Aluminum Usage In Cars To Grow — Davenport & Co

(Kitco News) – U.S. automobile production has rebounded from the global recession and the combination of more cars being made and tighter fuel efficiency standards will mean greater use of aluminum, said an aluminum industry analyst.

Automobile production in the U.S. rose 38% in 2010 and is up another 11% year-to-date, said Lloyd O’Carroll, senior vice president and metals equity analyst for  Davenport & Co.

The firm projects production to rebound 13% in 2011 and 10% in 2012. Along with more cars and light trucks being created, the weighted average of pounds of aluminum used per car is growing, with 332 pounds used in 2010. That figure is estimated to grow to 337 pounds in 2011 and 342 pounds in 2012, O’Carroll said. For comparison, in 2006, the aluminum weighted average was 316 pounds.

The rising use of aluminum in passenger cars and light trucks comes because of rising fuel-efficiency standards in the U.S., he said. Europe has its own regulations which will also mean a bigger push to use aluminum in vehicles to make them lighter weight.

Currently, the type of car that uses the most aluminum is the high-end and specialty car, such as the Audi A8 and some Jaguar vehicles, which have more customized parts. But that is beginning to change as a move to “mass customization” is beginning. O’Carroll said a car like the Audi A6 will have an all-aluminum body. “Aluminum is an ideal material as it has two properties going for it, high-strength and stiffness,” he said.

Aluminum is beginning to replace low-strength steel and how much more aluminum can be used in cars depends on auto engineers. Because aluminum and steel have different properties, engineers have to look at different ways to use the metals to get desired results. Aluminum can be more flexible than steel which can cause some issues when stamping the metal into shape, but those details are being worked out.

In addition to the growth in light trucks and cars, sales for heavy trucks and truck trailers have risen, and there, too, fuel standards will mean more aluminum will be used to lessen the weight of the vehicles. O’Carroll said there are two benefits here. An overall lighter weight vehicle allows a shipper to pack more goods in a truck and still stay within fuel standards, which will increase freight movement.

In the heavy truck market, the poundage of aluminum per unit has risen to 2,150 pounds from 1,709 pounds in 2006, he said. In the truck trailer market, the weight is now 3,500 pounds, up from 2,916 pounds in 2006.

A big ramp up in output is expected in the aircraft sector, he said. “Boeing has a six year order backlog that they want to cut by 50% to make it only a three year backlog,” O’Carroll said.

Also, he said, American Airlines has not ordered any new planes and they will need to do so as other airlines are putting in orders.

Of all the sectors for aluminum use, the aircraft sector has the best fundamentals. “I’m very bullish on aircraft parts. It’s what I’m most bullish about. I strongly recommend any stock that just touches supplies to the aircraft industry,” he said.