ALUMINIUM
The Industry Lightweight
May 2019
Aluminium demand is forecast to grow ~2.5% from 65.6Mt in 2018 to 67.3Mt in 2019, with a further rise of 3.25% to 69.4Mt expected in 2020. Significant portions of the industry are driven by automotive demand, with long-term trends indicating heavier use of aluminium as the automotive industry, particularly in China, moves away from internal combustion engines and seeks to reduce weight.

Aluminium is particularly appealing to the automotive industry dur to their light weighting properties, the metal’s good durability and superior corrosion resistance. The metal is approximately 10%-40% lighter than steel, which enhances vehicle acceleration, braking and handling. While the higher price of aluminium compared to steel makes it a competitive disadvantage, the metal’s reliability means that demand for it in the automotive industry remains high.

Iceland’s first all-aluminium car, Isar, was released earlier this year. As a lightweight road car built almost entirely out of Icelandic aluminium, the jeep-style four-wheel drive weighs just 3t—around two-thirds or less of other similar cars. While the car is largely intended as a concept piece—with just five models sold as of March—it provides an insight into the broader design goals of the entire automotive industry: to produce cars that weigh less, cost less, and use less fuel.

 

Pictured: Isar—Iceland’s first all-aluminium car is up and running. 

 

While building entire cars from aluminium may be somewhat ahead of the curve, producers are seeing an increased focus on light-weighting as electric vehicles become more common. Even with combustion-engine vehicles, consumers are consistently searching for models that provide a higher fuel efficiency—and that generally means less weight. This becomes even more important when considering electric vehicles, as consumers place a great deal of importance on the maximum range of models and their batteries; a factor that benefits from less weight—and more aluminium.

Much of aluminium demand is driven by China, albeit at a slower rate than seen in the previous decade as the rate of the country’s economy growth slows. Continued infrastructure development and ambitious initiatives for promoting electric vehicle production are set to play a large role in driving aluminium demand.

 

 

Looking to China’s counterweight, the US appears set to see strong benefits for its automotive aluminium industry from the hopefully-soon-to-be-ratified USMCA free trade agreement that will replace the currently-standing NAFTA. Looking past the potential difficulties in ratification, the agreement could see the automotive aluminium and steel industry benefit from US$600m of extra business during the five years after ratification.

As new rules of origin will require 75% of auto content to be produced on the North American continent—closing what automakers have described as “loopholes” in current agreements—US-based industry is expected to see a considerable boost. The recent deal between Braidy Industries that will see it supply BMW with high-grade aluminium sheet alloys for automotive use from its under-construction Kentucky rolling mill appears to be an indicator of the kind of deals that the trade agreement will incentivise.