step up their EV production. This could potentially help even out consumer demand in relation to high interest rates. Meanwhile, metals like nickel and lead continue to persevere in demand. Still, even these metal prices may be in for a roller coaster ride.

For example, lead jumped in price month-over-month before retreating again. In the case of nickel’s, fears of a squeeze seem quite prominent. This places some pressure on EV battery producers, as high demand could encounter tight supply.

Lithium, on the other hand, didn’t move outside support and resistance zones month-over-month. While battery metal prices went up slightly, the index remained sideways overall. Indeed, lithium prices managed to avoid the broad impact of zero-COVID. This could be due to most of the world’s lithium coming from Australia and Chile as opposed to China.

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By Jennifer Kary

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  • George Doolittle on December 16 2022 said:
    *"transportation"* is far more than just Das Auto although certainly there is that. The current crisis appears to be one of *"housing"* which if true has a truly profound and negative impact upon conspicuous consumption one aspect of which absolutely is the entire US Automotive Sector the largest anywhere on Earth and so big in fact there is in fact a *"waste problem"* with the Industry at the moment and a problem oddly as part of "green new deal" has been left to Industry to resolve which to my knowledge only former founders of Tesla have resolved to do ("Redwood Materials"?)

    Anyhow my understanding of the US nuclear Industry is that "decommissioning work" is taken very seriously both in the United States, Japan, Europe/Great Britain...presumably Ukraine/Russia as well. Two huge winners in have zero nuclear power period appear to be Taiwan and Australia...the latter of which maintaining grid stability has been very much a great industry for Tesla to involve itself in.

    I've said it before I'll say it again:
    Long IBM strong buy
    Long GE strong buy
    Long 3M strong buy
    Long Kinder Morgan strong buy on and on it goes.

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