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Latest news on Aluminium industry, technology and market evolution

By 2030, aluminum demand from Electric Vehicles (EVs) will near 10 million tonnes, a ten-fold increase from 2017, according to analysis by mining and metals business intelligence firm. The usage of primary aluminum intensive, extrusions and rolled products will be significantly higher than seen in internal combustion engine vehicles today.

In addition, scrap-intensive secondary castings usage will fall as the shift to full battery electric vehicles occurs. In the coming years, EVs will support primary aluminum demand and impose a limit on scrap demand.

Global battery electric (BEV), plug-in hybrid electric (PHEV) and hybrid electric (HEV) sales will increase to 42 million vehicles worldwide by 2030. From a share of 4% in 2017, they expects electric vehicles to account for approximately 30% of the global vehicle fleet by 2030.

Sales of New Energy Vehicles (NEVs) grew by more than 40% year on year globally in 2016-2017. These global trends will have potentially decisive impacts on aluminum markets.

We estimated aluminum intensity of EVs through discussions with car makers, Tier 1 and Tier 2 automotive suppliers and information from automotive shows and conferences. The analysts complemented this research with desk-based research of investor material and conference presentation from key industry players.

Plug-in hybrid and full battery electric vehicles use 25-27% more aluminum than the typical internal combustion engine car today. This assumes 160 kg (353 lbs) of aluminum per vehicle as a baseline for aluminum content in internal combustion engines.

Increased aluminum usage in internal combustion engine (ICE) cars is in great part due to the light-weighting benefits of aluminum. However for EVs the increase in aluminum usage has as much to do with new applications, as increased adoption of aluminum body sheet.

EV aluminum intensity model can be broken down into four categories:

  • E-drive: encompassing housing for e-motors, DC-AC inverters, DC-DC converters, chargers, heat-pumps and reduction drives.
  • Batteries and battery housing: covering battery casing for prismatic batteries, battery foil and battery housing. Battery housing is the biggest volume element of this market. Car makers are yet to decide the standard for battery housing, and this incorporates a combination of predominantly steel housing (Mitsubishi Outlander PHEV and Nissan Leaf BEV), cast aluminum battery housing (Audi PHEVs) and a combination of extrusions and rolled products (Tesla Model S).
  • BIW and closures: We can split this category which covers aluminum automotive body sheet. Current EV models are more aluminum-intensive than current ICE. However, two developments are threatening aluminum body sheet uptake from EVs. First, improved battery technology reduces the need to lightweight. Second, carmakers are now designing EVs from scratch, rather than converting ICE models, which increases the driving range. Cars such as the Nissan Leaf and Tesla Model 3 are less aluminum-intensive than previous models. Nonetheless an undershoot in battery advances will be a boon to aluminum sheet to light weight and extend range.
  • Common with ICE: we can estimates there is just more than 60 kg (132 lbs) curb weight from ICEs which will be present in all EVs—brakes, steering, heat exchangers and wheels. In addition, plug-in and hybrid electric vehicles retain the engine supporting secondary castings demand.

EV battery housing gives the largest potential upside to aluminum extrusions usage. More modest gains for extrusions will come in existing applications, such as trim and crash management systems.

However, companies such as Magna and Nemak are hoping to dominate battery housing with cast aluminum solutions. These companies are key aluminum engine part suppliers today and need to adapt to the shifting automotive landscape.

Excluding used beverage cans, car engines are the main market for end-of-life aluminum scrap. Their forecasts that by retaining the engine, plug-in and hybrid vehicles will support secondary aluminum castings demand—postponing the onset of a “castings Armageddon” in the form of a universal shift to battery electric vehicles and the concomitant disappearance of engines.

They also suggests that aluminum rollers should be betting against great leaps in battery technology and extended driving range. For the previously mentioned castings and extrusions applications, aluminum is the most suitable material. For rolled products, it is mostly the light weight benefit.

Primary aluminum producers and indeed the LME price have great potential upside from EVs. No primary producers today are exposed to the secondary castings market. A wholesale shift to battery electric vehicles will boost primary aluminum demand at the expense of aluminum scrap.

MARCH 27, 2018 

LONDON (Reuters) - When electric carmaker Tesla Inc. launched its first mass market model last summer, it sent a shockwave through the aluminum industry by largely shifting to steel and away from the lighter weight metal it had used in its first two luxury models.

The switch by Elon Musk’s Tesla to the heavier-but-cheaper metal highlights how steel is fighting back against aluminum, which had widely been expected to be the bigger beneficiary of the electric vehicle revolution.

Aluminum had been seen as the key to offsetting the weight of batteries in order to extend the range of electric vehicles, crucial to increased consumer acceptance.

But as makers of battery-powered cars look to tap into bigger markets with cheaper vehicles - and embrace technological developments in batteries and components - many are increasingly looking to steel to cut costs. The price of Tesla’s mass-market orientated Model 3 is around half of the luxury Model S.

Before the aim was: ‘Let’s get the electric vehicles developed’.  Now it’s: ‘Let’s get them developed at the right price'.

