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Analysis: Aluminum in Autos Grows, But Steel to Stay Dominant

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LONDON Sep 22, (Reuters) - Steel will remain the dominant material in the manufacture of cars even as environmental pressures lead to greater use of lightweight aluminum.
But aluminum is more expensive than steel and prices are considered more volatile. What's more, steel producers have not been sitting on their hands. They are developing lighter, stronger steels to cut car fuel consumption and harmful emissions.
Also in their favor, car plants are geared up to use mainly steel parts and a switch to aluminum would not be made lightly.
&quot;At least in the medium term there's a limit to what can be done with the existing technology,&quot; said John Kovacs, principal consultant in industry consultancy CRU Group's steel team.
&quot;Retooling factories to work with aluminum instead of steel would be a costly step which will limit substitutability.&quot;
The fact that an auto cycle plan is for up to 10 years also means any potential big switch to using other materials could be decades down the line.
Also a disincentive is that aluminum costs more than steel. Aluminum has made inroads in some auto parts such as engines, bonnets, tailgates and doors in some models. But future gains such as greater use in car bodies may be limited.
&quot;Cost is a consideration and the market for new applications for aluminum in cars is pretty saturated, I don't see any great increase in intensity of use,&quot; said independent consultant Angus MacMillan.
The European price for competitive material hot dipped galvanized steel coil, used in outer car body panels, which is not traded on the LME, is around $800 a tonne, according to Metal Bulletin. The London Metal Exchange (LME) three-months aluminum price was last indicated at around $2,180 a tonne.
The volatility of aluminum prices is often cited as another reason why it will not replace steel in a mass-produced model.
Volatility has increased in commodities like aluminum, which are not just bought and sold by traditional users, but are also viewed as investment tools by the wider financial community.
In the past 12 months London Metal Exchange (LME) three-month aluminum prices have ranged between around $1,800 and $2,500 a tonne.
LUXURY CARS
Aluminum tends to be used more extensively in luxury cars though, including the body, as cost is less of a consideration.
&quot;Mercedes-Benz uses a significant amount of aluminum per year in various types and forms. Usage has been growing over the past years with the introduction of new products, such as the focus on light-weight applications,&quot; said a spokesman for German carmaker Daimler.
&quot;Use of aluminum is expected to increase, for example in applications such as outer panels, doors and some structural applications,&quot; he added.
France's PSA Peugeot Citroen, Europe's second-biggest carmaker, said lower emissions implied weight reduction. But it said it was too early to say how this would affect the material composition of cars.
There is no denying aluminum use has grown considerably. In the average British-produced car it has risen by around one-third since 2000 to around 140 kg, according to the UK's Aluminum Federation (Alfed).
Even so, it still only accounts for about 10 percent of the average car weight, compared with steel's 60 percent.
Some believe aluminum has further growth potential.
British-based car firm Jaguar Land Rover has said demand for aluminum sheet in the European car market could double or triple in the next five to 10 years.
But if aluminum makers undertook long-term supply agreements to combat price volatility, it could be greater.
Indeed, Norwegian aluminum maker said it would consider such deals with manufacturers intent on selling more cars with &quot;greener&quot; credentials.
But ArcelorMittal, the world's biggest steel producer, said the use of lighter, stronger steels in cars is growing fast and questioned aluminum's green credentials. The production of aluminum is more CO2 intensive than steel.
Steel may remain the main material of choice in the foreseeable future, but the amount per car will fall as they get lighter.
&quot;Light-weighting is definitely a factor that has the potential to reduce steel consumption over time,&quot; said CRU's Kovacs.
&quot;But the growth in the car industry, in particular in China, India, Brazil and Russia, will likely outweigh the savings from lighter weight steels.&quot; 
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Analysis: Aluminum in Autos Grows, But Steel to Stay Dominant | Shanghai Non ferrous Metals

Analysis: Aluminum in Autos Grows, But Steel to Stay Dominant

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