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Auto growth still fueling the market for steel, aluminum

Keywords: Tags  automotive, 2015, 2016, vehicle sales, oil, SUVs, CUVs, Detroit GM

The automotive market has been a consistent bright spot for metals makers over the past couple of years even as other end-users have become increasingly volatile. Demand up and down the supply chain has remained strong, and steel, aluminum, stainless steel and other metals products show no signs of slowing down.\

Although March vehicle sales increased the seasonally adjusted sales rate fell, now standing at 16.56 million after the February SAAR reached 17.53 million.The pace of sales last month is the lowest since the SAAR came in at 16.39 million in February 2015. The SAAR topped the 17 million mark for 10 straight months until March.

This follows a 2015 that set a record for the number of vehicles sold in a single year in the U.S., the culmination of several years of steady recovery from the depths of the Great Recession.

Some of this success has been based on affordable fuel, which has seen oil prices mostly dropping for nearly two years. This has meant an increase in sales of not just all vehicles, but of larger vehicles. Cross-over Utility Vehicles and SUVs now account for more than 1/3 of all light vehicle sales.

The Ford F-150, which features an aluminum body, has been one of the bigger success stories in those categories. For the first two months of 2016, the Ford F-Series pickups led all sales. As a result, aluminum and steel continue to slug it out for the future of meeting auto en-user needs.

The lightweighting movements to aluminum and new steel products have been driven by changing and pending Corporate Average Fuel Economy (Cafe) standards from the federal government. (Under these standards, the final target and the anticipated actual performance are both projected values due to uncertainty regarding the final composition of vehicle types in the new-vehicle fleets for future model years.)

A rapid increase in new light-duty vehicle fuel economy has occurred since late 2007, according to a recent University of Michigan study. American automakers have benefitted in recent years from the combination of new fuel standards and improved auto metals. For example, Detroit did well in auto sales last year.

Although the Cafe standards may change over time, the strength of the automotive market is not expected to change significantly in the near-term future.

When auto sales in the U.S. rose in 2015, it marked the sixth consecutive year of increases, and beyond that reached an all-time high with more than 17.5 light vehicles purchased domestically.

With the energy market remaining questionable early into this year and construction steady but not gaining as significantly as the auto industry, steel, aluminum and other metals makers continue to count on carmakers to be major consumers of their products.

Despite some concerns that auto demand could begin to cool off this year, most industry players remain confident about the sector. To start 2016, General Motors posted sales of 203,745 units in January, 0.5 percent more than in January 2015. Ford sold 173,723 units, a 2.6-percent decrease from January 2015.

In a timely development, some big industry signs about the strength of steel in the automotive end-user market can be found among the finalists in the 2016 AMM Awards for Steel Excellence (winners will be announed in June).

S-in motion is a set of lightweighting steel solutions developed by ArcelorMittal. The program officially launched in 2010 with the introduction of the C-segment Sedan.

Since then, the portfolio has expanded to offer lightweighting solutions for light commercial trucks, pickup trucks and mid-size electric and hybrid vehicles, as well as other vehicle part solutions.

The S-in motion Mid-Size Sedan and SUV design solutions were developed to save more than 20 percent of the body structure mass compared to the current state-of-the-art 2015 baseline vehicles. If the weight reductions were compared to an earlier baseline, the weight savings would have been even more substantial. Following the successful rollout of the S-in motion C-segment Sedan and Pickup Truck, ArcelorMittal sought to further expand its suite of S-in motion lightweight steel solutions to include mid-size vehicles.

From its inception, Providence, R.I.-based NanoSteel’s objective as a company was to design sheet steel with both high strength and high ductility to meet the light-weighting requirements of the global automotive industry.

With launch production partner Westchester, Ohio-based AK Steel, NanoSteel plans to bring this new advanced high strength steel to market this year.

AK Steel’s excellence in processing and its unique capabilities helped make this revolutionary material become a reality and in 2016, the initial demonstration material has been completed.

This combination of properties allows automakers to use thinner gauges of steel to reduce part weight and form unique geometry parts to meet stiffness requirements for ride quality/safety. High formability also means that the sheet can be stamped at room temperature leveraging existing parts production infrastructure. In addition to achieving these product performance capabilities, the company’s other key objective was that the material be easy to adopt, both from a production and a usage standpoint.

AK Steel’s leadership in production, quality, and service within the automotive market and its deep process knowledge across multiple production technologies stood out, making them an ideal launch partner to bring the company’s new AHSS designs to commercial scale and early adoption.

NanoSteel sheet alloys are designed with conventional steel elements not specialty metals or rare earths and can be produced on existing sheet casting and processing equipment without new investment.

Longer term and together with commercial partners such as AK Steel, NanoSteel aims to capture a portion of the overall AHSS market which is forecast to grow to $55 billion by 2020 and $77 billion by 2025.

Nucor Corp. redesigned lighter-weight, high-strength steels and special bar quality (SBQ) products and also dedicated a Detroit sales office to service auto market.

The auto industry has traditionally preferred to deal with companies that produce steel in blast furnaces, as opposed to the electric arc furnace (EF) process that Nucor uses to produce steel from scrap and scrap substitute.

Nucor sees the U.S. automotive market as the sector where it has the greatest growth opportunity and, with the operational improvements it has made, Nucor is now capable of producing every steel product used in the industry.

