WCA September 2016

From the Americas But even as the Detroit Three collectively showed improvement, Kia commanded the spotlight with its first-place finish among all brands. With an overall score of 83, Kia finished ahead of Porsche, Hyundai, Toyota and BMW, which rounded out the top five in that order. This was the first time in 27 years that a mainstream automotive brand achieved the highest score in the rankings; and the second consecutive year that Kia, which ranked second in 2015, led all non-premium brands in initial quality. (“Kia Ranks First, Detroit Three Rise in JD Power Study,” 22 nd June)  The study also found that all automakers are making better cars. This year, the initial quality of new vehicles improved six per cent, double the three per cent rate of improvement in 2015 and the largest increase since 2009.  The week in which Power published its results was good for Ford on another count. On 19 th June, the brand- new Ford GT sports car took first, second and fourth place in its class in the 24 Hours of Le Mans endurance race in France. The No 2 spot was claimed by a Ferrari, recalling – a half-century on – the high point in Ford history when its GT40 racers topped Ferrari’s entries to score the top three finishing spots in the 1966 event. Buying a new car would compel the typical American household to live beyond its means According to the vehicle valuation firm Kelley Blue Book, the average price of a new car or light truck in the USA in 2016 is about $34,000. A new analysis from the personal finance site bankrate.com , published 1 st July, found that a median-income USA household couldn’t afford a new car in any of the 50 largest cities in the country. To calculate an affordable purchase price for major cities, Bankrate used median incomes from federal Census data and factored in sales taxes and insurance costs. By these criteria, the median income of around $84,000 in San Jose, in California’s Silicon Valley, allows for a new car purchase price of $33,000. In Hartford, Connecticut, with a median income of about $29,000, the affordable purchase price is about $8,000 – not even a quarter of the sticker price of a new car. Accordingly, many Americans are borrowing more, for longer periods, to finance the purchase of a car. Experian said that, in the first quarter of this year, the proportion of new cars bought with the help of financing rose to more than 86 per cent; and the average loan amount topped $30,000, the highest since the credit services firm began tracking the data. The average term for a new-car loan is now about five-and-a-half years, and some loans stretch out seven years. Again according to Experian, auto leases, which often offer lower payments than traditional car loans, are becoming more popular in the USA. Leases were reported as accounting for more than 30 per cent of new-car transactions in the first-quarter 2016.

Aluminium While China’s steel overproduction draws all the attention, its exports of semi-finished aluminium products continue unabated “Excess aluminium production there is damaging the prospects of aluminium producers in the rest of the world, purely because of the size of China’s massive aluminium industry.” In the matter of aluminium, Stuart Burns of MetalMiner was calling attention to another Chinese industry that both produces and exports too much product. Citing recent reporting by Reuters , Mr Burns noted that, as with China’s exports of steel, its aluminium exports have clouded prospects for producers elsewhere, forcing closures and losses and delaying investments. Reuters pointed out a number of similarities between the two Chinese industries. In April, the world’s largest producer in both markets accounted for 51.5 per cent of global steel output and 54.4 per cent of global primary aluminium output. In both industries, China has been exporting excess production in the form of semi-manufactured products. In 2015 its steel product exports of 112.4 million metric tons (mmt) represented around 14 per cent of the rest of the world’s output; its aluminium product exports of 4.2 mmt, around 17 per cent of the global total. In the case of steel, though, wrote Mr Burns, the fear of jeopardising China’s application to the World Trade Organization (WTO) for market economy status “has forced a more conciliatory response by Beijing in recent discussions, and the promise of large-scale closure of older [steel] capacity in China.” How effective this will be remains to be seen, the MetalMiner founder acknowledged. Even so, he said, the Chinese position on steel presents a marked contrast vis-à-vis aluminium, where Beijing seems unable or unwilling to curtail new investment. As prices on the Shanghai Futures Exchange rose this year, idled smelters have restarted and new capacity has continued to come on-stream. By the Reuters reckoning, annualised run rates increased by almost 650,000 metric tons (mt) over April and May, with May’s average daily output of 86,290mt the highest since November 2015. (“Chinese Aluminium Exports Increase Even as Oversupply Remains,” 22 nd June)  The rapid rise in China’s aluminium capacity derives largely from the new state-of-the-art low-cost smelters in the north western provinces. Employing cutting-edge, world-class technology, they are commanding good prices for their output ($1,600/mt at midyear, up from the $1,450-1,500/mt levels of late 2015). As a result, Reuters concludes, capacity is unlikely to be trimmed anytime soon – at least not by government fiat. Mr Burns summed up: “For aluminium producers outside of China, that is not good news.”

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Wire & Cable ASIA – September/October 2016

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