The ripple effect of the US automotive strike spreads: upstream steel industry forced to reduce production.
The US automobile strike enters its seventh day, causing a $3.9 billion market value decline for steel companies.
The impact of the major strike in the US automotive industry has spread to upstream steel manufacturers, and the UAW will discuss today whether to expand the scope of the strike to 18 factories of the three major automakers.
If the situation continues to escalate and evolves into a comprehensive strike in the entire automotive industry, according to the forecast of the chief economist of Pantheon Macroeconomics, the US quarterly GDP may be hit by 1.7 percentage points.
According to reports, UAW negotiators said that the latest proposal from the Stellantis Group "is not good for us." The strike will continue, and UAW expects a weekly reduction in demand for 1.1 tons of copper and 9.5 tons of aluminum.
Currently, US Steel has idled a blast furnace in Illinois in response to the strike.
During the strike, the stock price of Timkensteel Corp., one of the world's three largest bearing manufacturers, fell by 21%, and the stock price of Cleveland-Cliffs Inc., the largest iron ore company in North America, fell by 15%.
Currently, the valuation of members of the S&P Super Composite Steel Index, including major producers such as Nucor Corporation, Steel Dynamics Inc., AK Steel Holding Corporation, and Cleveland-Cliffs Inc., has lost a total of $3.9 billion.
In a report to clients on Thursday, JPMorgan analyst Bill Peterson wrote, "Automobiles are one of the most concentrated sources of US steel demand (accounting for about 25%), and we expect that if the strike continues, it may further idle or reduce production capacity."
Steel prices are highly sensitive to negotiation trends. Peterson mentioned in the report that unless there is a long-term deadlock between the automakers and their unions, analysts expect that once the two sides are close to reaching an agreement, steel prices will begin to recover.
Historically, the last strike by US auto workers against General Motors occurred in 2019, which caused metal prices to fall by 1%. This strike targets the "Big Three" in Detroit, and JPMorgan analyst Gregory Shearer said that the impact on metal demand may be greater than the General Motors strike in 2019 due to the higher intensity of metals.