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Automotive market opens doors for new steel products

Jun 30, 2014 | 08:00 PM | AMM staff

As steelmakers look back at the headier days of the construction business and forward to the promise of a continued strong energy market, the domestic auto industry is helping to boost metals production and revenues in the here and now.

North American auto sales are on track to reach around 16 million vehicles this year, up 2.4 percent from 2013. Although growth slowed down a bit in April, annual sales are still on pace to be the highest since the bottom fell out of the market during the Great Recession, even beating last year’s total of 15.6 million vehicles. Detroit brands are making a comeback after the near death of the U.S. auto industry in 2009, with the domestic Big Three now holding a healthy share of the market.

“Looking ahead, auto sales could continue to gradually increase, in line with an ongoing improvement in overall (economic) health,” New York-based Bank of America Merrill Lynch said.

Baby boomers are living longer and continuing to buy new cars after retirement, while younger people aim to purchase new vehicles as the economy revs up, according to Michael Rippey, president and chief executive officer of Chicago-based ArcelorMittal USA LLC and chairman of the American Iron and Steel Institute. “The first thing you do in our country when you graduate and move on and start your career is you buy a car,” he said.

In addition, the U.S. steel industry will benefit as old vehicles—on average more than 11 years old in the United States—are replaced. 

Automakers will demand not only more steel products, but ones that are technologically innovative and sturdier while helping to meet mandated increases in fuel efficiency.

To that end, the steel industry is responding “aggressively” to a growing challenge from competing materials, Rippey said. “Many steel companies have increased their product development activities to continue to provide innovative steel solutions, and we’ve redoubled our efforts in the research and development labs. We have been confronted with competing materials for years, but this time it seems as if the megaphone is louder from the other side and the investment they are making exceeds what they have done in the past.”

As the automotive market looks for innovative ways to meet future corporate average fuel economy (Cafe) requirements, the North American steel industry continues to invest in advanced materials and manufacturing technologies that have led to the introduction of new automotive steels, according to the AISI’s 2014 Steel Profile report. The steel industry is meeting this need through the development of new advanced high-strength steel (AHSS) grades, which offer unique metallurgical properties and manufacturability that enable the auto industry to affordably meet increasingly stringent requirements.

“Studies show that AHSS steel grades are growing faster in new automotive applications than aluminum and plastic—steel’s main competitors. Each year, new car models are introduced using lighter-weight, higher-strength steel components that provide a cost-effective answer to the demand for increased safety and fuel economy,” the report said. 

Rippey did not specify the competing materials, but Dearborn, Mich.-based Ford Motor Co.’s recent move to an aluminum-bodied F-150 pickup has started a debate about lightweighting materials. 

He pointed out that mass reduction isn’t the only way to meet stringent Cafe standards, which will nearly double the average light vehicle fuel economy to 54.5 miles per gallon by 2025. “A 10-percent reduction in vehicle weight with high-strength steel or alternative materials results in approximately a 6-percent fuel economy improvement. With an average pickup truck, that’s only 1 to 2 miles per gallon,” Rippey said, pointing to other areas companies are looking at to improve fuel economy, such as powertrains and aerodynamics.

Recent projects, such as the FutureSteelVehicle, which introduced more than 20 AHSS grades, show that the latest steel grades, combined with innovative processing methods and design optimization techniques, enable steel to achieve a 39-percent mass reduction in many applications, equivalent to mass reduction levels achieved by aluminum.

Mass reduction with AHSS conserves material and helps reduce greenhouse gas emissions over the full life cycle of the vehicle, including manufacturing, driving and recycling, according to the AISI. Life-cycle assessment data show that steel, which makes up nearly 60 percent of the average North American vehicle, generates fewer manufacturing emissions than other automotive materials and provides a significant reduction in driving emissions.

If currently available AHSS were applied throughout the present U.S. automotive fleet, the AISI report said, greenhouse gas emissions from automobiles would be reduced by about 12 percent—an amount greater than the emissions generated by the entire U.S. steel industry today. This reduction in emissions is already under way, with automotive designers using increasing amounts of AHSS in vehicles.

Steel remains the preferred material for automakers worldwide, and AHSS is regaining market share in automotive applications that previously favored aluminum, according to executives at Luxembourg-based ArcelorMittal SA. And while adoption of AHSS by automakers will lead to a reduction in tons shipped to the auto sectors, the amount of steel used by vehicle manufacturers as measured
by surface area could remain unchanged.

In Europe, ArcelorMittal has already had success convincing some automotive original equipment manufacturers (OEMs) to switch aluminum doors back to steel, company chairman and chief executive officer Lakshmi N. Mittal said. The steel door is “a very close” match to aluminum in terms of weight but comes at a significantly lower cost. “We are now promoting this solution, and it is under evaluation at various OEMs,” he said, adding that “steel remains the material of choice for automotive.”

In North America, ArcelorMittal’s ability to offer advanced steels to the automotive sector has been bolstered by its $1.55-billion acquisition—with Tokyo-based Nippon Steel & Sumitomo Metal Corp.—of Essen, Germany-based ThyssenKrupp AG’s plant in Calvert, Ala. The plant, renamed AM/NC Calvert, cements ArcelorMittal’s position in the United States and Mexico “for at least the next decade,” Mittal said.

