Must know: Steel companies are bracing for aluminum onslaught

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Nov. 20 2020, Updated 2:21 p.m. ET

How serious is the threat from aluminum

Since Audi launched its aluminum-body sedan some 20 years ago, many luxury cars and SUVs have followed suit. But aluminum was not able to penetrate the mass market. Until now. In Part 10 of this series, we learned that Ford will soon release the F-150 mini truck featuring a fully aluminum body.

Not all automobile companies are shifting to aluminum

General Motors does not plan to produce cars with fully aluminum bodies anytime soon. Toyota, meanwhile, may increase the aluminum content in its vehicles. Overall, the response of automobile companies is mixed. The main reason for this is the extra cost involved in producing fully aluminum bodies. According to estimates, producing aluminum auto bodies raises the price of vehicles by more than $1, 000 per unit. Regardless, it’s expected aluminum use in auto bodies will increase tenfold by 2025, as the chart above shows.

How are steel companies adapting?

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Steel companies, for their part, are producing better varieties of steel—lighter-weight varieties than traditional steel products. ArcelorMittal SA (MT) is at the forefront of this work, collaborating with auto companies to produce steel that meets the requirements for lighter vehicles. Other steel companies are following suit.

The new steel varieties cost more than traditional steel products, but less than aluminum. Because of the higher selling prices, profit margins of steel companies are protected. All steel companies, including United States Steel Corporation (X), AK Steel Holding Corporation (AKS), and Steel Dynamics, Inc. (STLD), have focused development on these value-added products.

Investors are able to invest in both steel and aluminum industries through the SPDR S&P Metals and Mining ETF (XME). You can learn more about steel companies by visiting our Steel industry page.

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