Car manufacturers using record amounts of aluminum

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Carmakers from Ford Motor Co. to Audi AG and Jaguar Land Rover Plc are using record amounts of aluminum to replace heavier steel, providing relief to producers of the metal confronting excess supplies and depressed prices.

Aluminum content in vehicles is rising about 5 percent a year and growth will accelerate in the next decade as drivers seek improved fuel economy and lower emissions, according to Gayle Berry, a London-based analyst at Barclays.

"This is one of the reasons why aluminum has the most bullish long-term demand outlook of all the base metals," Ms. Berry said, without disclosing forecasts. Morgan Stanley predicts a 29 percent gain in aluminum prices by 2018, compared with a 9.8 percent drop for copper.

Producers are hungry for new markets, even at the expense of steelmakers. At current aluminum prices, which are more than a third below 2008 highs, at least 30 percent of aluminum companies aren't making money, according to Moscow-based United Co. Rusal, the biggest producer. Rio Tinto Group CEO Tom Albanese resigned Jan. 17 as the company unveiled $14 billion in writedowns, largely in aluminum.

Automakers like Ford, the second-largest in the U.S., should help pull aluminum suppliers out of a slump, said Kirill Chuyko, an analyst for BC Financial Group in Moscow. Some 25 percent of demand is from the transport industry, with cars and light trucks using two-thirds of this, or about 10 million metric tons a year, the International Aluminum Institute estimates.

In the U.S., the popularity of the Ford F-150 pickup truck looms among the largest threat from automakers to the steel industry. The next generation of the pickup will be redesigned, with a higher aluminum content helping to reduce its weight by as much as 750 pounds (340 kilograms), Ford has said.

"The F-150 is the best-selling vehicle in North America, and would likely trigger all other truck makers to convert" to increased aluminum content, said Kenneth Hoffman, Princeton- based sector head for metals and mining research at Bloomberg Industries.

A switch to aluminum among U.S. carmakers could add as much as 40 percent to North American demand in coming years, said Mr. Hoffman, who titled a January talk to steel executives in Chicago "The Death of the Steel Industry as We Know It."

The metal has failed to revisit the $3,317 a ton level reached in 2008, averaging about $2,200 in the past five years, data compiled by Bloomberg show. Prices slumped about 15 percent in 2012, while producers pared global output by 3 percent from January through November, according to the London-based aluminum institute, a trade group for producers.

autonews


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