Will the New CAFE Standards Shift the Advantage to Aluminum?

With new and more demanding gas mileage standards for North American vehicles taking effect next year and in the years to come, the competition for automotive sales between steel and aluminum producers will only intensify.

By Dan Markham, Senior Editor
For the past 35 years, steel and aluminum have been engaged in a steady, if somewhat one-sided, fight for sales to the North American automotive market. But as 2012 approaches, that contest may get considerably more competitive.

The first wave of new corporate average fuel economy standards is scheduled to take effect next year. These tougher new government standards may shift the advantage from the cheaper but heavier steel toward the lighter though more expensive aluminum.

Aluminum’s growth in automotive has been a slow, incremental climb for the past three decades. A few years ago, it passed iron for the No. 2 spot among automotive materials, but it remains far behind mild steel because it is two to four times more expensive. But the aluminum industry believes that is about to change—dramatically.

“The use of aluminum in the automotive market here in North America will more than double by 2020,” says Kevin Lowery, a spokesman for Alcoa in New York. “And from 2020 to 2030, look out.”

Promise Still Outpacing Practicality of Electric Vehicles

While hybrids and other electric-powered vehicles are beginning to gain some traction with consumers—especially as gas prices approach $4 per gallon—widespread adoption is still years away, say most auto analysts.

“Electric vehicles are not going to be there for another 10 years due to many factors,” says Tracy Schneiter, a vice president for automotive analysts IRN Inc., Grand Rapids, Mich.

It starts with consumer acceptance. So far, the hybrid vehicle’s increased fuel efficiency is not sufficient for most consumers to justify its high price tag. When federal incentives to purchase hybrids expired, their sales dropped through the floor, Schneiter says.

Even for those environmentally-conscious individuals willing to invest in the various forms of electric vehicles, the absence of the necessary support structure remains an issue. In a report on electric vehicle deployment rates, the Ann Arbor, Mich.-based Center for Automotive Research says infrastructure, such as public charging stations, will be an important factor influencing adoption of electric vehicles.

Adoption of electric vehicles is likely to occur on a state-by-state or city-by-city basis, with electric-vehicle-ready communities targeted first by the automakers, experts say. According to CAR, when selecting markets for deployment of electric vehicles, Ford “considered past hybrid purchasing trends, utility company collaboration and commitment to electrification by local governments.”

Even if communities, the carmakers and the public are willing to embrace electric or hybrid-type engines, there remain obstacles to full deployment. At the March Steel Business Briefing Steel Markets North America Conference in Chicago, analyst Chuck Bradford noted that one key element of the electric car, the lithium used for batteries, shares a trait with the petroleum the U.S. is trying to wean itself from. “I’m concerned with where we’re going to get the lithium for all these lithium batteries,” said Bradford, president of Bradford Research Inc. in New York. “The lithium mined in the U.S. is chemical grade. Most of the lithium comes from China, Chile and Argentina. The big question is how many electric cars we can make with the limited supply of lithium.”

Ron Krupitzer, vice president of automotive applications for the Washington, D.C.-based American Iron and Steel Institute’s Steel Market Development Institute, says the steel industry is trying to stay ahead of the curve on any new engine technology. The association’s Future Steels program is studying the variety of hybrid technologies with an eye toward where steel best fits. “We’re trying to evaluate the best use of steels in these configurations,” Krupitzer says. “Many times, even the current vehicles are adapting existing platforms originally designed for internal combustion engines. We want to take a clean sheet of paper and design the best package of steel for these particular power trains.”

But the steel industry is not going to yield its position of dominance quite so easily. Steelmakers are banking on the continuous development of high-strength and advanced-high-strength steels to retain their position as the material of choice for automakers.

Three converging factors have come together to set off the battle over automotive materials. It began with safety issues, as carmakers were tasked with making vehicles more crash resistant. Since then, the call for fewer harmful air emissions, coupled with the need for greater fuel efficiency to reduce the nation’s dependence on foreign oil, have spurred on the fight.

The conflict will reach a fever pitch by 2012 when the first CAFE benchmark must be met, ramping up to 2016 when domestic fleets will be expected to average 35.5 miles per gallon. While the standards for 2017 and beyond have not yet been established, some experts predict they could range as high as 47 to 62 miles per gallon as an eventual target.

All of these factors put the material used in all automotive applications under the microscope. Mild steel has long been the preferred material due its versatility and low cost. But stronger-yet-lighter material is the new objective, and aluminum and high-strength steel meet that goal much better.

“Aluminum has had steady growth, adding about seven to eight pounds a year for two decades,” says Doug Richman, vice president of engineering and technology for Kaiser Aluminum, Foothill Ranch, Calif. “Now it will accelerate pretty heavily, just with the new standards for 2016.”