It is the latest tussle in a decades-long battle between steel and aluminum for market share among automakers, seeking to cut the weight of vehicles to help slash emissions and meet tough government pollution standards.

Steel is also winning back some market share among gasoline vehicles, such as the Audi A8. The latest model abandoned its heavy use of aluminum and shifted to a mix of steel, aluminum, magnesium and carbon fiber.

The competition between the metals has intensified amid rapidly growing demand for battery-powered cars.

Sales of electric and hybrid vehicles are due to surge to 30 percent of the global auto market by 2030, according to metal consultants CRU, up from 4 percent of the 86 million vehicles sold last year.

In China, the world’s largest auto market, sales of new energy vehicles are due to grow by 40 percent this year to top 1 million vehicles, according to the China Association of Automobile Manufacturers.

Tesla declined to comment, but in a filing with the U.S. Securities and Exchange Commission last month it said it designed the Model 3 “with a mix of materials to be lightweight and safe while also increasing cost-effectiveness for this mass-market vehicle”.

Other makers of mass market electric vehicles that have also chosen steel over aluminum include Nissan Motor Co Ltd’s Leaf, the world’s best-selling all-electric vehicle, and Volkswagen’s e-Golf.

The e-Golf has 129 kg of aluminum and the Leaf uses 171 kg while Tesla’s luxury Model S contains 661 kg of the metal, according to A2mac1 Automotive Benchmarking. A detailed breakdown was not available for the Tesla 3.

STEP CHANGE

Aluminum is still expected to benefit greatly from the electric vehicle revolution, however, especially from hybrids because they have two engines.

Both the combustion engine block and transmission are typically made of aluminum while the metal is also often used for housing the battery and motor in electric vehicles.

The European light-metal foundry industry has been in a difficult economic situation for many years. 

Compared to other production processes of metalworking, the average Ebitda achieved in aluminium die casting is lower. This is due to various different reasons, which are — just like the process itself — very complex. The low Ebitda leads for instance to a lack of investments in human resources and machines, and eventually to predictable consequences. European foundries are in danger of losing their leading global position in know-how and innovation in the medium term. The business location West-Europe, with its high wages and energy costs, has its particular burdens for foundries. The recently negotiated wage settlement in the metal industry will further aggravate the already tense situation in the foundry industry. This exerts an enormous additional burden on the industry.

Analyzing the Conditions

To assess the impact of the very complex framework conditions and changes, detailed analyses have been conducted and evaluated. Over the next few years (forecast period until 2025), aluminium castings will continue its strong growth. However, the focus of the industry’s growth will not be in Germany or Europe, it will rather be in China (8,3 %) and India (7,9 %). Future growth will rely on novel products offering a high degree of clamping force. This will require extensive investments. Previous "bread and butter parts" of the powertrain (engine, transmission) will disappear with the rising importance of e-mobility. The current Ø-Ebitda margins of German foundries reflect obvious competitive disadvantages compared with the international market, leading to disadvantages with regard to investments. Wage rises of currently 4.3 % have grave consequences, especially in the foundry industry where they aggravate an already critical overall situation. (Example: Ø sector Ebitda 8.1 % (Germany); after salary increase Ø Ebitda 6.6 %)

Results and Conclusion

The assessment of the overall situation by European die-casting foundries shows opportunities and risks. When assessing the risks, it becomes clear that quick and sustainable action is urgently required. First of all, the profitability should be dealt with. On an operational level, productivity must be increased in the short term. The only realistic and swift lever is the continuous improvement process. The European aluminium die casting industry is currently at a turning point.

The market currently offers a broad scope of both opportunities and risks. In order to exploit the opportunities, but also to minimize existing risks, the short-term increase of profitability of European foundries is a top priority. The momentum of current changes requires additional fast responses and sustainable action. Relocation and production to locations with more favourable competitive conditions cannot be the only answer. On the operational level, the continuous improvement process (CIP) is the only realistic lever to ensure success in the short-term. Only foundries with sufficient profitability will be able to benefit from the current opportunities in the long-term.

Global primary aluminium production increased by 5.8 percent in 2017. Continuing strong demand is also being reflected in price trends and has had an enormous impact on the level of international aluminium stocks. Aluminium will continue to benefit from the trend towards lightweight construction in coming years.

Global primary aluminium production increased by 5.8 percent in 2017, with a 10 percent increase in China and stable production in North America and Europe. In total, approx. 63.2 million tonnes of aluminium were produced worldwide in 2017. Market observers are expecting continued solid growth in the current year, with Düsseldorf-based IKB Bank forecasting global primary aluminium production of 64 million tonnes and recycled aluminium production of approx. 12 million tonnes in 2018. Strong demand is also reflected in pricing trends. Whereas the price was approx. 1,700 US dollars per tonne at the start of 2017, it had risen to between 2,100 and 2,200 US dollars one year later.

The outlook for the aluminium industry in the current year continues to be good overall, in spite of continued political uncertainty, such as the planned US tariffs on aluminium imports, Brexit and the concern that China, as the world’s largest producer of aluminium and semi-finished aluminium products, might expand its exports into European markets.

