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New fuel efficiency standards shouldn't weaken demand for advanced high-strength steel

A coil of advanced high strength steel.

The Environmental Protection Agency recently announced its intention to roll back tough fuel-efficiency standards that require automakers' fleets to average 54.5 miles per gallon by 2025, possibly by giving them longer to meet that target.

The Obama-era emissions regulations required automakers to double their fuel economy in about a decade. That drove demand for advanced high-strength steels, which are stronger than traditional steel grades, so less can be used in cars, trucks and SUVs without sacrificing safety.

It's why the market research firm Ducker Worldwide estimates demand for advanced high-strength steel in vehicles has grown by more than 10 percent for each of the past four years.

Automakers won't have to race as fast to cut weight out of cars if the regulations are loosened, but that shouldn't weaken demand for advanced high-strength steel or put the brakes on the development of new grades, said Jody Hall, vice president of the automotive market for the Steel Market Development Institute.

"It won't reduce demand, because there's been a signification adoption of high-strength steel, which are greater performance at little additional cost," Hall said. "We've been collaborating directly with the auto industry on incorporating these grades into the designs of vehicles and they're not likely to go back to traditional steel. We once only had seven grades of steel, but now have 200 grades of higher-strength steel that's thinner and reduces the mass of vehicles."

Automakers have been working to lightweight vehicles for decades, and initially wanted stronger grades of steel more for collision safety.

"They wanted to reduce mass to vehicles when adding airbags, navigation systems, power windows, sun roofs and other features that add mass of their own," Hall said. "Reducing mass has been beneficial to the automakers."

Many have turned to alternative materials like aluminum and carbon fiber, with Ford most notably switching the body of its best-selling F-150 pickup truck from steel to aluminum. But the loosening of the tailpipe emissions regulations could help make steel even more attractive.

"Aluminum and carbon fiber are very expensive for a little bit of additional mass reduction," Hall said. "In a highly competitive industry, automakers will do what they need to do to meet fuel economy standards but they have to be cost-effective because they compete on price. Vehicles that turned to composite materials have gone back to steel, because it's more cost-effective at reducing mass."

Steelmakers like ArcelorMittal continue to develop new grades of advanced high-strength steel that's more formable, more easily stamped at stamping plants and further boosts fuel economy. There continues to be global demand for lighter vehicles since countries all over the world, including the European Union, have imposed tougher emissions standards to reduce greenhouse gases and combat climate change. 

Much of the demand for lighter vehicles is being driven by governments looking to reduce the use of fossil fuels and not consumers themselves, Hall said.

"When gas was an average of $3.54 per gallon, 60 percent of vehicle purchases were smaller cars," she said. "Now that prices have come down, 72 percent of purchases were for larger SUVs and trucks. It went from 40 percent to 72 percent. Americans like the space, outside of cities like New York City and LA. It's a large country and people want a lot of space to haul their families and recreational equipment. If people can afford large vehicles, they're going to drive them."

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Business Reporter

Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.