By the time the next set of standards takes hold, Lowery believes the aluminum industry will be poised to win the dominant market share in the auto materials market. “The first phase is primarily just lightweighting, substituting some materials and consolidating part streams. The next phase will be aluminum-
intensive vehicles,” he says.

Corroborating the aluminum industry’s bullish predictions are recent comments from automakers such as Matthew Zaluzec, global materials manager for Ford Motor Co., Dearborn, Mich., who told The Wall Street Journal: “I believe in 2015 and 2020, we will be more aluminum-intensive. It may not be 100 percent, but it could be more than 50 percent.”

At the moment, aluminum represents about 8 percent of the average vehicle’s weight, so a 50 percent share would represent a major shift for both the aluminum and steel industries. The bulk of aluminum’s use in cars to date is in castings used in engine blocks, cylinder heads and transmission cases, among other applications.

“Castings are nearing saturation,” Richman says. “What’s taking over is flat-rolled product for body closures—doors, hoods, trucks and front fenders. The real frontier, and where the next gains have to come, is in the body in white.”

Gains in the enclosures and body frame, which would also allow for greater use of aluminum extrusions to marry the flat-rolled parts, would result in the aluminum-intensive vehicle the nonferrous industry has long sought. So far, only a handful of vehicles, including Jaguar and Audi models, have used aluminum to such an extent because of its relatively high cost.

Mild steel, for years the go-to product for automobile and light truck manufacturers, will undoubtedly lose much of its share of the market. The question for steelmakers is how much of that can be shifted to the high-strength and advanced-high-strength steels they are now producing.

ArcelorMittal recently launched its S-in motion project, in part to coincide with the changes in vehicle weight requirements. The program, designed by specialists at the company’s North American and European research centers, highlights the weight reduction potential offered by steel products. 

The company cites a “14 percent weight reduction in a typical C-segment 5-door passenger car, with no compromise in safety performance,” through the use of ArcelorMittal’s AHSS, says Dr. Blake Zuidema, director of automotive product applications at the company’s R&D center in East Chicago, Ind.

“ArcelorMittal works closely with vehicle manufacturers around the world and knows their unique, individual design, manufacturing and materials preferences. These preferences were addressed in the development of S-in motion solutions, but the program was conducted internally with design assistance from independent, globally recognized design firms,” Zuidema says.

Severstal North America’s Tom Marchak believes steel’s existing position as the market leader will serve it well in the future. “There are varying opinions about future product choices for the manufacture of safe, fuel-efficient and affordable light vehicles. We have looked at those suggestions and believe them to be cost prohibitive. We feel that steel enjoys advantages of cost effectiveness, ease of use, existing support infrastructure and a vast array of emerging new and highly effective products,” says Marchak, vice president of commercial for the Dearborn, Mich.-based steelmaker.

Like the aluminum industry, the steelmakers believe high-strength steels will assume a dominant place in the marketplace. “Today, these grades make up about 14 percent of the steel used to make cars and light trucks. We expect that percentage to grow to 45 to 50 percent by 2020,” Zuidema says.

But aluminum officials point to a 2010 study by Aachen University for the European Aluminum Association that tested the performance of aluminum against high-strength steels in 26 different components. According to the study, aluminum enjoyed significant weight-reduction advantages over the high-strength steels in virtually all categories. Compared to a mild-steel-intensive automobile, aluminum reduced the vehicle’s weight by up to 40 percent. In contrast, the high-strength steels tested resulted in only an 11 percent reduction.

“We don’t see it competing, to be quite frank,” Alcoa’s Lowery says of high-strength steel.

Steel industry proponents can note, however, that the steels used in the testing, rated with yield strengths up to 1,200 megapascals, do not represent the extent of the product. Developments in the industry push some products well past that yield strength limit to upwards of 2,000 MPa, says Ron Krupitzer, vice president of automotive applications for the American Iron and Steel Institute in Washington, D.C.

Krupitzer recognizes the constant threat facing the steel industry to maintain its dominant position in the automotive market, its second-largest consumer next to construction.

“We are the dominant material in the vehicle. All of these changes occurring in power train, safety and fuel economy could invite new materials to take over our job in the vehicle. We have to continue to improve the engineering performance of steel to rise to the level of expectation of the customer. And we’ve been able to do that for the last 10 to 15 years by changing the ability to use high-strength steels, not only for the designers but the stampers, welders and joiners,” he says.

And they will ultimately decide the material war, Lowery notes. “At the end of the day, it doesn’t matter what the aluminum industry says or what the steel industry says. It’s what the customers say.” n­­ 

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Thursday, February 22, 2018