Recovery in the automotive sector is likely to stimulate demand for steel, said the American Iron and Steel Institute (AISI).
Automotive markets have been hit hard by the Covid-19 pandemic. In the first five months of the year, there was a significant decrease in shipments of various steel products, including hot rolled and cold rolled coils, galvanized sheets and select bars. Recently, moderate growth in auto production has boosted supplies to the industry since early June this year, said Timothy Gill, chief economist at AISI.
The seasonally adjusted annual assembly rate for passenger cars in the first half of this year was 4.15 million units, down 39% from the corresponding half-year period in 2019, when the adjusted annual rate was about 10.74 million units. The Mexican auto industry reported a slow return to production compared to factories in the US.
Going forward, a shift in consumer preferences from low-mileage cars to high-mileage trucks and SUVs will increase the rate of domestic production, which in turn will increase demand for domestically produced steel. By the way, light trucks, including SUVs, account for 77% of total car sales.
Several steel furnaces that were shut down during the lockdown have resumed production in response to growing demand from the automotive industry.