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* Light base metals threaten to replace automotive steel
* High costs is biggest factor delaying mass use in cars
* Steel firms push high-grade steel as alternative
A collapse in steel demand from the ailing auto sector may be foremost on steelmakers' minds at the moment, but rising government fuel standards are the greater cause for alarm as aluminium and magnesium steal market share.
While the auto industry consumes only about 6 percent of the world's crude steel production, mills have long counted on steady growth in car sales to generate new business -- growth that may now be in doubt as aluminium and other super-light materials replace steel to help meet tougher environmental regulations.
The threat became more apparent this week as U.S. President Barack Obama introduced the most aggressive proposal yet to boost U.S. auto fuel economy standards, which would encourage automakers to invest in fuel-saving technology.
Under the new standards, U.S. passenger vehicles and light trucks must raise fuel efficiency by 5 percent yearly to an average 35.5 miles per gallon (6.62 litres/100 kilometres) by 2016. The current law requires a similar gain by 2020.
"To achieve weight-saving and improve fuel efficiency, it's inevitable to replace steel to lighter materials, as steel accounts for around 50-60 percent of total vehicle weight," said Han Do-suck, principal researcher of South Korea's Hyundai Motor's materials research team.
"We are open to all possibilities and new technologies but any dramatic and immediate change is unlikely, mainly because of cost issues."
The incentives are clear: fuel efficiency usually rises by 5-10 percent for every 10 percent reduction in vehicle weight, and per-vehicle steel consumption is well over 1 tonne.
That can be a big blow to already reeling steelmakers, such as Nippon Steel, POSCO and AK Steel, which count auto firms as a major client and face reduced demand as auto output falls by as much as 20 percent this year.
Already automakers are increasingly stripping off sheets of steel in favour of lighter and more stylish materials, such as aluminium, magnesium, titanium, plastics and carbon fibre.
The Mazda2 subcompact, for example, reduced weight by almost 100 kg from its predecessor by using lightweight and thinner ultra-tensile steel, altering the electrics, suspension and exhaust, and even by changing door speakers to save weight.
ALUMINIUM LEADS, COST STILL CONCERN
The substitution has been led by aluminium, which can halve weight of vehicle body frames, thus dramatically reducing emissions of carbon dioxide blamed for global warming.
A survey by research firm Ducker Worldwide showed that per-vehicle aluminium content in North America would rise to 376 pounds by 2020, or 10.4 percent of total vehicle weight, from an estimated 8.6 percent this year.
For graphics on the use of aluminium in cars, click: http://graphics.thomsonreuters.com/059/CMD_AUTAL0509.jpg
Aluminium, which is as stiff as steel but weighs one third as much, has been developed for around two decades for use in autos but its high price and relatively complicated processing structure have prevented its use for the whole auto-body frame.
"Aluminium is some three to four times more expensive than steel per volume, and as a relatively less standardised and commoditised processing tool it costs a lot more to process the metal for auto use," said Kim Hyung-wook, a chief researcher at Korea Institute of Materials Science.
"That's why the use of aluminium has been limited to premium auto models, where manufacturing and material costs are relatively minimal compared with total vehicle price."
Audi, a unit of Volkswagen, has led the replacement and introduced all-aluminium body vehicles such as A8, but most carmakers have limited the use of the metal mainly to hood and trunk lid due to high prices.
"Rising demand for aluminium and toughening auto efficiency standard mean prices of the metal will rise again and that'll be a big burden to both carmakers and consumers," says Lee Hang-koo, a researcher at Korea Institute for Industrial Economics and Trade, who estimates the use of automotive steel would decrease around 5 percent by 2010 from 2007's level.
Some analysts estimate it could cost consumers between $5,000 and $12,000 more per vehicle under the new U.S. federal fuel economy targets, though the Obama administration said the efficiency upgrade could cost just $1,300 and consumers could look to recoup much of that by spending less on fuel.
NEW TECHNOLOGY
Other light materials will also compete to replace steel, about 74 million tonnes a year of which are used to make cars and light trucks. World steel production is 1.3 billion tonnes.
Although aluminium is the dominant substitution at the moment, it faces threats from other materials such as magnesium and high-grade steel, which steelmills are aggressively pushing for as alternatives to lighter but expensive materials, as it costs only 10-30 percent more than automotive steel.
"We see the potential of magnesium increasingly used in cars to replace steel, especially in hybrid cars and premium models as it weighs only 25 percent of steel and 70 percent of aluminium," said Shin Dae-ho, a magnesium marketing officer at POSCO.
"But high prices are one of the key hurdles and it needs further research to become commercialised," Shin said, adding POSCO aims to produce magnesium for auto use from 2011 and the metal would become competitive to aluminium if prices fall below 10 million won ($7,984) a tonne from $30,000.
In terms of per-volume prices, magnesium cannot compete with automotive steel, which costs around $800 a tonne, but carmakers can reduce weight by half by using magnesium to maintain the same rigidity.
In the end, warn some analysts, the shift away from steel use may not be as "green" as it first appears.
"We need to think whether reduced steel consumption is really beneficial to the environment, given that it is 100 percent recyclable through scrap use," said Han at Hyundai.
"From this perspective, further cooperation is needed more than ever to develop high-grade steel."