Trends In Steel Usage In The Automotive Industry
Steel has for long been the material of choice for automakers worldwide. The usage of steel has allowed automobile manufacturers to achieve desired standards of strength and safety for their vehicles at relatively low costs vis-a-vis other materials. However, given the increasingly stringent regulations pertaining to automobile emissions and fuel efficiency, reducing the weight of automobiles has become an extremely important consideration for automakers. Steel is facing increasing competition from aluminum and other materials, as automobile manufacturers look to reduce the weight of their vehicles, in order to conform to these regulations. In this article, we will look at the current trends in steel usage by the automotive industry, the changing landscape of regulations, the implications for steel producers, and steps taken by these companies to rise to these challenges.
Trends in Steel Usage in the Automotive Industry
As per the World Steel Association estimates, the automotive sector accounts for roughly 12% of the overall global steel consumption. [1] ArcelorMittal (NYSE:MT) is one of the leading global producers of automotive steel, accounting for around 16.7% of the world’s automotive steel sheet market in 2014. [2] Steel is the dominant material in automobile manufacturing, accounting for roughly 60% of the weight of an average automobile. [3] However, going forward the share of steel in automobile manufacturing is likely to drop, with automakers looking to comply with stringent regulations governing automobile emissions and fuel efficiency.
Fuel Efficiency and Emissions Reduction Regulation
One of the most pressing areas of concern and strategic thrust for automakers is compliance with changing regulations governing the automotive sector. In order to tackle environmental concerns, governments both in North America and Europe have set specific targets for fuel efficiency and emissions reduction. For example, the U.S. government has targeted an improvement in average automobile fuel efficiency from 27.5 miles per gallon in 2012 to 54.4 miles per gallon in 2025. [4] In the EU, the target is to reduce average vehicular emissions from 130 grams of carbon dioxide per kilometer in 2015 to 95 grams of carbon dioxide per kilometer by 2021. [5] In order to make cars more fuel efficient, manufacturers have been looking at ways to make their cars lighter. This has opened the door for other materials such as aluminum to eat away at steel’s market share.
Challenge to Steel from Other Materials
As a result of the need to make their cars lighter, manufacturers have been incorporating a greater proportion of lighter materials such as aluminum and plastic composites in their vehicles. A case in point is Ford’s iconic F-150 pickup truck. Aluminum accounts for roughly 25% of the curb weight of the 2015 F-150. [6] Though this is a specific example, it is also indicative of a larger trend. In North America, average aluminum content in automobiles has increased by 44.3 pounds per vehicle between 2012 and 2015, as compared to an increase of 10 pounds per vehicle between 2010 and 2012. [6] This corresponds to an increase in the percentage contribution of aluminum to the average curb weight of an automobile in North America from 9% in 2012 to 10.4% in 2015. [6] As per a study by Ducker Worldwide, average aluminum content in cars in North America is set to increase to 19% of a car’s curb weight by 2025. [6] Since aluminum is a lighter metal than steel, the increase in terms of volume of aluminum used in an average automobile is a better reflection of the increase in the scope of application of the metal. The volume share of aluminum in automobiles is expected to rise from 6.6% in 2015 to 26.6% in 2025. [6]
Given the favorable regulatory environment, the scope of aluminum as a material used in automobile manufacturing is certainly set to increase. However, aluminum is a much more expensive metal than steel. Similarly, other lighter materials such as manganese and plastic composites are even more expensive. Thus, there is a trade-off between weight reduction and an increase in costs. There is an opportunity for new materials which balance low cost with weight reduction. This is an opportunity that steelmakers are trying to exploit with their advanced high strength class of steels.
Advanced High Strength Steels
Major steel companies such as ArcelorMittal and U.S. Steel (NYSE:X) are investing heavily to produce advanced high-strength steels, in order to maintain steel’s position as the material of choice for the automotive industry. Advanced high strength steels have minimum tensile strengths of 500 to 800 Megapascals (MPa). [7] These steels offer significant weight savings as compared to traditional steels of comparable strengths. These materials are competitive relative to other materials, as shown in the figure below:
(Source: Global Steel 2014, Ernst & Young)
Companies such as ArcelorMittal are collaborating with Original Equipment Manufacturers (OEMs) in order to develop steel solutions that cater to the manufacturers’ requirements in terms of weight reduction as well as safety. [2] Examples of success stories are ArcelorMittal’s proprietary S in Motion steels which provide 19% weight savings for a typical C-Segment vehicle. [8] In addition, the company has also unveiled other classes of advanced high strength steels such as the proprietary Usibor and the Fortiform range of steels, tailored specifically for automotive applications. [5] Around 30% of ArcelorMittal’s R&D budget is devoted to developing solutions for the automotive market. [5] Similarly, U.S. Steel’s proprietary DUAL TEN and TRIP range of steels are also targeted towards the automotive sector. Such investments by steel companies will go some way towards maintaining the competitiveness of steel vis-a-vis other competing materials in the automotive market.
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- Steel by Topic, World Steel Association [↩]
- ArcelorMittal’s 2014 20-F, SEC [↩] [↩]
- New steels fight aluminum to oust heavy metal from cars, Automotive News [↩]
- Steelmakers Must Step On Gas To Keep Car Work, Financial Times [↩]
- ArcelorMittal unveils Fortiform, a range of new advanced high strength steels for safer and lighter cars, ArcelorMittal News Release [↩] [↩] [↩]
- 2015 North American Light Vehicle Aluminum Content Study, Ducker Worldwide [↩] [↩] [↩] [↩] [↩]
- Advanced High Strength Steels, U.S. Steel [↩]
- Global Metals, Mining & Steel Conference, ArcelorMittal Website [↩]