Seoul: A collapse in steel demand from the ailing auto sector may be foremost on steel makers’ minds at the moment, but rising government fuel standards are the greater cause for alarm as aluminium and magnesium steal market share.
While the auto industry consumes only about 6% of the world’s crude steel production, mills have long counted on steady growth in car sales to generate new business—growth that may now be in doubt as aluminium and other light materials replace steel to help meet tougher environmental regulations. The threat became more apparent this week as US President Barack Obama introduced the most aggressive proposal yet to boost US auto fuel economy standards, which would encourage auto makers to invest in fuel-saving technology.
Under the new standards, US passenger vehicles and light trucks must raise fuel efficiency by 5% yearly to an average 6.62 litres per 100km by 2016. The current law requires a similar gain by 2020.
“To achieve weight-saving and improve fuel efficiency, it’s inevitable to replace steel to lighter materials, as steel accounts for around 50-60% of total vehicle weight,” said Han Do-suck, principal researcher of South Korea’s Hyundai Motor Co.’s materials research team. “We are open to all possibilities and new technologies but any dramatic and immediate change is unlikely, mainly because of cost issues.”
The incentives are clear: fuel efficiency usually rises by 5-10% for every 10% reduction in vehicle weight, and per-vehicle steel consumption is well over 1 tonne.
That can be a big blow to already reeling steel makers, such as Nippon Steel Corp., POSCO and AK Steel, which count auto firms as a big client and face reduced demand as auto output falls by as much as 20% this year. Already auto makers are increasingly stripping off sheets of steel in favour of lighter and more stylish materials, such as aluminium, magnesium, titanium, plastics and carbon fibre.
The Mazda2 subcompact, for example, reduced weight by around 100kg from its predecessor by using lightweight and thinner tensile steel, altering the electrics, suspension and exhaust, and even by changing door speakers to save weight.
The substitution has been led by aluminium, which can halve weight of vehicle body frames, thus dramatically reducing emissions of carbon dioxide blamed for global warming.
A survey by research firm Ducker Worldwide showed that per-vehicle aluminium content in North America would rise to around 170kg by 2020, or 10.4% of total vehicle weight, from an estimated 8.6% this year.
Aluminium, which is as stiff as steel but weighs one-third as much, has been developed for around two decades for use in autos but its high price and relatively complicated processing structure have prevented its use for the whole auto-body frame.
“Aluminium is some three-four times more expensive than steel per volume, and as a relatively less standardized and commoditized processing tool it costs a lot more to process the metal for auto use,” said Kim Hyung-wook, a chief researcher at Korea Institute of Materials Science. “That’s why the use of aluminium has been limited to premium auto models, where manufacturing and material costs are relatively minimal compared with total vehicle price.”
Audi AG, a unit of Volkswagen AG, has led the replacement and introduced all-aluminium body vehicles such as A8, but most carmakers have limited the use of the metal mainly to hood and trunk lid due to high prices.