Earnings reports by aluminum giant Alcoa
Since fuel efficiency has risen to the fore, the stakes regarding whether steel or aluminum will more rapidly command market share in automobile manufacturing generally boils down to the metals' relative weight, along with cost, malleability, and strength. In an effort to win the battle, both companies have effectively hung out "help wanted" signs to lure the scads of engineers -- 1,300 at Alcoa in just the past year – who will provide a figurative leg up in the metal-on-metal competition.
With federally dictated Corporate Average Fuel Economy (CAFE) standards dictating that vehicle fleets must achieve 35.5 mpg in average fuel efficiency by fast-approaching 2016, the need to strip hundreds of pounds of bodyweight from today's vehicles becomes steadily more crucial. As you might suspect, aluminum, at 10% to 40% lighter than steel, wins the weight tussle, hands down. As to cost, aluminum once bore twice the price tag of steel, but that difference has been trimmed to between 35% and 85%.
From a strength standpoint, the nod obviously goes to steel, as does the market share breakdown: Out of a given amount of metal consumed by the automobile industry, about 87% goes to steel, with aluminum accounting for the rest. But with lighter cars becoming a necessity, that lopsided balance is likely to move in aluminum's direction. Indeed, a Ford Motor
The target for the makers of both types of metals generally starts with the car's body skeleton, which typically represents a quarter of the vehicle's weight. But in their research, the companies don't go it alone. On the steel side, U.S. Steel is involved in a major joint venture with Japan's Kobe Steel, while Luxembourg-based ArcelorMittal
The contest is important to all the companies involved. U.S. Steel CEO John Smurna strongly emphasizes the important battle that his group and the aluminum makers are engaged in, while his Alcoa counterpart wants to double the amount of aluminum that the carmakers buy in just the next two years.
While the contest is likely to become more like weekend football -- hopefully, sans the concussions -- with aluminum's solid prospects of continuing to gain on both steel and copper, I, for one, will keep my eyes peeled on Alcoa and its smaller brethren, a la Century Aluminum
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Fool contributor David Lee Smith doesn't own shares in any of the above-named companies. The Motley Fool has a disclosure policy.