Nucor says its efforts are paying off. Nucor has seen its sales to the automotive industry rise 20 percent over 2014. To expand product offerings for the automotive market,

Nucor made several major capital investments in recent years. It invested nearly $300 million at three of its bar mills–Memphis, Tenn.; Norfolk, Neb.; and Darlington, S.C.–to expand its SBQ production capabilities. It also invested heavily to produce wider, lighter sheet steel at its Berkeley County mill in South Carolina. These investments in value-added product offerings and high-strength steels allow Nucor to sell into markets for exposed, crankshaft and drivetrain applications.

General Motors Co. believes that auto sales in the United States are merely “plateauing,” disputing claims made by some analysts that the sector is in for an imminent downturn.

“The bears argue that the industry has peaked and is ready to roll over. They often cite the fact that the U.S. auto industry is in its seventh year of expansion, margins are as good as they get, and a recession is right around the corner,” GM executive vice president and chief financial officer Chuck Stevens said during an earnings call in February. “On the other hand, a number of people, including GM, believe that the industry is plateauing, with many years of strong performance ahead.”

Even with additional signs of a looming downturn, such as tightening credit metrics and leaner vehicle inventories in the United States, Detroit-based GM believes that factors pointing to sales plateauing around 17.5 million units per year outweigh the arguments forecasting a drop, although the company acknowledged that predic-ting the market’s future behavior is problematic.

“We are very aware that downturns are difficult to predict,” Stevens said. “That is why we are planning and running the business accordingly. In essence, proactively managing the cycle.”

Stevens said that enhancing efficiency in GM’s assembly operations will allow the company to save up to $5 billion by 2018, which should somewhat cushion the company should the market begin to dip.

Meanwhile, Dearborn, Mich.-based Ford Motor Co. reassured investors in January that the company will continue to perform at “benchmark levels” in 2016.

“We expect 2016 to be another strong year for the company. ... We’re going to continue to monitor the business environment to anticipate or react to any changes that we see and take appropriate action,” Ford president and chief executive officer Mark Fields said.

Nucor Corp. is seeing strong opportunities in the automotive sector for both its sheet and special bar quality products, and is looking to increase its presence in the market.

John J. Ferriola, chairman, president and chief executive officer of Charlotte, N.C.-based Nucor, said the steelmaker expects to increase its sales to the auto industry to 2 million tons a year “in the next couple of years,” up from 2015’s 1.4 million tons.

AK Steel has always made a point of developing new products and processes for its customers despite steel being a cyclical business. In the case of the Dearborn Works, that means coming up with next-generation advanced high-strength steels for an automotive industry looking to make lighter vehicles.

Steel Dynamics Inc.’s (SDI’s) Columbus, Miss., mill could eventually ship 400,000 to 500,000 tons of steel per year to the automotive sector—if the company’s goal is reached in coming years, according to SDI’s top executive.

But aluminum advocates say their material builds a better vehicle. Aluminum’s use in autos and commercial vehicles is accelerating because it offers the fastest, safest, most environmentally friendly and cost-effective way to increase performance, boost fuel economy and reduce emissions while maintaining or improving safety and durability. From mass-market vehicles like the Ford F-150 to luxury cars like Audi, Mercedes Benz and Land Rover, aluminum is increasingly the “material of choice” for automakers thanks to its strength and environmental advantages. The Aluminum Association’s Aluminum Transportation Group (ATG) communicates the benefits of aluminum in transportation through research programs and related outreach activities.

Use of automotive aluminum has grown continuously for 40 years. Aluminum is now second only to steel as the most used material in vehicles.

At the end of a vehicle’s life nearly 90 percent of the aluminum, on average, is recycled.

Compared with a fleet of traditional steel vehicles, aluminum use saves the equivalent of 108 million barrels of crude oil in energy.

Pound for pound, aluminum can absorb twice the crash energy of mild steel. Larger crush zones can be designed without corresponding weight penalties.

Because aluminum is lighter, it allows automakers to increase dent resistance—they can make body panels thicker while still lowering weight.  And a lower weight vehicle has better acceleration, better braking and better handling.  In addition, lighter vehicles can haul and tow more because the engine isn’t carrying unneeded weight.

When applied to an optimized automotive body structure, aluminum can provide a weight savings of up to 50 percent compared with the traditional mild steel structure. Aluminum body structures are equal or superior in strength to steel and absorb twice as much crash-induced energy. Primary-structure weight savings also allow other vehicle systems to be downsized (including the engine, transmission, suspension and wheels). Across the board, in weight, strength and safety, aluminum’s advantages are clear.

Commercial truck fleets looking to increase fuel efficiency, haul more freight and retain more drivers can look to lightweighting as a key enabler, according to a recent Confidence Report on Lightweighting by Trucking Efficiency.  The report found that investing in lightweighting is an attractive and economical alternative to adding expensive new equipment – potentially saving fleets nearly $1 million over five years. Trucking Efficiency is an initiative of the North American Council for Freight Efficiency (NACFE) and the Carbon War Room (CWR) that aims to double the efficiency of the North American trucking fleet.  

“When lightweighting is looked at not only in terms of better fuel economy but also improved freight efficiency, it makes sense in a wide variety of applications,” said Mike Roeth, Operation Lead at Trucking Efficiency. 

Lightweighting investments have already been made by the majority of bulk carriers, and current industry trends make it worthwhile for more carriers to adopt lightweighting technologies.  NACFE estimates that over the next 5-10 years the number of refrigerated and dry vans requested to operate at maximum weight will double and lightweighting can help move their freight more efficiently, resulting in significant fuel savings and emissions reductions. One technology with a proven track record of helping OEMs achieve lightweighting goals in vehicles of all types is aluminum. Research conducted by Ricardo Consulting Engineers has shown that an “aluminum-intensive” Class 8 commercial tractor trailer can reduce weight by 3,300 pounds.

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