North America's scrap metal producers and processors might feel buoyed by automotive production in 2010 compared with the previous year, but the unvarnished opinion from one auto industry consultant is they should be lowering their forecasts for automotive metal needs for the next decade.
"Demand factors are going to remain negative for some time," Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc., Richmond Hill, Ontario, said at the Metals Service Center Institute's Economic Forecast Summit in Chicago. He listed a host of reasons for his analysis.
First, the corporate average fuel economy (Cafe) goal of 35.2 miles per gallon by 2020, even if the requirement gets pushed further into the future, will "force a reinvention of the product," meaning smaller, lower-power vehicles much like those that European automakers have been producing for more than 10 years.
Second, Americans are no longer able to use their home equity as cash machines to buy vehicles, which at one point pushed North American auto sales to an annual rate of 20 million vehicles. Years of massive overbuying means there is a 25-million to 30-million vehicle overhangmore cars than driversthat has to be worked off.
His forecast runs counter to some others involved in the industry. For example, aluminum die casters in the automotive sector are forecasting stronger business as automakers continue to show resilience.
"The automotive industry is going well. It hasn't recovered, but clearly going from a production of 8 million cars to 10 million is going in the right direction," an executive member of the North American Die Casters Association told AMM.
But the numbers might be on DesRosiers' side. He projected 2011 sales of 13 million vehicles, and said it will take four or five years to get back to 16 million units in the United States. "North Americans are likely to buy 10 percent fewer vehicles between 2010 and 2020 than during the prior decade," he said.
Additionally, he projected imports will continue to take market share. "We do continue to have an onslaught of imports," DesRosiers said, noting that first it was Japanese and South Korean vehicles, now it's European models and next will be vehicles made in China.
More components and automotive parts used in American-made vehicles also will be made in China and elsewhere in Asia, DesRosiers said. "The raw material for those parts will be made in the exporting country, not in North America," he said.