Aluminium deficit could snowball to slow OEM plans

There are a number of key trends impacting the adoption of aluminium in the automotive industry. Several aluminium suppliers describe their products as lightweight alternatives to conventional steel solutions, suggesting that they can help OEMs to reduce emissions and improve vehicle fuel efficiency. “As the global transition to a low-carbon economy accelerates, replacing steel with aluminium will be a helpful tactic for OEMs,” Molly Shutt, Commodities Analyst at BMI Research, told Greenstreetsoftware.info. However, a number of factors are expected to limit production of the material. Curbing capacity A recent report from BMI Research suggests that the global aluminium market will grow over the next few years due to increasing demand from the automotive, aerospace and construction industries. Several vehicle manufacturers are examining the potential benefits of switching from steel to aluminium as they hope to achieve lightweighting goals, but plans may be put on hold. The same report suggests that the aluminium deficit will deepen from 295 kilotons (kt) in 2017 to 2 megatons (mnt) by 2021, while the aluminium stock-to-use ratio will decline from 22% in 2017 to 11.2% in 2021. This is due to a number of factors. At 33.1mnt per year, the vast majority of the world’s aluminium is produced in China. The report suggests that this will grow to 36.8mnt by 2021, marking a slower yearly rise of 2.8% compared to 12.5% between 2012 and 2017. “The Chinese government plans to curb aluminium production capacity and suspend alumina production in three provinces in an effort to fight air pollution over the winter months and in April issued an order for local governments to crack down on environmental violations by smelters,” the report reads. In June 2017, the country’s largest aluminium producer, China Hongqiao, cut production capacity by 250kt. Although the company didn’t provide reasons behind the cuts, Shutt is convinced that it is “either an anticipated environmental crackdown from the government or related to the ongoing accounting scandal that has delayed the firm’s 2016 report.” US-based aluminium suppliers could also face headaches, with production expected to fall from 716kt in 2017 to 670kt by 2021. This is partly due to the fact that the number of operational smelters has recently fallen from 11 to five, as companies face unsustainable running costs. Shutt thinks that President Trump’s ‘America First’ procurement strategy could provide a welcomed boost to the profit margins of US-based aluminium suppliers. Despite this, she believes that the likelihood of a significant return of US aluminium output is small. Promising places It's not all doom and gloom. The report also highlights the United Arab Emirates (UAE) as an “aluminium production growth bright spot, supported by the government’s initiative to diversify the economy through industrial production.” Emirates Global Aluminium is the region’s main producer. It recently invested US$300m on a three-year project to replace older production lines at its Jebel Ali aluminium smelter with its own in-house technology, boosting production by around 20%, reducing costs and cutting energy consumption by approximately 10%. In terms of usage in the automotive industry, several markets could prove extremely important. The BMI Research report suggests that increasingly stringent regulations surrounding CO2 emissions and fuel efficiency will motivate OEMs to adopt the material as they hope to achieve lightweighting goals. “I believe that aluminium penetration will increase in Europe over the next five years to go along with explosive growth in Asia due to more stringent carbon emission regulations, the sales growth for SUVs, and the electric vehicle (EV) production slated to account for more than 20% of the total auto market by 2025,” Pierre Labat, Vice President, Sales & Marketing Global Automotive at Novelis, explained to Greenstreetsoftware.info. Another potentially significant growth market for aluminium usage in vehicles is India. “India has huge potential to increase the role of aluminium in vehicle production,” Shutt said. “Recent investment announcements of EV and battery production indicate a prioritisation of low-carbon systems that would also boost aluminium usage in the industry.” Considering upfront costs As well as location, Shutt was eager to outline the vehicle segments that could be particularly suitable for increased aluminium usage. “Luxury vehicle manufacturers will remain primary drivers of the aluminium growth trend,” she stated. “Given that aluminium is more than three times the cost of steel per ton, expensive vehicle pricing will need to cover the higher material cost. However, some producers will prioritise spending on aluminium as a way to pre-empt regulatory costs.” She referred to the Ford F-150 as an example here. The OEM reportedly spent around US$1.5bn redesigning two US plants to produce the aluminium-intensive pick-up. “We also expect an increase in recycling efforts from OEMs, with the emergence of closed-loop value chains where companies recycle 100% of certain materials, such as aluminium,” she added. “With this in mind, OEMs can track, reclaim and recycle vehicles to re-use aluminium and reduce costs.” Looking ahead, Shutt thinks that some vehicle manufacturers may find it difficult to justify using aluminium in place of steel due to its low cost and high production capacity. Steel suppliers are also eager to stop the switch by bringing out new advanced high strength steels (AHSS) and ultra high strength steels (UHSS).

Increased demand and limited production output could cause setbacks for new aluminium-intensive vehicle designs. Michael Nash investigates

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