Aluminium is on average 20pct to 40pct lighter than steel

Aluminium is on average 20% to 40% lighter than steel, depending on the product, and can be made equally strong and crash worthy but at about 3 times the cost per ton. With the exception of high end automobiles where price sensitivity is less important, steel is the standard for car bodies and train cabins. Aluminium can claim dominance only in aerospace, where its lightweight properties more than outweigh its additional cost. However, high gasoline prices and heightened environmental concerns are driving tougher fuel efficiency standards that heavily influence metal preference, a trend we think is unlikely to reverse.

In the US, car companies face stricter Corporate Average Fuel Economy standards by the Department of Transportation and the Environmental Protection Agency, with European counties similarly insisting on greater fuel efficiency to make this a global effort. The American standards adopted in 2009 require cars and trucks to average 35.5 miles per gallon of gas by 2016. This implies a fuel usage reduction of 7% to 20% which will require the removal of between 250 to 700 pounds per car. In July 2011, the next set of standards were unveiled, mandating vehicle fleets to average 54.5 miles per gallon by 2025. This represents a considerable challenge for automakers.

In a typical sedan, about 25% of the car's weight is made of the body skeleton another 25% is the engine and transmission, and 20% is the chassis and suspension. All of these components are primarily made from steel. That is roughly 55% to 60% of total car weight coming from the cheaper metal with aluminium making up only about 8%. The body skeleton is where aluminium makers have set their sights. Current estimates indicate that doing nothing other than switching from a steel car body to one made of mostly aluminium can shave 10% to 15% off the weight of a car which would create about 10% gain in fuel efficiency while maintaining safety standards and lowering carbon emissions.

While increased aluminium adoption will increase the sticker price of a car anywhere from USD 500 to USD 1,500, consumers could save up to USD 4,000 per vehicle in fuel costs, so automakers should have little trouble passing along the higher metal costs to consumers and therefore are unlikely to invest heavily in ways to reduce the weight of a car through methods other than aluminium usage. It is also unlikely that metal pricing could diverge enough to impede the use of aluminium from a cost perspective. Further, automakers are becoming more open to retooling their factories for aluminium than they were in the 1970s, when emissions standards were first introduced and aluminium makers started touting the benefits of their product in automotive vehicles. Also, aluminium is similar enough to steel that car manufacturers will not have to completely retool their equipment.

There are only a few hurdles to making the switch from steel to aluminium in auto bodies. First is the inherent resistance to change, specifically due to the needed investment in equipment to adjust to the different welding properties and thickness of aluminium. There is also a competitive defense steelmakers are hard at work to come up with a more lightweight steel product to enable automakers to lighten their vehicles without adjusting their production processes for aluminium. Steel giants ArcelorMittal and US Steel currently are investing in the development of new high strength steel products specifically for car bodies in order to remain competitive and combat aluminium substitution.

There also could be some unforeseen process challenges. When fuel economy standards were first introduced in the 1970s, some attempts to use aluminium were unsuccessful and steelmakers were quick to develop specialty steel alloys that achieved the same strength with less metal. Aluminium can be more flexible than steel which can cause difficulty when shaping the metal into a car body. While we do not expect to see aluminium adoption for all car bodies, the benefits of aluminium are clear and the drawbacks are few.