China continues to be the primary driver of growth

The People’s Republic of China has long since become the world’s largest producer of aluminium, but even demand is growing there faster than anywhere else. China continues to be the primary driver of growth in the aluminium industry, and e-mobility is a major factor.

Global demand for primary and recycled aluminium is being fuelled by the trend towards lightweight construction in the automotive industry. The consumption of aluminium is growing in the booming aerospace industry, while the upturn in the construction industry in continental Europe is also stimulating demand. In addition, demand in the mechanical engineering and packaging markets continues to increase.

Lightweight automotive construction still has a great deal more to offer

The automotive industry is a key growth driver for the industry, not only due to the continued strong growth in private transportation worldwide, but also to the increasing pressure to utilise lightweight materials to protect the environment and the climate. The field of lightweight automotive construction continues to develop, and its possibilities are far from being exhausted. And: In light of megatrends such as future mobility, electromobility and additive manufacturing, new solutions and applications employing aluminium materials are increasingly sought-after.

In the lightweight construction sector, aluminium is in competition with other materials, yet even if it should lose market share in individual areas of application, it will find increasing employment in others, and its growth areas will remain larger than the areas in which substitutes are found. The trend towards energy-saving cars and the material's excellent reusability, which allows the energy invested in its production to be entirely reclaimed, are certain to increase aluminium consumption.

Aluminium stocks in warehouses have declined sharply

The high demand has a huge impact on stocks – regardless of whether it be the officially registered volumes found in certified warehouses and listed on metal exchanges such as the London Metal Exchange (LME), stocks held by producers or “secret reserves” of aluminium found elsewhere. Aluminium stocks in LME warehouses have fallen sharply – the volumes currently held are but one quarter of their level in 2014 globally. These figures reflect the fact that demand for this lightweight metal has increased markedly compared to the previous century, not only in China but worldwide. CRU, a metals consultancy, does not expect demand for aluminium to weaken before 2025 at the earliest, and forecasts demand to remain strong – and most likely continue increasing – until then.

Sales of New Energy Vehicles (NEVs) grew by more than 40% year on year globally in 2017. These global trends will have potentially decisive impacts on aluminum markets.

they estimated aluminum intensity of EVs through discussions with car makers, Tier 1 and Tier 2 automotive suppliers and information from automotive shows and conferences. The analysts complemented this research with desk-based research of investor material and conference presentation from key industry players.

Plug-in hybrid and full battery electric vehicles use 25-27% more aluminum than the typical internal combustion engine car today. This assumes 160 kg (353 lbs) of aluminum per vehicle as a baseline for aluminum content in internal combustion engines.

Increased aluminum usage in internal combustion engine (ICE) cars is in great part due to the light-weighting benefits of aluminum. However, for EVs the increase in aluminum usage has as much to do with new applications, as increased adoption of aluminum body sheet.

EV aluminum intensity model broken down into four categories:

  • E-drive: encompassing housing for e-motors, DC-AC inverters, DC-DC converters, chargers, heat-pumps and reduction drives.

  • Batteries and battery housing: covering battery casing for prismatic batteries, battery foil and battery housing. Battery housing is the biggest volume element of this market. Car makers are yet to decide the standard for battery housing, and incorporates a combination of predominantly steel housing (Mitsubishi Outlander PHEV and Nissan Leaf BEV), cast aluminum battery housing (Audi PHEVs) and a combination of extrusions and rolled products (Tesla Model S).

  • BIW and closures:  this category which covers aluminum automotive body sheet. Current EV models are more aluminum-intensive than current ICE. However, two developments are threatening aluminum body sheet uptake from EVs. First, improved battery technology reduces the need to lightweight. Second, carmakers are now designing EVs from scratch, rather than converting ICE models, which increases the driving range. Cars such as the Nissan Leaf and Tesla Model 3 are less aluminum-intensive than previous models. Nonetheless an undershoot in battery advances will be a boon to aluminum sheet to light weight and extend range.

  • Common with ICE: there is just more than 60 kg (132 lbs) curb weight from ICEs which will be present in all EVs—brakes, steering, heat exchangers and wheels. In addition, plug-in and hybrid electric vehicles retain the engine supporting secondary castings demand.

EV battery housing gives the largest potential upside to aluminum extrusions usage. More modest gains for extrusions will come in existing applications, such as trim and crash management systems.

However, companies such as Magna and Nemak are hoping to dominate battery housing with cast aluminum solutions. These companies are key aluminum engine part suppliers today and need to adapt to the shifting automotive landscape.

Excluding used beverage cans, car engines are the main market for end-of-life aluminum scrap. By retaining the engine, plug-in and hybrid vehicles will support secondary aluminum castings demand—postponing the onset of a “castings Armageddon” in the form of a universal shift to battery electric vehicles and the concomitant disappearance of engines.

Primary aluminum producers and indeed the LME price have great potential upside from EVs, . No primary producers today are exposed to the secondary castings market. A wholesale shift to battery electric vehicles will boost primary aluminum demand at the expense of aluminum scrap.