Steel imports remained low again in March at 2.51 million tons, increasing only 1.2% from February’s 2.48 million tons. While buyers are gagging over 2008 prices, domestic transactions remain lower than international prices and that is keeping foreign-made steel out of the U.S. marketplace.

According to year-to-date figures, imports have decreased 11.5% compared to 2007—or from 8.66 million tons in 2007 to 7.66 million tons in 2008. First-quarter imports are down 12% from Japan, 53% from Brazil, 59% from Russia, 29% from South Africa and 41% from China.

An analysis of Census Bureau data shows that products showing increases versus the same period in 2007 were line pipe (up 43%), oil country goods (up 14%) and such heavy structural shapes as wide-flange beams (up 9%). A review of the data by the American Institute for International Steel (AIIS) suggests that import arrivals in March were ordered from nations other that Mexico or Canada late in 2007.

“With the recent surprising run up in prices, those who received imports in March probably are benefiting by having missed some of the price increases,” says David Phelps, president of AIIS in a statement. Based on Purchasingdata.com statistics, steel prices in March were 16% higher than the fourth quarter of last year. Total steel imports in March were 17.4% below those of March 2007.

Looking ahead, independent analyst Michelle Applebaum expects imports to be up in April but suggests that “strong global prices, a weakening dollar and disciplined inventory management by service centers will lead to fewer imports into the U.S. during the summer months.” Analyst Timna Tanners at UBS Investment Research agrees that “importers continue to see limited import activity to the U.S. over the next few months.”

North American motor vehicle production dropped 9% during the first quarter due to the overall drop in consumer spending and the ongoing strike at parts supplier American Axle & Manufacturing Holdings, suggests analyst David Leiker at Baird Research.

This explains why bookings are in disarray for makers of automotive-grade plain and zinc-coated steel, common alloy aluminum sheet, copper wiring harnesses and lead for batteries. About 3,600 United Auto Workers union members have been on strike at American Axle's five U.S. facilities since Feb. 26. American Axle makes axles, drive shafts, stabilizer bars and other components for automakers.

The auto assembly cutback is much higher than the 5% forecast earlier by numerous automotive analysts and is pinned to weaker-than-expected sales. The Detroit News this week reported that “automotive sales are falling harder and faster this year than anyone anticipated because of a toxic combination of factors not seen since the oil shock of the 1980s”—citing a weak economy, sagging consumer confidence, record-high gasoline prices and hard-to-get credit.

Automakers, consultants and financial analysts have been cutting their forecasts after the weaker-than-expected start to the year. But they have not arrived at a consensus about this sales slump because it defies the usual patterns. "It's an unusual downturn. It's probably the deepest since the 1980s, but technically, this is still not a recession," Jesse Toprak, director of market analysis at online automotive research site Edmunds.com tells the Detroit newspaper. “Nothing like this has ever happened before.”

Economists Carlos Gomes at Scotiabank.com tells Purchasing.com this morning that “the deterioration in the auto marketplace probably will continue until summer,” when his forecast suggests stabilization and a slight pickup in assembly and sales in the fourth quarter. However, he still sees a 5% slide in U.S. and Canadian motor vehicle sales for 2008 to 15.3 million units from 16.1 million in 2007.

Normally, in a weakening economy, demand for oil falls and prices subside. And interest-rate cuts usually encourage banks to lend more generously, enabling consumers to keep spending. But this time, there's no such relief to encourage car buyers. Oil prices keep rising, pushed by strong demand in huge emerging economies such as China. In the United States, the impact of high gas prices has been magnified this time around because light trucks make up half the market.

And the Detroit Free Press says that Ford Motor Co. is forecasting a drop-off in industrywide sales of minivans to a 23-year low this year while large pickups decline to the fewest in a decade as more consumers turn to smaller cars. Minivan sales may drop below 600,000 for the first time since 1985 and large pickups may slide to fewer than 2 million, a level they have topped annually since 1998, says George Pipas, Ford sales analyst. Pickup sales have been hurt by a declining housing market.

