INDIANAPOLIS | Automakers are putting their vehicles on crash diets to prepare for tough new federal rules that demand twice as much fuel-efficiency by 2025.
The need to slash weight out of vehicles has spurred significant and ongoing innovation in steelmaking over the past few years, industry leaders said at a town hall forum at the Association of Iron and Steel Technology's AISTech 2014 conference in Indianapolis.
"The (Corporate Average Fuel Economy) standards were a kick in the teeth," said John Farris, vice president and general manager of Nucor Steel-Texas. "We've exponentially increased the rate at which we're developing new products."
Farris, ArcelorMittal USA president and CEO Michael Rippey, U.S. Steel North American Flat-Rolled Operations senior vice president Douglas Matthews and other executives took part in a panel discussion that was intended as a "state of the union" for the steel business.
The industry will need to navigate through choppy waters in 2014, said Berry Metal Co. president George Koenig. Steelmakers everywhere face issues such as overcapacity, raw material cost concerns, and the encroachment of more lightweight aluminum on the long-secure automotive market.
Despite the challenges, steel industry leaders were enthusiastic about the future, especially because of increased demand from the pipeline and automotive sectors. They expressed confidence in their ability to design new high-strength steels for lighter-weight vehicles that serve automakers' needs and keep them from switching to aluminum and other rival alternative metals.
Steelmakers need to continue to evolve their product offerings, Rippey said.
"It really is an exciting time for the industry, not just here at home but all over the world," he said. "I've seen a lot of changes in the products we make. We make different products for automobiles than we did only a few years ago. A few of you may remember 30 years ago, when the outer panel on automobile rusted off because it was exposed and not coated. But we're going from linear change to exponential change. There's a lot of challenges, and a lot of opportunities."
Steelmakers have been successful in designing new advanced high-strength steel grades for the rebounding automotive sector, Rippey said.
Strong demand from carmakers has been a bright spot for the steel industry, which has struggled during the downturn and slow recovery. Automakers are on pace to produce 16.6 million units in 2014, the most in years.
The fleet of cars on the road is old, and many vehicles need to be replaced. Demographics also are working in automakers' favor, Rippey said. People are living longer and buying an additional car in their lifetimes, instead of buying their final vehicle around the retirement age of 65. The children of baby boomers also are now graduating and starting households of their own, and cars are typically the first major purchase they have to make.
"I read an article in the depths of the recession that the age of consumerism is over," Rippey said. "I had to chuckle. Twenty-somethings don't want to live in our basements forever. The American Dream is to be out there on our own, and enjoying all the things we've come to expect."
U.S. Steel plans to aggressively pursue lightweight grades and car part designs to keep its automotive customers happy, Matthews said.
The automotive sector has been a battleground among metals manufacturers for years. But at first, aluminum was mainly used for forgings and extrusions.
Aluminum makers are penetrating more deeply into the automotive market with the announcement of a new aluminum-bodied F-150 model that is 700 pounds lighter than its predecessor.
"Our industry was little lethargic to respond to that threat," Matthews said. "It's an assault on our market, and we're moving swiftly to ensure steel remains the material of choice with automakers."
Grades of advanced high-strength steel that are on the drawing board and in manufacturing workstreams today are so advanced that they are hard to even categorize as steel, Matthews said. They have characteristics that traditional steel does not.
"Steel can beat out aluminum," he said. "What we've developed ... are almost new categorizations of a metal from the standpoint of capability and strength."
Both steel and aluminum will have their place in cars going forward, said Dieter Hoeppli, managing director and head of Metals and Mining, Americas for Deutsche Bank Securities.
The aluminum sector estimates it will furnish 2 million more tons to the automotive industry by 2025, but the industry does not currently have enough production capacity to supply that much metal, Hoeppli said. A new aluminum plant costs an estimated $1.5 billion to $2 billion to construct, and is not a minor undertaking.
Steel also costs around $800 to $900 a ton, while aluminum costs about $1,800 a ton and has risen above $3,000 a ton before.
Another advantage steel maintains is that car-buyers likely would perceive it as safer, said forum moderator Jon Delano, the money and politics editor for a CBS affiliate in Pittsburgh.
"I can't think of a safer product than steel," he said. "It's very safe. When I hear that something is made of aluminum, I think of aluminum foil or cans I can crush with one hand."