Auto sales increasing – What about demand for steel?

October 12th, 2012 | Blog, News

On October 2, 2012 Dee-Ann Durbin and Tom Kreshner of the AP Auto writers indicated that auto sales continue to rise in the US, more specifically 13% versus one year ago as a result of low interest rates, new models, consumer confidence and aging vehicles. Similarly, in Canada, according to The Canadian Press automakers sold 6.4% more vehicles last month when compared to one year ago.  Industry experts are optimistic about this trend continuing to the end of this year and early next year.

So what does this mean for the demand for steel?

According to Vitaly Belskiy with Forst & Sullivan, steel represents 55% of the weight of an average C Class passenger and 5% of its production costs. Admittedly, steel is important to the sector however, the construction sector is by far the most influential.

The Organization of Economic Co-operation and Development (OECD) in their “Perspectives on steel by steel using industries” indicated that the global construction industry is the largest consumer of world steel in the range of 50%. The transportation sector accounts for 16% of the demand. This covers cars, trucks, shipbuilding, rail, and aviation industries. Steel is used in the basic vehicle frame and for making hoods, doors, bumpers, mufflers, fuel tanks. Speciality steel which is excellent for tenacity and mechanical strength is used in engine-related parts, transmissions and suspensions. Closely behind the transportation sector is the demand for steel from the machinery industry at 14%, metal products at 14%, domestic appliances at 3%, and electrical equipment at 3%.  The drivers of steel demand are complex and multi-faceted. Hence the increase in demand for automobiles, although it helps it is only one of many factors.

What about the role that North American automobile growth plays globally?

In recent years, this growth has been led by China and demand from other emerging markets. In 2009, according to OECD statistics, China represented 23% of total units sold, Japan 13%, USA 9%, India 4%, Brazil 5%, South Korea 6% and Mexico 3%. These statistics indicate that economic conditions in the emerging are also key determinants in the global demand for increase units. Moreover, OECD points out although the automobile industry was severely affected by the economic downturn the situation in emerging markets was more stable. Growth in emerging markets is creating an entire new class of potential consumers.

Overall at GB Resources our recycling business is diversified to take advantage of growth in both the construction and automobile sectors through our scrap metal and auto recycling services. We recycle every part of an automobile – from the plastic gas tank to the metal radiator. Nothing goes to the landfill. We recognize complexity and dynamism of our industry and work with our clients to ride the highs and the lows.

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