The U.S. auto market continued to slump in March, with light-vehicle sales falling 19% at General Motors, 10% at Toyota and 14% at Ford. The month had two fewer selling days than in March 2007, which magnified the declines. But analysts tell The Wall Street Journal they were expecting weak monthly results in what is shaping up to be one of the toughest years for U.S. auto sellers in at least a decade. Some economists tell Purchasing.com that the consensus forecast of a 15.5 million sales year may be too optimistic.

Sales last year were 16.1 million units. But the continuing downturn in the economy is dampening demand in general, while high gasoline prices continue to cut deeply into sales of traditional SUVs and pickups. “This is a very challenging external environment, reflecting a seismic shift in consumer preferences,” says Ford marketing executive Jim Farley. “These conditions will likely persist in the near future.”

Also, the fact that Toyota has seen sales decline for the seventh of the past nine months is signal of the malaise now afflicting automakers in the U.S.— as the troubles on Wall Street and in the housing market take a rising toll on the economy. The WSJ says that when people see the value of their homes decline -- and real-estate executives say home-price falls around the country are the worst since the 1930s -- expensive purchases such as a car are often the first to get postponed.

Connector suppliers say it's likely that they will have to increase prices this year because of increased costs for precious metals and plastics.

"We continue to see rising raw materials costs most specifically for gold,” says Peter Krehbiel, president, connector products division, Molex Inc. in Lisle, Ill.. “We anticipate price increases this year due to rising costs for precious metals and resins." The last price hike implemented by Molex was last summer.

Tyco Electronics' Communications, Computer and Consumer Electronics (CC&CE) business unit implemented 5% price increases for some products in certain segments on Jan. 1. Additional price hikes are under evaluation.

Tyco has felt the impact of rising metal and oil prices. Gold is used in connectors and oil has impacted the price of plastics that Tyco also uses.

“We've been hit with some pretty good increases over the past several months and how this is going to impact us is a little tough to tell right now," says Jeff Brown, director of product management for the CC&CE business unit for Tyco in Harrisburg, Pa.

Brown says the biggest material cost impacts have been for palladium and gold, which are used heavily in the connector industry as plating materials. "Over the last few months we've been hit on multiple fronts with a lot of the raw materials we use," he says.

Despite having very focused programs in both manufacturing and engineering groups to reduce costs, Brown says it's getting more difficult to find ways to improve efficiencies and cost to offset those raw material price increases.

World copper supply may loosen this year if Chinese analysts are correct in predicting that the country’s net copper imports may fall by 10% this year from 2007 to 1.22 million metric tons. Meanwhile, short-term copper prices have tumbled to a three-week low as fears of a looming U.S. recession continue to spark a global market sell-off of stocks and futures.

The subscriber-only NymexDirect newsletter says that Maike Futures Brokerages’ deputy general manager, Shen Haihua, told the recent 2008 Base Metals Market Outlook forum that full-year refined copper imports will be 1.32 million metric tons, down from 1.48 million in 2007, while exports may fall to 100,000 metric tons from 124,000 last year. Shen forecasts there will be a 12% growth in domestic production to around 3.89 million metric tons, which should absorb a projected 8% increase in domestic consumption to 5.13 million metric tons. (The 2007 copper consumption total was around 4.74 million metric tons, a 22% gain from 2006 use.)

Meanwhile, the world copper price fell today back toward a $3 annual price average. It had jumped to $3.13/lb on Tuesday because of the aggressive rate cut of 75 basis points by the Federal Reserve in a bid to prevent the economy from sliding into recession. The 2008 consensus forecast for copper cathode is closer to $3/lb than last year $3.25, a projection endorsed by Xavier Garcia de Quevedo, the head of Mexico's Mining Chamber of Commerce, who sees cathode averaging $3, according to the Denver Post.

The Globe and Mail newspaper in Toronto suggests that slowing growth in the U.S., the world's biggest economy, could hurt demand for metals. Industrial metals have been focusing on movements in global financial markets in recent weeks rather than on supply and demand fundamentals. “Fundamentals really had little to do with any of ... (the) moves,” Standard Bank said in a research note. “Instead, the metals again looked to technical signals, the rest of the complex and the wider global markets for direction.”

