Steelmakers Aim to Keep Auto Market

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ArcelorMittal MT -1.62%’s hulking green-painted steel plant in rural Alabama is at the heart of Big Steel’s response to aluminum in the battle for one of the metal industry’s best customers: carmakers.

The aluminum industry made strides this year with Ford Motor Co.F -1.00%’s announcement that it would make the new F-150 principally out of aluminum. The metal–which although it is more expensive is, as a rule, lighter than steel–helps automakers meet new fuel efficiency standards.

Aluminum makers Alcoa Inc.AA -1.57% and Novelis, a unit of India’s Hindalco Industries Ltd.500440.BY -4.45%, have trumpeted recent investments totaling more than a billion dollars in new sheet production in Iowa, upstate New York, Tennessee and overseas. A report published this summer by Ducker Worldwide, a consulting and market research firm, says that 18% of all vehicles will have all-aluminum bodies by 2025, compared with less than 1% in 2014.

Steelmakers, facing their biggest defeat by aluminum since they lost the beer can in the 1970s, are also spending billions of dollars to fight back.

ArcelorMittal, in a 50-50 joint venture with Nippon Steel & Sumitomo Metal Corp.5401.TO +0.68%, paid Germany’s ThyssenKrupp TKA.XE -2.80% $1.55 billion for this state-of-the-art plant 35 miles north of Mobile, in a town so small it only recently acquired a McDonald’s.
The facility takes slabs of steel from Mexico, Brazil and Indiana, heats them to 1,200 Celsius (2,192 Fahrenheit) and–in a long, cavernous hall, tall as a 10-storey building–rolls them in coils up to 3,200 feet long.

The plant, completed in 2010 at a cost of around $5 billion, follows a familiar Southern industrial blueprint: it was built partly with state incentives, and its roughly 1,550 workers are non-union. Excluding benefits, they make an average of around $20 per hour, decent pay in this part of the country. Some workers commute from over an hour away.

Engineers for ArcelorMittal say almost half the production here, currently at around 4.5 million tons per year, is destined for the car industry, slightly more than ArcelorMittal says it originally expected. The rest will go to industries as varied gas drilling and construction.

“People don’t get that steel is a hi-tech industry now,” says Blake Zuidema, ArcelorMittal’s director of automotive product applications, on a recent tour of the plant.

Mr. Zuidema, who has a PhD in metallurgical engineering, points to the steel industry’s increasing mastery of chemical alloys, temperature manipulation and surface shape as ways steel is responding to aluminum.

For example, the company on Sept. 16 announced a $6.7 million investment to beef up a coating line so it can produce a special steel that is hardened thanks to a special cooling and reheating procedure, then coated in aluminum silicon.

Such technologies, ArcelorMittal says, will allow carmakers to reduce the weight of a pick-up truck by as much as 384 pounds–their answer to the aluminum F-150. By contrast, Ford engineers say the new F-150 weighs up to 700 pounds less than a traditional steel model, largely thanks to an all-aluminum body. The new F-150 also saves up to 60 pounds in the frame by replacing traditional steels with advanced high-strength steels, says Ford spokesman Michael Levine.

Steelmakers say their innovations are a step in the right direction that makes them competitive, and their metal has advantages that make up for still being heavier, such as affordability. Raw steel costs around a third the price of raw aluminum.

Jeff Tomko, president of Honda Manufacturing of Alabama, LLC, a big customer for ArcelorMittal, says the Japanese automaker is pleased with the performance of ArcelorMittal’s new steels in crash tests. On a recent tour of Honda’s plant near Birmingham, Ala., managers from both companies showed off a crash test video of a steel driver’s side door frame that allowed a dummy to survive a head-on collision.

Steel, however, remains heavier than aluminum. “We’ve got to balance” weight and safety, says Mr. Tomko.

“We’re bullish about steel,” says Lou Schorsch, chief executive of ArcelorMittal Americas. “But we think competition is a healthy thing.”