Auto, energy industry impacts mount

Auto components maker Magna idles plants, while energy industry analyst sees massive activity decline in that sector.

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March 23, 2020

In news affecting scrap generation and demand in the short term, facility closures in the auto industry are growing, while energy sector exploration and drilling are plummeting.

Canada-based Magna Corp., a global auto components maker with $40 billion in annual sales, says with automakers closing assembly plants, it has begun “to temporarily suspend or reduce manufacturing at a number of our divisions around the world, with the exception of China.”

The firm says on its website its affected facilities “are expected to suspend operations. with production status reevaluated week to week.” The company operates more than 340 manufacturing plants in 27 different countries making exterior body parts, powertrain components and seats. Magna has not issued a statement summarizing which plants have been immediately affected.

Also hard hit by the COVID-19 epidemic, combined with a plummet in oil prices, has been the energy exploration, drilling and refining sector.

An analysis issued March 19 by Joseph Chang of London-based Independent Commodity Intelligence Services (ICIS) concludes, “In the wake of the coronavirus and collapse in crude oil prices, chemical, and oil and gas, and midstream companies will all slash capital spending for growth projects to preserve cash.”

The ripple effects have already included the scaling back or idling of steel and stainless steel mills that produce pipe and tube for the energy market.

Also impacted is polymers production, according to Chang. He says Shell announced March 18 “the temporary suspension of work on its 1.5 million-metric-tons-per year [ethane and ethylene] cracker under construction in Monaca, Pennsylvania,” and that “no timeframe was given for when work would resume.” The plant has been designed to produce virgin plastic pellets.

In the scrap metals sector, if there is a silver lining it is that the facility closures will reduce industrial scrap generation at the same time Asian manufacturing is rebounding from its bout with COVID-19. The overseas demand, combined with short supply, could help scrap grades from experiencing too much downward price pressure during the stretch when North American manufacturing is scaled back.