Car Wars: Aluminum v. Steel, Episode One

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This is the first part in a multi-part series. Keep an eye out for the next installment.

The opening “crawl of Return of the Jedi references the Galactic Empire secretly building a new “armored space station even more powerful than the first dreaded death star, thought to “spell certain doom for the small band of rebels struggling to restore freedom to the galaxy. We’ll let readers draw their own conclusions in terms of which metal represents the Death Star and which represents the rebels. But make no mistake about it; metal product substitution appears live and well within the automotive industry. One need only visit a few websites — for example, Alcoa’s — to see how it describes the aluminum value proposition, or this slick video from Novelis on the Jaguar XJ aluminum body or the Aluminum Association’s website articulating the virtues of aluminum over other materials.

But the steel industry has not taken this threat lying down; in fact, it has conducted considerable product innovation to address some of the specific benefits the aluminum industry has touted. What we find intriguing about the specific debate between steel and aluminum for the automotive industry is where it has played out and what arguments each side makes.

The automotive industry, guided by recent changes to CAFE standards impacting passenger cars and light trucks, will need to “meet an estimated combined average mile per gallon (mpg) level of 34.1 by MY 2016, and that has driven the industry to lighten up vehicles as one means of achieving the targets. According to a recent Wall Street Journal article, automakers seek to remove anywhere from 250-700 pounds of weight from each car.

Metal makes for an easy target.

The arguments made by both sides of the debate, however, differ in some key respects. This series will examine the arguments made by proponents of both sides as well as offer up some arguments that have received less media attention. The aluminum industry has built a compelling case centered on the following (and borrowed from the Aluminum Association):

  1. Increased payloads aluminum allows a hauler to carry more tonnage than it otherwise could with an alternative material
  2. Lower fuel consumption (see weight argument above)
  3. Reduced GHG emissions (again, see weight argument above)
  4. Lower maintenance costs fewer trips reduces wear and tear
  5. Corrosion resistance aluminum serves as a better material from a corrosion standpoint
  6. Higher resale value this rests on the notion that aluminum retains its value more than steel
  7. High recycling rates aluminum is “infinitely recyclable

Alcoa makes several additional arguments including: crash protection without compromise and enhanced driving performance, along with, “All other factors equal, lighter cars accelerate faster, stop faster, and have better handling that’s why many top performance cars are all-aluminium.

But don’t count the steel industry out. Though CAFE standards may serve as the impetus and momentum behind aluminum, they have also driven innovation within the steel industry. The steel industry has also built a compelling case centered on the following:

  1. CSR/Lifecycle Costs Steel emits fewer emissions during the production process than aluminum, thus it has a lower carbon footprint
  2. Safety/Energy Management – The main body – the undercarriage and beams are made out of steel. Steel’s versatility from a welding/stamping processing standpoint also has advantages over aluminum (we will dive into this in greater detail in a subsequent post)
  3. AHSS Advanced High Strength Steels these materials are recyclable, take less energy to produce and aid in the “light-weighting of traditional steel parts

Several additional considerations make the debate between the two materials all the more fascinating. For example, consider the aluminum shortages that have already started to appear in the European automotive industry. With a significant ramp-up in aluminum usage in the automotive industry, how will the industry effectively meet demand? That question leads us to another key issue: carbon cap and trade legislation, strongly supported by the aluminum industry and largely opposed by the steel industry. Why?

Aluminum, as a global industry, has a strategic advantage over the [largely] domestic steel industry currently supporting the auto sector. Any climate change legislation would handicap the steel industry while allowing the aluminum industry to leverage global supply options not subject to such legislation. Obviously this has implications from a trade perspective, but provides a real-world example of how policymakers will need to consider climate change legislation as well as regulation (as the case may be) moving forward.

No debate would be complete without an analysis of costs. We will continue to cover this topic; check back in with us for Episode 2.

–Lisa Reisman

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