It is too soon to realise the full impact of these hurricanes but we can start to assess the likely impact on the US aluminium market. There are two key questions that need asking: how quickly will the repairs and replacements happen? And, how significant will any increase in demand for aluminium products be?
Extensive vehicle damage will boost near-term demand
Over one million cars and light trucks were damaged or destroyed by the hurricanes and will need to be replaced; in addition, a large number of commercial vehicles and recreational boats will be replaced. It will take months for the insurance claims to be processed and, of course many of the dealer lots will need to be replenished as stock at many of these have been damaged.
We expect sales of cars and light trucks to be reduced in September due to the storms’ impact on local dealerships and people’s ability to buy; however, in the near-term, we expect delayed purchases together with demand for replacement cars and light trucks to result in a pick-up in demand for vehicles. However, the US auto industry has built up a 70-day/4.2 million unit inventory over the past few years. The additional demand for replacement vehicles may dent the inventory but the huge available stock is far in excess of likely replacement demand.
At this point, we do not believe this will result in increased automotive production; however, the additional demand could prevent the expected drop in production volumes.
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