A struggling North American steel industry is looking for
customers to buy its products in almost any shape or form.
High-strength steels (HSS) are recognized as competitive with
aluminum and plastics, but with the automotive industry running
on four flat tires, steelmakers are finding it more and more
difficult to move even an innovative, environmentally friendly
product to customers who, while they might want the steel,
really have no need for it.
"There was a lot of talk last year about a drastic drop in
the amount of mild steels being used in cars and light trucks,
but you haven't heard much of that lately," Charles Bradford, a
steel industry analyst at Affiliated Research Group LLC, said.
"That (drop in mild steel usage) was to be offset by more use
of high-strength steel. But there are a lot of problems now
with (automakers). No one is really focused on the automotive
market except for trying to find ways to not get stuck with
Analysts agree that opportunities exist for steel in
high-strength applications in automotive markets. John Tumazos
of Very Independent Research, Holmdel, N.J., said that about 85
percent of aluminum in a car is in castings, wheels, engine
blocks and other components. In some upscale models, there also
is aluminum in hoods, trunk lids and deck lids.
"You can consider that high-strength steel could take about
5 percent of the aluminum content," he said. "You have about
300 pounds of aluminum in a car, so high-strength stands to
replace about 15 pounds of aluminum per vehicle. If you figure
about 12 million cars in the automotive market, you're looking
at about 180 million pounds of aluminum, or about 90,000 tons.
That would be the opportunity for high-strength steel as far as
Bradford said there is a lot of pressure on automakers to
reduce weight, so there are a lot of good reasons for them to
use high-strength steel. "But no one is selling any cars right
now, so it's kind of tough to focus on design. Everyone
realizes cars will be smaller, but whether people buy them or
not is another story," he said.
So, too, is the issue of what automakers need. With auto
designs moving toward lighter and smaller vehicles, steelmakers
are under increasing scrutiny to develop more high-strength
steels for more and varied applications.
"It's tough when you don't know what kind of cars you're
going to be making," Bradford said. "Congress is making cars
now. The last time that happened was in the Carter
administration. Back then, it was said that everyone would have
to have small cars, and it immediately followed with
predictions that 5,000 people would die immediately because
small cars hit bigger things. People said that when everyone
had a small car that would go away. People forgot that cars
still hit trucks, bridges and trees. They do not just hit other
small cars. High-strength steel makes sense. How (steelmakers)
do it-heat treating or high-strength low-alloy-is really the
question. That's the difficult part. Aluminum has good uses in
a lot of cars, but high-strength steel makes sense because it's
cheaper than aluminum, even though aluminum is cheaper these
days than it has been."
Tumazos agreed that cost issues are favoring high-strength
steels over aluminum or plastics, a trend that should continue.
The main concern on the steel side should be maintaining, then
adding to, its share of vehicle mass. "The most important thing
is preventing aluminum's growth from (its current) levels," he
said. "You want to preserve the extent to which steel is
replacing aluminum and then upgrade from that point, preferably
at a higher price."
But the weak economics that have driven down material prices
also have forced steelmakers and aluminum manufacturers to cut
back their research budgets. In the case of steel, that means
potentially less research into high-strength steels.
"I would think that both steel and aluminum, because of the
economic situation, have cut back their research budgets,"
Tumazos said. "Historically, the chemical and plastics
industries and aluminum have spent a great deal more than
He remembered an encounter almost a decade ago with Alain
Belda, former Alcoa Inc. chairman, where the two discussed
Alcoa's purchase of Reynolds Metals Co. and Alumax Inc., only
to learn that between the three companies they were losing $400
million a year to automotive design to Detroit.
"The global recession clearly would have an impact on
research spending by chemicals and plastics companies as well
as by steel," Tumazos said. "But steel may have a little more
of an advantage now because while those companies were spending
years ago, steel was going through some tough times and did not
devote as much money to research."
Analyst Mark Liinamaa of Morgan Stanley Research, New York,
said most of the major North American integrated steel
companies find themselves in a battle for market share in
high-strength steels. But more than a battle, the use of
high-strength steels calls for steelmakers to work as closely
with their customers in the automotive sector as they can, he
"AK (Steel Corp.) has done a lot of research and U.S. Steel
(Corp.) has, too," Liinamaa said. "ArcelorMittal (SA) acquired
Dofasco (Inc.) and a big plus for them was Dofasco's
involvement in auto steel, so they are all in the market. What
they are trying to do with high-strength steel is maintain or
grow market share."
Liinamaa said steelmakers must work hand-in-hand with their
automotive customers. "Small changes in the structure of the
steel can make for big changes in the presses the auto stampers
use," he said. "That's why they have to work so closely
together. I don't really know if (steelmakers) have many
alternative markets for high strength if their automotive
customers go down. I'm sure there are some alternative markets,
but there is no doubt auto is the main market. It would be
difficult for steelmakers to replace automotive customers if
that market went down. That would be a huge loss for steel.
That's why building these relationships is so important."