TPT November 2015

Global Marketplace

Japanese mills to produce an additional 600,000 metric tons (mt) of automotive steel, up five per cent from 2014 levels. › While this may seem a welcome prospect, in the meantime Japan, the world’s No. 2 steel producer, must work down high stockpiles after a sales tax hike last year restrained demand and pushed the economy into recession. And Reuters correspondent Yuka Obayashi also noted that foreign exchange rates have been less favourable to China, India and South Korea than to Japan. She wrote, “Aspike in Japan’s demand could prompt producers elsewhere in Asia . . . to send excess steel to Tokyo.” › Ms Obayashi pointed out that, at 110.7 million mt last year, Japan’s steel output is dwarfed by China’s production of some 800 million metric tons. Elsewhere in automotive . . . › Another carmaker with at least a tentative homing instinct is Ford Motor Co which on 12 August celebrated the return of medium-duty truck production from Mexico to the US. After putting $168 million into a new body shop and tooling at its assembly plant in Avon Lake, Ohio, Ford commenced production of the F-650 and F-750 trucks which had been built in Mexico in a joint venture with Navistar. The move, negotiated under the terms of a 2011 agreement with the United Auto Workers, does not mean a total break with Mexico for Ford. The UAW expressed its displeasure with recently announced plans by the company to invest $2.5 billion in building new engines and transmissions there. Mexican production is certain to be an issue in the talks on a new master agreement to take effect on expiration of the current compact. › The US luxury car segment is expected to end 2015 at 2 million sold, up 8 per cent from 2013 and representing 12 per cent of the domestic industry. Lexus has a sales goal of 340,000 vehicles for the year. But according to Jeff Bracken, general manager of Toyota’s Lexus luxury division, the company is in a tight race with the German brands BMW and Mercedes-Benz, both ahead of Lexus in sales through midsummer. In an unusual bid to distinguish itself and its premium experience with high-end shoppers who dislike haggling over price, Lexus has introduced negotiation-free dealerships. As reported by Alisa Priddle of the Detroit Free Press (5 August), a dozen handpicked Lexus dealers were to begin a pilot project in which they must be prepared to let customers walk away if they balk at the set prices of new and used cars as well as of parts and service. Mr Bracken said he expected the ensuing dip in sales and market share to be only temporary. Denying that the concept of negotiation-free pricing is revolutionary, he cited the example of a Toyota dealership in Arizona that has employed it with success for 12 years. He told the Free Press , “So we know it can be done, even in a highly competitive market.”

Mr Swiecki said, “In a good economy like this, [the Mishawaka plant] is going to be very, very busy.” › American auto manufacturing as a flourishing sector is supported by statistics. According to data from the Commerce Department’s International Trade Administration, the number of American-made vehicles exported to other countries grew to more than 2.1 million in 2014, more than doubling from just over 1 million in 2009. Exports to China were especially impressive, jumping to 305,000 in 2014 from barely 25,000 vehicles in 2009. After years of overseas production, Japanese carmakers – big buyers of steel – are bringing some of that work back home When the Japanese yen was at 75 to the US dollar, building their production facilities elsewhere afforded Japan’s carmakers a profit margin about 2.5 times that of building at home. But with the yen at 125 to the dollar, its value in midsummer, the allure of moving at least some of that production back to Japan has become plain. Nearly two years into the strongly pro-business policies known collectively as Abenomics – Prime Minister Shinzō Abe’s plan for revitalising the world’s third-largest economy – Japanese automakers are looking to profit from a major benefit of the yen’s decline: more competitive exports. With Toyota, Nissan and Honda among those ramping up local output, the trend holds obvious significance for Japanese steelmakers. Toyota Motor has revised upward a previously announced goal for new domestic annual production by 80,000 vehicles, while Nissan Motor plans to raise local output by 26 per cent in fiscal 2017-18 from its year that ended in March. By June, Honda Motor had already shifted production of the Fit subcompact from Britain to Japan, adding 20,000 vehicles to its domestic annual output. As of September it planned to be making an additional 30,000 cars in Japan while cutting output in Mexico. Mitsubishi Motors has joined in the shift, saying it will stop building cars in the US and serve the American market from Japan and Thailand. “The yen’s weakness is now having real effects,” Nomura Securities analyst Yuji Matsumoto told Reuters. “The repatriation trend will buoy steel demand.” (”Weak Yen, Returning Carmakers Throw Lifeline to Japan’s Steel Mills,” 6 August) The size of that boost of course remains to be seen. But Mr Matsumoto said that, as carmakers move to factories at home, Japan’s annual vehicle production could rise by as much as 700,000 by 2017-18, potentially pushing output to above 10 million units. That would be the highest since before the 2008 onset of the global financial crisis and would require

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N ovember 2015