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Fuel efficiency goals will hurt some steelmakers, Fitch says

Keywords: Tags  steel, high strength steel, auto, fuel efficiency, ArcelorMittal, Posco, Fitch Ratings, aluminum magnesium

LONDON — Tough new vehicle fuel-efficiency targets in the United States and Europe are likely to lead to lower sales volumes for steel companies, Fitch Ratings Ltd. said.

Higher prices for lighter, stronger steels should benefit well-funded producers that have the resources to invest in product development compared with companies that make less-sophisticated components, such as heavier structural parts, the ratings agency said.

Steelmakers will have to make lighter products without compromising strength or safety in the face of competition from aluminum, magnesium or carbon-fiber alternatives.

ArcelorMittal SA has indicated that components made from its third-generation advanced high-strength steels will be up to 27 percent lighter than those made using current grades while retaining similar strength.

A weight reduction of this magnitude implies a similar fall in steel volumes consumed by the auto industry, Fitch said. "We expect companies such as ArcelorMittal or South Korea’s Posco to be relative beneficiaries of the changes because they have the financial resources to invest in new product development and have close global partnerships with auto manufacturers."

A version of this article was first published by AMM sister publication Steel First.

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