Believe it or not, one metals analyst we know of forecasts metal prices based on media sentiment.
In other words, the analyst actually forecasts for a price increase or decrease based on the number of times the phrase “X metal price increase” or “X metal price decrease” appears in the mainstream news feeds. That’s not much different from how many media outlets report on economic conditions by examining the number of times economists and market watchers mention the word “recession.”
We make no judgment call on that particular methodology, but if we used that approach for determining who would win the on-going Car Wars saga (steel vs. aluminum) we might come to a clear cut conclusion – (the winner would be aluminum).
But is aluminum the right conclusion?
Humor me for just a minute. If I type into Google, “steel to meet CAFE standards,” I see (and chances are, you would also) links to 10 items. To save readers the time and trouble, MetalMiner analysis of the links suggested the following:
- 5 articles appear negative to steel (v. aluminum)
- 2 articles appear positive to steel but one was written by steel producer ArcelorMittal (a very large steel supplier to the automotive industry) and the second story came from steel trade group AISI, so hardly positive press
- 3 articles appear neutral
Ford F150 Pickup Adds Salt to the Wound
The major announcement by Ford that it would produce its popular F150 pickup using aluminum body panels has received extensive media coverage including on this site. But does the mere extensive coverage of these developments portend the actual outcome?
In other words, can we conclude aluminum will become the dominant material of choice for use in the light-weighting process?
It will grow for sure, but we don’t think it will ever surpass steel within the automotive industry for a host of reasons. However, we speak of automotive usage or share of wallet, not on the marketing prowess of the two industries, because we know aluminum would beat steel hands down on that one.
In our opinion, the popular press has missed some of the key arguments that really underpin the Car Wars debate. The first argument involves an obvious truth – the total number of pounds of steel used in a car will decrease, no matter the material used!
High-strength steels and ultra high-strength steels will necessarily replace the heavier steels used previously. This alone automatically decreases the total steel weight used per vehicle. However, the high-strength steels contain the most value-add – in other words, the margins on high-strength steels exceed those of mild steels.
In fact, one of the “neutral articles” mentioned previously, from Popular Mechanics, cites a SMDI study suggesting “a 10 percent growth in the use of advanced high-strength steel, eventually culminating in the replacement of 650 pounds of mild steel with 350 pounds of ultra-high-strength steel to meet the 35mpg CAFE standards.”
Of course, that only gets us to the 35mpg CAFÉ standards as required by 2016 as opposed to the required 54.5mpg by 2025. This decrease of total pounds of steel used of course has absolutely nothing to do with aluminum.
In a follow-up post, we’ll cover a few other under-reported aspects of Car Wars.