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What do Detroit and the ‘new domestics’ really want?


North American mills have the capacity to supply nearly all the steel needs of the "new domestic" automakers—even higher value-added and advanced high-strength steels.

Nucor Corp. supplies material to the new domestics as well as the Detroit-area Big Three automakers, said John Ferriola, chief operating officer of the Charlotte, N.C.-based mini-mill steelmaker. "We have not failed to be able to produce a type of steel that has been requested," he said, touting the capacity of the company's Berkeley, S.C., mill to provide a range of dual- and complex-phase steels that are both strong and formable.

Some in the industry claim that the new domestics are easier to work with than the Detroit automakers because they plan further ahead and communicate more clearly with their suppliers. "That statement was true many years ago," Ferriola acknowledged. "Today, frankly, we've worked very hard—as have other companies—to improve communications between the steel users and the steel producers."

U.S. Steel Corp., Pittsburgh, thinks it knows what both the new domestics and Detroit automakers are looking for.

"They want the unattainium," joked Jody Shaw, manager of automotive marketing for the big steelmaker. "It is stronger than steel, it is very formable so they can shape it into whatever shape they want to make, it is completely weldable and it is cheaper than dirt."

But until metallurgists master unattainium, Detroit and the new domestics like Toyota Motor Corp., Honda Motor Co. Ltd. and Nissan Motor Co. are placing more and more orders for advanced high-strength steels like dual-phase 590, 780 and 980 to reduce weight and keep strength.

Supplying the new domestics isn't much different from supplying the "old" domestic automakers, Shaw said. But U.S. Steel needs to have a solid understanding with a customer that a new grade will have a solid market before it will commit to making an advanced grade of steel. "We develop a lot of these grades for a customer at their request," he said. "It's a fairly big investment, and when we go down a path like that we want to be sure we are going to have a market when it's done." The company has developed between 20 and 30 grades of advanced high-strength steels in recent years, and only one or two have yet to find a home.

The catch some of the advanced high-strength steels aren't as formable as customers would like, and traditional methods of testing whether a grade will stand up to the production process don't always work with the newer-breed steels. "This unknown failure criteria is a big issue. It's slowing the process of integrating these grades in the vehicle, and we need to get our arms around this thing," Shaw said.

The industry is investing heavily in studies to understand the formability issues arising with advanced high-strength steels. "About 15 years ago, when we went from mild steels to high-strength steels, we had the same kind of growing pains and worked our way through it," he said. "We're re-experiencing that with these advanced high-strength steels."

ArcelorMittal SA, Luxembourg, which serves both U.S. and new domestic automakers and has supplied Honda and Toyota since the 1970s, said advanced high-strength steels are a growing business as automakers seek to reduce weight to meet more-stringent fuel economy standards while at the same trying to keep up with stricter safety standards.

"Pretty well all the grades they are looking for are available here in North America for their plants over here," said Paul Schurter, principal engineer of advanced engineering at ArcelorMittal's automotive product applications unit.

And both U.S. and new domestic automakers are moving steadily up the high-strength-steel food chain, he said. "With each new platform that's launched, they're all moving into higher levels of advanced high-strength steels. A few years ago you saw them using dual-phase 590 grades, and now you're seeing dual-phase 780 and dual-phase 980."

Martensitic and transformation-induced plasticity (TRIP) grades also are starting to be applied. "They need to meet those fuel economy and crash requirements without cost penalties, Schurter said. And even advanced high-strength steels, which are more expensive than traditional mild steels, offer a "big, big cost advantage compared to aluminum or any of the other light metals."

The new domestic automakers might import steel in isolated cases, Schurter allowed, but it could hardly be called a trend.

Severstal North America Inc., Dearborn, Mich., also is seeing growing business with most of the new domestics, according to Chris McCarthy, the company's vice president of sales and marketing. "Most of the material is sourced here in North America. Raw materials have shot up in a big way, particularly overseas, and the value of the dollar makes us very competitive."

"You take freight rates and currency rates, which I think are a long-term phenomena, and great increases in productivity, and North America is a great place to manufacturer," McCarthy said. And with exports currently driving the economy to some extent, there also are signs that exports of vehicles from North America could increase.

Severstal thinks it has a leg up on its competition, particularly given its massive investments in North America. Severstal has poured $1 billion into improvements at the former Rouge Steel Co. in Dearborn, Mich., including a new cold-reduction mill in addition to a new hot-dipped galvanizing facility that will produce galvanneal and other advanced coated steels for exposed automotive products, McCarthy said. The company also has launched full production at SeverCorr LLC, an electric furnace operation in Columbus, Miss., and recently acquired the Sparrows Point, Md., mill of ArcelorMittal for $810 million. "There will be significant capital expenditures made at Sparrows Point," he said."

The Dearborn facility is well located to supply automakers in the U.S. Midwest as well as southern Ontario, SeverCorr is in a prime position to serve the southern United States and Mexico and Sparrows Point has a strategic spot on the East Coast, McCarthy said.

Severstal supplies hot-rolled products for wheels and frames, cold-reduced products for roofs and body-in-white parts and hot-dipped galvanized products for hoods, doors and fenders, McCarthy said. Cold-reduction facilities produce substrate that can be coated or electrogalvanized not only for the current basket of advanced high-strength steels but also for steels that are just now being developed, he added.

"The equipment we're putting in will give us superior products that will have unique capabilities that our competition won't," according to McCarthy, who declined to specify exactly what those capabilities or products might be.

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