After some news sources report its annual output declined in 2007, Chilean copper miner Codelco plans to increase capacity in 2008 by upping its capital spending to $2 billion, up from $1.69 billion last year. Of that, $241 million will go to its new mine in Gaby due to start production in March, pumping out 100,000 metric tons of copper this year.

Codelco said this week its biggest risk to production is lack of energy. Bloomberg reports that energy prices in Chile, the world's largest supplier of copper, surged 29% in 12 months because of a shortage of natural gas from neighboring Argentina.

Copper prices in the U.S. hit their highest point in three weeks after the reports of Codelco’s reduced output hit the market to combine with weather-related concerns in China and lower stockpiles on the London Metal Exchange.

"It's a combination of these copper-specific fundamentals against the macro, and certainly with copper prices at $3.45/lb, the macro is losing," said Bill O'Neill, managing partner of LOGIC Advisors in a recent Reuters report.

Copper buyers will have less trouble sourcing the red metal this year as a succession of bad news on the economy—including poor bank earnings, falling construction rates and rising expectations that overall gross domestic product (GDP) growth will slow—is driving many copper market watchers to revise their 2008 copper demand forecasts.

U.S. copper consumption for construction and manufacturing has been sliding for the past two years. Last year, the U.S. and Canada consumed an estimated 5.4 billion lbs of copper, a 3% decline from the year before, and new outlooks for 2008 see further slippage.

"Copper demand is probably falling 8% per annum in the U.S.," says Jon Bergtheil, head of global metals strategy at the J.P. Morgan Securities offices in London. Not quite as bearish is Larry Edelson at Weiss Research in Jupiter, Fla., who forecasts that refined copper consumption will fall by 3.3% this year. Still, their views now erase earlier forecasts of a 4% rebound in 2008.

Standard Bank analysts looks at poor residential construction figures as a key indicator of copper demand in the U.S., citing the fact that housing starts charted by the Commerce Department dropped by a faster-than-expected 14% in December to the lowest monthly level in more than 16 years. Another weak indicator for copper is that building permits also fell more than expected in December by 8% to 1.07 million units. For the year, permits were the sharpest seen in more than 25 years. From early 2006 levels, housing starts have declined by 56% and permits for new construction are down 52%.

Still, overall, the world price of copper remains around or above $3/lb for what would be the third consecutive year. Edelson says "copper's price has recently been strengthening even in the face of the U.S. slowdown. That could be signaling that Asian economies, where much of the demand for copper is coming from, remain buoyant, steaming ahead."

Spot copper prices remain in the $3.70-$4.00 range as global stockpiles have dropped to the lowest level in six months, spurring speculation supply will trail demand for the year. “Copper looks the tightest market from a fundamental perspective,'' writes Barclays Bank analyst Kevin Norrish in London. Inventories may reach an all-time low and prices are sure to rise to an even higher record, he suggests.

A Thompson Financial report this morning says that sentiment towards nonferrous metals has swung since the start of this year. Most analysts had warned that base metals' prices were set for sharp falls as the credit crunch lingered, which meant players would sell off their holdings to raise cash and cover losses. But, in recent weeks, commodities have become tipped as useful assets. In the wake of the crisis, raw materials hold their value on a tight supply/demand balance, unlike equity markets which can crash completely. It is that perception that helped world copper hit its highest ever price of $4/lb on March 6 at the same time as gold and oil prices tested record highs.

Copper’s price has climbed for six consecutive years as production disruptions at mines from the Asia-Pacific region to Latin America have limited supply growth while demand from China, the world's largest user of the metal, and other developing nations has expanded. A weak dollar makes industrial metals cheaper for local currency holders and boosts the appeal of commodities. So, copper was up 27% in mid-March since the start of the year.

However, some other analysts suggest that copper prices may see some downward correction because the depressed U.S. economy will reduce near-future demand for the metal and China’s imports for the high-priced red metal may start declining. “Overall, we expect volatile trading in this short Easter week,” agrees analyst William Adams at BaseMetals.com. “Also, copper prices above $4 seem to be unattractive for Chinese investors,” adds an analysis by Karvy Comtrade in Mumbai, India.

