Europe’s car sector is experiencing a significant shortening of order backlogs, signalling weakening steel demand by the end of the year and having implications for steel makers in Europe and platinum miners, according to UBS.
Another risk is the growing cost advantage of Chinese EV producers, driven by their 25% lower production costs compared to traditional OEMs.
This is expected to lead to market share gains by China, potentially posing a long-term risk to EU steel producers as steel is primarily a regional market, the investment bank said.
The implications for metal producers are significant.
Battery metals like lithium and copper are poised to benefit from the continued growth of EVs.
However, the picture is less rosy for platinum group metals (PGMs), especially with battery electric vehicles (BEVs) set to dominate hybrids.
The potential for fuel cell vehicles to gain significant market share is doubted due to cost and energy efficiency concerns, further undermining the long-term outlook for platinum.
In terms of stock implications, the outlook is bearish for European steel companies, which have already faced significant declines in equities this year.
South African platinum miners face their own challenges, as PGM prices have fallen into the cost curve due to a destocking cycle and cyclical downturn.
While there's some short-term potential for supply-driven price increases, the long-term forecast suggests a structural and growing surplus for palladium and rhodium starting in 2025 as BEVs capture a substantial market share, UBS said.