What does an Apple iPad have in common with solar power technology infrastructure? More than you might think. According to some aluminum producers, both markets are primed for serious growth and offer an exciting opportunity for the aluminum sector.
Analysts are hesitant to overstate the impact that growth in consumer electronics and solar power components—even ones that prominently feature specialty aluminum components—might have on overall aluminum demand, but in the age of weaker automotive sales and a lagging construction market, aluminum producers said any chance at increased market share is a worthwhile one.
The most visible new end-use application for aluminum comes in portable sizes. Some of today's most popular consumer electronics feature visible aluminum components, like Apple's new iPad sporting a matte aluminum wrap, which passed the 1-million-unit sales mark in the first week of May. As Apple and other high-end original equipment manufacturers (OEMs) shift fashion and consumer taste away from plastic and magnesium and toward aluminum, how much benefit will the aluminum market really experience?
Perhaps a lot, according to Randall Scheps, who earlier this year was appointed to Alcoa Inc.'s newly created position of director of consumer electronics market development.
Aluminum use in consumer electronics is projected to more than double in the next five years as consumers increasingly demand electronics that they perceive to be both stylish and environmentally friendly, Scheps said. Aesthetically, aluminum is less likely to show fingerprints and signs of wear than alternative materials, like chrome or polished plastic, and environmentally aluminum is one of the most recycled materials in the world.
Accordingly, the company is gearing up to expand its reach in the market. "We are targeting all of the major OEMs. The electronics OEMs that use a lot of aluminum today tend to set the fashion for the industry, which other OEMs only want to emulate," Scheps said. "We've been watching some fairly major trends—all of our major OEM customers are seeing increased demand for new aluminum content."
Scheps estimates that aluminum use in target segments like laptop computers, smart phones and flat panel televisions will double to 800 million pounds over the next five years. "Aluminum laptop cases can be recycled, and aluminum has a lower lifecycle CO2 footprint than either plastic or magnesium," he said, noting that while not all consumers think about recyclability when buying electronics today, an increasing number will make it a priority in the future. "Certain leading-edge customers are there, but not all customers are there yet. The footprint will be a metric that everyone will care about at some point."
The electronics segment might represent an attractive growth opportunity in terms of percentage growth, but the volume of aluminum demanded by manufacturers won't be enough to make up for the loss of demand in core end-markets like construction and transportation, analysts said.
"I suppose in theory it could be a very large market. Individually, though, the percentage by weight of the metal would be fairly low, and it's probably fairly insignificant in terms of a 38-million- to 40-million-tonne global market," CRU Group analyst Jon Barnes said.
Luckily for aluminum producers, consumer electronics aren't the only potential growth story for the light metal. Solar panel technology also might see a new wave of aluminum demand, market sources told AMM.
Traditionally, aluminum has played a small role in concentrated solar power technology (CSP) in the form of aluminum trusses, or framework, to support the parabolic glass troughs used to concentrate the sun's energy. In a departure from tradition, Pittsburgh-based Alcoa is developing a new take on existing CSP technology that incorporates aluminum into the troughs themselves in place of existing glass mirrors—a modification that the aluminum producer said will lower the installation costs associated with new solar fields and allow solar technology manufacturers to scale up more rapidly.
"The concept of using aluminum in solar technology itself is not a new concept. What's fairly new is the particular way they designed the panel," said Chuck Kutscher, manager of the U.S. Energy Department's National Renewable Energy Lab (NREL) thermal systems group.
While Alcoa isn't among those supplying the soft alloy extrusions for the supporting truss structures used in existing solar installations, the company said its new take on parabolic troughs eliminates the truss design by replacing it with a cylindrical wingbox that is itself weight-bearing.
"Our hypothesis is that the market really needs to lower the levelized cost of energy," Scott Kerns, vice president and general manager of Alcoa's transportation products, said. "Cost savings around energy are going to be a big deal in the U.S. as well as the rest of the world. These CSP troughs are huge production needs, and .?.?. we felt that we could lower the overall cost by using aerospace and automotive technology in manufacturing."
But with aluminum's role in solar panel technology a new development, analysts said they don't yet know how much of a demand impact to expect.
"In terms of demand, we just started tracking the alternative energy market this year. It started out as kind of a niche market," Nick Adams, an Aluminum Association statistician, said. "It has begun to expand, but we're still waiting for first-quarter 2010 data."
Alcoa's testing has been partially subsidized by a $2.1-million Energy Department grant, but government funding alone won't guarantee any meaningful short-term impact on demand, analysts said. "The government will eventually find economic motives to continue building solar panels, but near term there is no real effect. It's just a small section of total demand in the market," CPM Group research analyst Doug Horn said.
Investment in green technologies, which tends to be the characteristic of low-growth, developed economies, also takes time. "Any time you do a substitution in materials, it's a leap step that doesn't happen overnight. Even over the next five years, I don't know how much the global demand will change," he said.
Alcoa acknowledges that the transition will take time, especially since testing must confirm that the new troughs meet or exceed electricity output generated by existing CSP models before the company can move forward with the next stage of development.
"Assuming the testing comes back positive and we continue to work with the DOE, our target is to be positioned to be able to commercialize the technology in the next two to three years," Kerns said. "As we look at demand and what's been announced around CSP troughs, there are billions of dollars that will be spent in the CSP marketplace. Without knowing the results of the testing, however, it's hard for us to say what the conversion rate is going to be."