Steel Demand to be Mainly Driven by Automotive Sector Recovery

SEATTLE (Scrap Monster): The recoveries in automotive sector will likely drive steel demand, said the American Iron and Steel Institute (AISI).

The automarkets have been hit badly due to the Covid-19 pandemic. The initial five-month period of the year recorded substantial declines in shipments of various steel products including hot-rolled and cold-rolled coils, galvanized sheet and selected bar products. Of late, the moderate pickup in auto production has boosted the shipments to the industry starting early-June this year, noted Timothy Gill, Chief Economist, AISI.

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The seasonally adjusted annualised light vehicle assembly rate in the first half of the current year was 4.15 million units, significantly down by 39% from the corresponding half-yearly period in 2019, when adjusted annual rate had totalled around 10.74 million units. The auto industry in Mexico reported slow return to production when matched with factories in the U.S.

Going forward, the shift in preference of consumers from low-mileage cars to high-mileage trucks and sports utility vehicles (SUVs) will boost domestic production rates, which in turn will lead to increased demand for domestically produced steel. Incidentally, light trucks including SUVs account for 77% of the total automotive sales volume.

Several steelmaking furnaces that were idled during the lockdown period have resumed production, in response to rising demand from automotive industry.