While ArcelorMittal is in a “battle” with competing materials in the sector, it also is in a good position to provide sophisticated steels to automakers globally, said Louis L. Schorsch, chief executive officer of ArcelorMittal’s Americas division. “There is a lot of technology being developed by our company and others to try to respond,” he said, referring to competing materials such as aluminum.

Schorsch agreed with an analyst who said that increased adoption could see a reduction of tons shipped to the automotive sector. The company expects to “get a better premium” for AHSS. “In terms of tonnage, the volumes will come down. But in terms of square meters, it could potentially be the same if we win that race” with competing materials, he said.

Steel faces a battle with aluminum and other materials in North America and Europe, according to ArcelorMittal’s Aditya Mittal, chief financial officer, principal accounting officer and member of the group management board. But in Europe there has been “more acceptance” of advanced high-strength steels and therefore a more developed infrastructure has evolved to supply them to the automotive sector. “In North America, we are making efforts to replicate that as we speak,” he said.

As for the competition between steel and aluminum, Fiat Chrysler Automobiles has flagged “reservations” about the use of aluminum for its lineup of pickup trucks, including the 2017 update to its Ram truck, chief executive officer Sergio Marchionne said. “We internally have reservations as to whether we think aluminum is the right solution on the truck side. The main objective for the 2017 intervention is to continue the lightweighting process on the vehicle—it’s the only way we can get substantial improvements in mileage.”

The Amsterdam-based automaker continues to watch “with some intensity” the rollout of Ford’s all-aluminum F-150 pickup, Marchionne said. “The mileage on the 3-liter EcoDiesel in the Ram 1500 today is better than the Ford F-150 will have with the aluminum body, at least in terms of what they have announced as mileage numbers, so we have to be very, very careful that we don’t invest in technology for no returns.”

In response, a Ford spokesman told AMM that mileage figures for the 2015 F-150 hadn’t been announced. “(Ford) EcoBoost delivers an ideal combination of performance and fuel economy,” the spokesman said, noting that diesel fuel costs about 30 cents per gallon more than regular gasoline. 

Marchionne noted that the relatively high cost of aluminum production and development of aluminum-related infrastructure might bode well for the continued usage of steel. “We understand fully the cost of making aluminum bodies,” he said. “Certainly we understand the technology associated with body shops. I think the usage of aluminum in our portfolio is better suited for other products than a pickup truck.”

“It’s interesting that the three different truck makers have taken three different steps in an effort to tackle fuel efficiency,” one industry insider told AMM. “Ford’s solution is to use aluminum, GM’s solution is to go to smaller trucks and Chrysler’s solution is to develop powertrain technologies.”

Despite aluminum’s gains, steel should continue to benefit thanks to a strong automotive market and limited aluminum production capacity, steel executives said at a town hall forum during the Association for Iron and Steel Technology’s annual AISTech conference in Indianapolis.

“Our industry maybe was a little lethargic to respond to that threat,”  said Douglas R. Matthews, senior vice president of U.S. Steel Corp.’s North American flat-rolled operations. “It was an eye-opening experience to realize that we need to move—and move swiftly—to get caught up so that we are the material of choice for our customers.”

With that in mind, Pittsburgh-based U.S. Steel built a new continuous-annealing line that started in February 2013 at its Pro-Tec Coating Co. joint venture in Leipsic, Ohio, and is now making grades that previously had been “only on the drawing board,” Matthews said. The mechanical properties of advanced high-strength steels are so different from traditional steels that “we’re almost a new categorization of metal.”

The notion of mass-produced aluminum vehicles also has been “sensationalized” by the media, he said, noting that Ford continues to use AHSS in its F-150 pickup. “We talk to (Ford) on a regular basis. ... They view steel as something they are going to need in their vehicles for as far out as they can see.”

ArcelorMittal also is developing AHSS “at a rate that is unprecedented,” Rippey said, although he noted that there remain “significant challenges” to developing some new steels.

ArcelorMittal in late May introduced its first entry in a new series of AHSS slated for launch this year. Dubbed HF1050, the third-generation AHSS for cold stamping is a direct outgrowth of research conducted at the steelmaker’s research and development campus in Maizieres-les-Metz, France. The R&D center, ArcelerMittal’s largest, is said to have an average of some 60 new products under development at any given time. Ten of the current crop are earmarked for service in the auto industry and targeted for launch in 2014, ArcelorMittal said

Aluminum isn’t the only potential threat to steelmakers’ foothold in the sector. BMW AG announced plans in May to triple the capacity of its carbon fiber plant in Moses Lake, Wash., to meet higher demand for lighter-weight components in automotive production.

The $200-million expansion, scheduled to be completed early next year, will make it the world’s largest carbon fiber production facility, the company said. The plant, which opened in 2009, is operated under a joint venture between Wiesbaden, Germany-based carbon fiber manufacturer SGL Group and Munich-based BMW Group.

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