China's Auto Industry: Roaring Ahead From Business Week

Since the mainland overtook Japan as the world's second largest car market, local automakers are increasingly competitive and cutthroat

The word Longbridge was once synonymous with all that was great about British motoring. This southern suburb of Birmingham in the English midlands gave a home and a name to what was, at its peak, the world's largest car plant, producing Austin, Morris and MG Rover cars.

As the UK auto industry slipped into 20th century oblivion, the plant saw nationalization, privatization, mergers, takeovers and, ultimately, financial meltdown. In April 2005, with owner MG Rover in receivership, Longbridge closed its doors after 100 years of continuous operation, putting 6,500 people out of work.

If all goes according to plan, the lights will officially be switched back on at the end of May. This won't just bring new life - and 250 jobs - to a corner of the English midlands steeped in auto making history; it also represents a big step for the new Chinese masters of Longbridge.

Nanjing Auto plans to launch the MG-TF roadster convertible this month and the cars will go on sale later in 2007, initially in Europe. But as well as serving as a staging post for exports, it is hoped that Longbridge, and the intellectual property that came with it, will help this domestic carmaker go toe-to-toe with foreign brands in the Chinese market.

"April 8, 2005 was one of the worst days of my life," said Adrian Ross, formerly convener for the Transport & General Workers Union at the plant. "At the end of the day, as long as Nanjing Auto honors what it has said about Longbridge then I am 110% behind them. Everything is there, geared up and ready to go."

TAKEOVER BATTLE
Nanjing Auto's involvement came after a fierce battle with rival Shanghai Automotive Industry Corp (SAIC) over the assets of the insolvent MG Rover. Nanjing Auto was the small-scale upstart, SAIC the established player running joint ventures with GM and Volkswagen that build around 700,000 vehicles per year.

In the end, SAIC paid US$130 million for the rights to two Rover models and one engine series. Nanjing Auto got the rights to the MG portfolio, as well as MG Rover's production lines and other assets, for US$97 million.

SAIC released the 2.5-liter Roewe 750, based on the Rover 75. In March, Nanjing Auto announced plans to start production of the 1.8-liter MG-TF roadster and the MG 7295 and MG 7275 sedans at its new plant in Nanjing, which is partly modeled on Longbridge.

The vigour with which Nanjing Auto and SAIC competed for MG Rover speaks volumes for both the ambitions and limitations of China's auto industry.

Last year, China overtook Japan to become the world's second-largest auto market as total vehicle sales came to 7.2 million units, up 25.1% year-on-year. Passenger vehicle sales rocketed 30% to reach 5.14 million units. Having put total light vehicle sales - the bulk of which is cars - at 5.7 million units in 2006, auto consultancy CSM Worldwide expects it to nearly double over the next seven years to more than 10.3 million units.

Needless to say, the top global automakers have all positioned themselves in joint ventures with domestic firms so as to take advantage of this boom.

"If you want to have any growth in the auto industry, you have to be focused on China," said Joseph Liu, executive director of vehicle sales, service and marketing for General Motors (GM) China, which works in partnership with SAIC.

"We expect to see double digit growth every year until 2010-11."

FOREIGN DOMINANCE
GM is the market leader, selling 876,747 vehicles in China last year, up from 665,390 in 2005. Volkswagen, which runs a joint venture with Changchun-based First Auto Works (FAW) as well as SAIC, occupies second spot with 711,000 sales in 2006, a year-on-year increase of 24%. Meanwhile, Ford, partnered by Changan Auto, saw sales jump 87% to 166,722.

The Japanese carmakers are the ones that are set to see the largest near-term growth, though. CSM expects Toyota, Honda and Nissan - all relative latecomers to the market - to more or less double their China sales within five years.

It is in this cutthroat environment that local Chinese automakers are looking to step up a level in product development.

