Aluminum and steel slug it out to become the lighter, stronger metal for cars

The federal government's quest to double the average car's fuel economy by 2025 has intensified the long-running battle between steel and aluminum producers over one of their biggest customers.

Both industries are pouring millions of dollars into new mills capable of making the lighter, stronger metals needed to take 400 pounds -- about 10 percent -- out of the average car. That's the weight reduction needed to meet the proposed fleet standard of 54.5 miles per gallon, according to Ducker Worldwide, a research firm that advises steel and aluminum producers.

The drive for lighter vehicles has helped aluminum to make steady inroads into what is the steel industry's second biggest customer.

About 30 percent of car hoods and 20 percent of bumper beams are aluminum, according to Ducker. The consultant forecasts greater strides for the metal in the years ahead. It estimates the average North American vehicle will contain 550 pounds of aluminum by 2025, up from 343 pounds in 2012.

If that scenario plays out, aluminum will account for 16 percent of the weight of a light vehicle, about double the current aluminum content of the same kind of car, Ducker said. Steel's share will drop from 58 to 46 percent, the research firm said.

To a great extent, the competition has been a matter of aluminum's cost vs. steel's weight.

Rising gasoline prices and aluminum's lighter weight have helped the industry muscle its way deeper into the automotive market.

Mr. Kavanagh of Steel Market Development Institute believes that steel will remain the dominant automotive metal, saying it costs less to produce than aluminum and offers automakers lower manufacturing costs.He also cites environmental advantages. When it comes to the emissions generated by making both metals and keeping cars that use them on the road, steel produces 5 to 20 percent less emissions than aluminum, he said.

No matter how light either material gets, both industries realize they must work closely with carmakers to provide metals that can be used to efficiently design and produce lighter weight cars.

On the aluminum front, Alcoa announced plans last month to invest $300 million to enable its Davenport, Iowa, works to keep up with automotive demand. The decision was based on business already on the books, but Alcoa expects growth beyond that.

"These are long-term decisions. These are assets that are going to be in place for 50 years," said Mr. Scheps, who worked with the auto industry before joining Alcoa six years ago. Novelis is investing $200 million to boost production of aluminum automotive sheet at its Oswego, N.Y., plant, citing growing demand from its customers.

Analyst Charles Bradford has covered competition between the two industries for decades. He witnessed aluminum's wholesale capture of the beverage can market and saw steel maintain its stronghold on food cans.

But when it comes to cars, the New York analyst believes that the handwriting is on the wall.

"Aluminum has gained market share every year," Mr. Bradford said. "Steel has to be the loser in terms of pounds. It doesn't have to be the loser in terms of profit."

He said the challenge for steelmakers will be to command higher profit margins on the next generation of steels than the industry realized from the lower grade of steels they will replace.

"They may be able to make more money if they sell less pounds. That's going to be the trick," Mr. Bradford said.