SINGAPORE: Copper prices rose on Tuesday, with Shanghai copper touching a near two-week high, as top consumer China surprisingly reported an expansion in factory activities this month.
The Purchasing Managers’ Index for China rose to 52 in March from the collapse to a record low of 35.7 in February, official data showed, much higher than a Reuters poll’ forecast of 45.0. The most-traded copper contract on the Shanghai Futures Exchange (ShFE) rose as much as 2.2% to 39,600 yuan ($5,578.56) a tonne, its highest since March 18.
Three-month copper on the London Metal Exchange (LME) was up 1.5% to $4,838.50 a tonne, as of 0124 GMT, reversing a streak of three straight losses. However, the longer-term outlook for copper, often used as a gauge of the global economic health, is still seen under pressure due to prolonged worldwide shutdowns to contain the coronavirus pandemic.
LME copper, despite the rally on Tuesday, was down 14.2% on a monthly basis, on track for its worst monthly decline since September 2011.
Having assured government that auto component makers will not retrench any work force including temporary workers, the part makers are urging the vehicle makers to release their timely payment and also requesting the government to extend the sops, so as to ensure that their cash does not dry up quickly.
“We now expect vehicle makers to release timely payments to ensure that there is cash in the system to deal with other responsibilities,” said Deepak Jain, managing director of Lumax Industries and president of Auto Component Manufacturers Association. “The steps taken by RBI will improve liquidity and we are hoping that the government of India, too, steps in with further monetary support.”
More than 100 component makers have already made an advance payment to 100,000 blue-collared workers a fortnight before the scheduled date of payment.
However, Jain told ET, if the lockdown extends beyond the current end date of April 14, many companies will be forced to move towards salary cuts and job cuts.
He is hopeful that vehicle makers and the government will step in to help the industry deal with this “unprecedented crisis”.
“The litmus test is ahead of us,” Jain said. “If there is no production in April, the industry may have to resort to some tough measures including job loss. And if payments are not honoured, then it may lead to a challenge of a different kind: will there be enough workforce once the situation comes back to normal?”
However, while most carmakers have assured timely payments to the vendor fraternity, there is a question mark over other vehicle makers’ ability to pay as Covid-19 crisis has made it a triple whammy for the auto industry that saw overall vehicle sales slump 16% in the first 11 months of the financial year even as companies had to invest on upgrading vehicles to meet the Bharat Stage-VI emission norms that will come into effect on April 1.
Two-wheeler makers Hero MotoCorp and Royal Enfield have already invoked a force majeure, and may not be honouring all the upcoming schedules. Also, barring Daimler, the vendors are yet to a get an assurance from the truck makers that have been severely hit because of a falling market and higher investment for BS-VI trucks.
Typically, ancillary companies receive payment from automakers in 30 days from the day of the invoice, and thereafter payment is released in the first week and third week of every month.
According to ETIG analysis, the payment cycle effectively gets extended to 40-45 days, and for every Rs 100 crore payment delayed by automakers, a component maker has to bear incremental interest of around Rs 8 crore.
The borrowing of the auto ancillary companies could double in the next three to six months following higher working capital requirement, as several automakers have been delaying payments to vendors.
The total debt of the auto ancillary companies (having more than Rs 100 crore of market capitalisation) stood at Rs 42,833 crore in FY19 compared with Rs 37,257 crore a year before, according to Capitaline data.
The funding pains for auto vendors could exacerbate if payment by automakers get delayed beyond the third week of April.
“The debt level of the auto ancillary could double in the near term,” chief financial officer of an auto ancillary company said on condition of anonymity. “The good news in the current environment is that working capital level of the companies was not stretched before the lockdown disruption due to muted demand. This could add comfort for bankers to extend higher working capital limits.”
In the event of delayed payment by vehicle makers, ancillary companies may have to approach banks for their funding needs, increasing the debt burden of the companies.
In addition, some automakers have closed bill discounting scheme for their vendor.
In order to ease the pain for companies from clogging funding line due to Covid-19, several public sector banks have launched a scheme for companies to increase working capital limits for a short-term period.
New Delhi: The electric vehicle insulation market size is estimated to grow to $4.2 billion by 2024 from $1.3 billion in 2019, at a Compound Annual Growth Rate (CAGR) of 26.7 percent, claims a study by ResearchAndMarkets.
The growing demand for battery electric vehicles (BEV) is expected to drive the growth in the insulation market for green vehicles. The growth is also attributed to the growing demand for thermal management in batteries, with the increasing production of electric vehicles.
The study also says that the insulation system for under the bonnet and battery pack application is to witness the highest CAGRS during the forecast period.
The study forecasts that thermal interface materials in the product type segment are estimated to witness the higher growth rate between 2019 and 2024, which is attributed to the growing demand for thermal management in batteries, with increasing production of electric vehicles.
The thermal insulations solve two types of problems in a vehicle, which are climate control inside a car and heat-related issues under the bonnet. The lithium-ion battery pack in an electric vehicle generates huge amount of heat, which requires to be controlled through the thermal management system, where the usage of insulation is essential.
The electric vehicle insulation market in Asia-Pacific region is projected to grow by 60 percent during the forecast period, while the North American market will see 25 percent growth.
In the North American market, electric vehicle manufacturers like Tesla, General Motors along with key EV insulation makers like DuPont, Unifrax, 3M are driving the growth of the market. Apart from that, the increasing imposition of stringent emission regulations too is helping in the growth of the electric vehicle insulation market growth.
New Delhi: The auto component maker ZF Friedrichshafen AG on Friday said it will be following the long-term goals of its “Next Generation Mobility” strategy to shape mobility needs of the future in 2021, the company said in a release.
The company has bagged new billion-euro orders for the hybrid-capable 8-speed automatic transmission and new business in the area of active safety technology with the continued increase in demand for electric bus drives, and R&D orders for automated driving functions.
The German car parts maker is preparing to ramp up the plants in Europe and the U.S. after customers resume production. In Asia, production has already been resumed.
Announcing the annual result for 2019, the component maker said it has achieved its targets for the full year which were revised in summer 2019. The ZF Group’s sales in 2019 stood at €36.5 billion when compared to the 2018 figure which stood at €36.9 billion. Organic sales declined by 1.9 percent.
“The general economic climate and special challenges connected to the overall transformation of our industry had a tangible impact on our business last year,” explained ZF CEO Wolf-Henning Scheider.
Adjusted EBIT amounted to €1.5 billion against €2.1 billion in 2018; the adjusted EBIT margin declined to 4.1 percent.
Investments in property, plant and equipment amounted to €1.9 billion. The company’s CFO Sauer noted, financing the planned acquisition of the commercial vehicle brake manufacturer Wabco was a success.
The company said its earnings were affected by higher research and development (R&D) expenditure and setting up new sites for future technologies – such as production facilities for electric drives in Germany, Serbia and China.
ZF increased its R&D expenditure to €2.7 billion from €2.5 billion in 2018. “When we overcome the current crisis, we want to continue to invest in future technologies in a focused manner,” said ZF CEO Scheider. “This will enable us to further expand our competencies as a leading systems supplier.”
Announcing the 2020 business outlook, Scheider emphasized, “The global economic situation has changed fundamentally since the spread of the coronavirus and the certification of the ZF annual financial statements. When the world comes to a social and economic standstill, we face an unprecedented situation.”
He further added, “Its effects are uncertain which is why we are currently not in the position to make a valid forecast for 2020. We will continue to do everything we can to protect our employees, stop the spread of the virus and ensure the stability of our company.”