Most domestic firms entered the market by producing vehicles that were basically low cost, low quality versions of existing models. For example, the Chery QQ, one of the best selling economy cars in China, prompted legal action from GM over the vehicle's similarity to the Daewoo Matiz, produced by the US carmaker's Korean joint venture.

"It all comes down to re-engineering," said Charles Cheung, head of regional autos at Citigroup. "Most carmakers start out by replicating existing models and that is fine. To really move up the value chain, they need to reinvent themselves."

STANDING OUT
Domestic firms account for 27% of the Chinese market but it is split amongst 20 or so manufacturers. With consolidation inevitable, the race is on to develop better designs and technology and wider product ranges under respected brands.

It is a strategy that will see them gradually move up the value chain, first challenging the lower-end Korean producers, Hyundai and Kia, before taking on GM and Toyota in the higher segments.

"There is no room for a firm that only focuses on small cars - you can't get the volume and profitability," said Lawrence Ang, executive director of Hong Kong-listed Geely Automobile Holdings. "You have to be a full range car manufacturer."

Geely, based in Zhejiang province, is moving fast to expand its product range. It is expanding from one to 1.8-liter models this year, will enter the two-liter bracket in 2008 and hopes to be offering 3.5-liter cars by 2010. Geely is also sinking 6-8% of annual revenues into research and development efforts.

"When you invest in developing engines and gear boxes, it gets expensive but our long-term competitiveness depends on technology. We are catching up with international car companies," Ang said.

The advantage that SAIC and Nanjing Auto have is that they have their hands on a Western-standard design ready made. The Roewe 750 has gone straight in at mid-market level and hopes to challenge some of the established foreign players. Backed by a proven track record in producing cars through its GM and Volkswagen joint ventures, SAIC will move from own-brand sales of 23,400 this year to an annual output of nearly 180,000 by 2013, according CSM.

The projections for the smaller Nanjing Auto aren't as high but, from an export angle at least, it can call upon the strength of the MG brand. (The Rover name is owned by Ford.) "Rover didn't sell in the North American market but, in the MG, Nanjing Auto has a brand that is recognized," said Ross.

The company also has the chance to develop the car designs it acquired at a research facility set up in the UK with the assistance of MG Rover.

"In the US, it takes decades for car companies to come into their own," said Michael Dunne, vice president for Asia-Pacific at auto consultancy JD Power & Associates. "Nanjing Auto and SAIC can say: here is a car with our brand on it and it's not the result of a partnership with a foreign car company."

SITTING PRETTY
If the likes of GM and Volkswagen are concerned about being challenged in the domestic market by the parent companies of their own joint venture partners, then they aren't showing it.

"There is a degree of natural substitution but, based on our product resources, we don't really see them as a director competitor," Liu said of SAIC's Roewe 750.

In his view, GM remains innovative enough to be more than a match for its competition. He cited the launch of the Buick GL-8 - which found success as a high-end minivan when everyone else said budget vehicles were the only option - as evidence that GM has what it takes to set the standards in China.

And getting your first car on the road is the easy part. Any manufacturer that really wants to make an impression has to back this up with effective after sales services and a string of successful follow-up models that make the line sustainable.

"Brand, future technology and distribution networks are very important," said Liu. "A car is not like a commodity - you have to build up trust."

Continued cutbacks in new-housing construction starts have reduced need for copper and brass mill products this year. The housing industry is by far the largest end user of copper, around 40%. And that’s why midyear shipments by copper and brass service centers are 8.4% lower at 207.8 million pounds than the 226.8 million shipped in the January-June period of 2006.

For the initial six months of the year, total copper shipments are down 2% from the companion period of last year, while brass and bronze shipments are down an even sharper 12.6%, reports Frank Brown, executive director of the Copper & Brass Servicenter Association in Wayne, Pa.

Year-to-year shipments for copper rod and bar, which are predominantly used in fasteners and wiring, are up 7.63%, “the only significant bright spot” for distributors this year, says the industry group. Copper sheet is down 6.3%, copper plate has crashed 16.5%, copper pipe is off 13.5%, 200-series brass sheet is down 14% and 200-series brass plate has collapsed by 32%, while 300-series rod and bar has dropped 11.4%.