EuroWire September 2016

Transatlantic cable

If a new steel is measurably stronger than leading automotive aluminium alloys, is it still only “an interesting product”? Usibor 2000, a new grade of steel announced by ArcelorMittal, is said to be some one-third stronger than steels currently available to carmakers. As such, it is claimed by its Luxembourg-based developer to promise potential weight savings of up 10 per cent over the current best steel grades for applications requiring complex shapes. “It’s lightweight because the material is so strong that you need a lot less of it to achieve the same functionality,” Greg Ludkovsky, head of research and development at ArcelorMittal, told Michael Pooler of the Financial Times . Launch is expected by the end of this year in Europe and by mid-2017 in the USA. (“ArcelorMittal to Launch New High Strength Steel,” 5 th June) The appeal of such materials needs no explaining. Ever more stringent regulations on exhaust emissions are compelling automakers to improve the average fuel e ciency of their models. One of the main ways of doing this is by reducing mass. As noted by Mr Pooler, while steel remains the material of choice in automotive it is increasingly crowded by substrates with weight advantages, such as aluminium and plastic composites. The threat became apparent when, in model year 2015, Ford Motor Co switched to aluminium for the body of its F-150 pickup truck. If the best-selling vehicle in the USA for more than three decades could be made from aluminium, what car could not be? So ArcelorMittal is justi ed in expecting a good reception for Usibor 2000. Like many other steelmakers, the world’s biggest producer by tonnage is promoting premium grades to o set downward price pressures on bulk steels. The company has in fact declared an intention of raising core pro ts by $3 billion by 2020. But, under present conditions of global oversupply, how big a di erence can even a worthy new steel product make to the developer’s bottom line? † Carsten Riek, a London-based UBS steels analyst consulted by Mr Pooler, said he thinks it unlikely that sales of Usibor 2000 would substantially boost overall pro ts at ArcelorMittal. One reason he gave is that this kind of steel is a niche product typically used only in frame parts of the car body to prevent structural damage in crashes, rather than throughout the entire vehicle. “It’s an interesting product,” Mr Riek told the Financial Times . “But there always has to be a large bene t for carmakers.” The USA, with a fraction of the output of number one producer China, again places fourth in steel production worldwide The 2016 edition of “World Steel in Figures,” published by the World Steel Association (worldsteel), provides a comprehensive overview of global steel industry activity in 2015. Together with national and regional steel industry associations and steel-research institutes, the worldsteel membership of over 150 steel producers represents some 85 per cent of global steel production. worldsteel (formerly the International Iron and Steel Institute [IISI]) published this list of the top ten steel-producing countries in 2015 (in millions of metric tons [MT]):

Steel

Of potential signi cance to integrated steel-makers, Nucor has plans to make scrap- generated steel more appealing to carmakers “There’s no rule at Nucor that says we have to keep making what we’re making and we have to keep making it where we’re making it.” That ringing assertion by CEO John Ferriola of Nucor Corp was made in the course of an interview this spring with Bloomberg News in New York, at which Mr Ferriola also shared what prompted it. Anticipating a cooling domestic auto market, the biggest American steelmaker is looking to supply more metal products to carmakers outside the United States. The Charlotte, North Carolina-based steelmaker recycles scrap in the small electric furnaces known as mini mills. As noted by Bloomberg reporter Sonja Elmquist, until recently that process has not been able to create the blemish-free exible steel required by automakers for external car parts. Now, however, Nucor has begun replacing some scrap with a type of iron re ned with natural gas, removing the contaminants from the scrap-based steel. This enables it to compete in a market that has been dominated by integrated producers, like US Steel Corp, that make steel “from scratch” – iron ore and coal/ coke. On 9 th June, Nucor announced a $270 million joint venture with Japan’s JFE Holdings Inc to produce steel for carmakers at a plant in Mexico. (“Nucor Looks to Step Up Foreign Steel Expansion in Automotive,” 17 th June) The 50:50 joint venture, Nucor-JFE-Steel Mexico, will begin production in 2019, JFE Steel Corp, a unit of the Tokyo-based company, said in a statement. The plant is to have a capacity of 400,000 metric tons a year. As reported earlier by Bloomberg ’s Masumi Suga, according to the JFE statement the deal ful ls that company’s need for a manufacturing base in the region covered by the North American Free Trade Agreement (NAFTA), where Japanese automakers have been growing; even as Nucor has been seeking to expand into supplying high-grade auto sheet. † According to David Gagliano, a metals and mining analyst at Bank of Montreal, Nucor’s investment in boosting capacity slated for car parts may have broader implications. Noting the growing interest of automakers in buying steel from recyclers, he told Ms Elmquist, “[The Nucor action is] potentially step one in a meaningful longer-term shift away from the traditional integrated steel producer supplier toward the mini mill.” † Ms Elmquist observed that Nucor’s push beyond national borders grew at least in part out of the company’s awareness of its growing heft in the US market. She wrote: “There are fewer domestic opportunities left to exploit without bumping into antitrust laws.” On the sidelines of a World Steel Dynamics/American Metal Market conference in New York from 13 th to 15 th June, Nucor’s Mr Ferriola essentially acknowledged as much. “We might be running out of opportunities in some of our core products because we’ve grown in terms of market share,” he said. “There’s a world of things we can do in new products we can bring to the market.”

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September 2016