The Heat is on Steel
Senior Economist, Steel Service, IHS Pricing and Purchasing
Automotive lightweighting: Why steel isn't going away, and why the steelmaking business isn't so bad after all
Cars have been made of steel, glass, and rubber since Karl Benz, Gottlieb Daimler, and the Duryea brothers laid the foundations of the modern automotive industry. Since that time, only the wood used in their early automobiles has largely disappeared. Ever since the US Congress enacted Corporate Average Fuel Economy (CAFE) legislation in 1975, however, automotive manufacturers have been under pressure to produce cars with lower CO2 emissions, i.e., lower fossil fuel consumption. Unfortunately, CO2 cannot be wished away by a catalytic converter or other technical means—it is the simple physical result of burning fuel. Car manufacturers have many technology choices to reduce fuel consumption, one of the most accessible being the reduction of vehicle weight, which has many positive trickle-down effects on other vehicle properties. Between 25% and 30% of the weight a car is made up of its metal body (the body-in-white, or BIW). Reductions in the weight of the BIW can lead to further weight savings in the powertrain, braking, and suspension systems, which are some of the main reasons why reduction in the weight of the BIW has been the focus of so much recent effort. Much public attention has been drawn to weight reduction by alternative materials such as aluminum and carbon-fiber composites, but the prices of both these materials make them less attractive for all but the higher priced vehicles. Instead, new types of steel are being developed that make weight reduction possible at more affordable costs.
Currently, there is strong competition among steel, aluminum, and composites. In recent years, the percentage of steel in a car has declined, mainly because car manufacturers are using more aluminum and molded plastics. Since the 1970s, the share of mild steel in a car has declined roughly 30% by weight, while the share of aluminum has tripled, and the use of plastics increased by more than 80%. Nevertheless, aluminum and plastics still only represent about 8% and 11% of the car's weight, respectively.
While the automotive industry is exploring other materials, and providers of these materials aggressively pursue automotive applications, advanced high-strength steels (AHSS) provide a viable alternative for manufacturers by offering the right balance between physical properties—strength for performance and ductility for production—and weight and price. These properties offer engineers the chance to use thinner steels to design parts that are up to one-third lighter, without affecting function or safety. On the cost side, AHSS are roughly twice the unit price of standard, exchange-traded steels. Nevertheless, some of this cost will be compensated for by the reduced amount of material required in a car.
Overall, IHS expects that steel will remain the predominant material in car production, but with advanced steel continuing to take an increasing share of that market. We attribute the advantage of advanced steels over other, alternative materials to three main factors: similar weight savings potential, lower costs, and compatibility with the currently installed manufacturing base and current engineering know-how.
First, aluminum's primary advantage is in weight savings—in excess of 30% in some cases. That is why many doors, hoods, and fenders have gradually changed from steel to aluminum. In addition, aluminum is making its way into the suspension systems, and is also used in a very large share of major engine and transmission castings. The use of AHSS steels is expected to yield a 25–30% reduction in the weight of the same parts, which makes this advanced steel the more attractive choice for most applications unless the absolute maximum weight savings is needed. The latest research studies by WorldAutoSteel suggest that in the near future, steel auto body structures could be as lightweight as today's aluminum bodies, while meeting all crash performance standards—at a cost comparable to today's steel structures.
Second, in cases where weight becomes less important than price, the high cost of implementing alternative materials keeps steel the first-choice material for high-volume car production, at least for the foreseeable future. The cost of implementation, which may include new tooling, capital equipment, new joining systems, and risks ranging from warranty exposure to crash liabilities often tips the balance towards some form of the more traditional materials, even though the actual final cost of the non-steel part itself may be less.
Finally, even though aluminum has a cost advantage over carbon fiber and other advanced composites, could the aluminum industry handle a sizeable increase in demand? Currently, utilization rates of aluminum production mills are relatively low, so an initial step-up in production for new automotive uses would not overwhelm the industry. Five years out, however, the supply-side might start running into capacity constraints—again assuming sustained growth in transportation equipment demand. This makes aluminum much more prone to price shocks and might lead to sharp increases in pricing as a reaction to higher use. In contrast, on the steel supply side, there is general overcapacity, so availability of more common varieties of steel (including AHSS) will not be a problem. So, even as demand for new steel grades rises, prices are expected to move upwards only at a steady and slow pace, rather than sharply, as our price forecasts show.
Going forward, we expect to see demand for automotive steel increasing, in value at least, if not in total tonnage, over the following 10 years. Steel mills have already shown the innovation they can bring to overcome the challenges of regulatory pressures and of substitution for competing materials. The price volatility of some alternative materials in the past has made the industry twice shy with respect to nonferrous solutions, as they seek price predictability, if not stability, over the perhaps decade-long life of vehicle platforms. These challenges will persist. Steel remains one of the prime choices to achieve the necessary weight reduction without compromising affordable strength, performance, or safety.
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