“Fuel-Efficiency Rules Are Already Raising Costs in Detroit” – Wall Street Journal, 22 January 2014

Even though GM and Chrysler have paid off their auto-bailout loans, they are still under the thumb of Uncle Sam; elements of Obama’s Climate Action Plan do not only extend towards power plants, but automakers as well. According to the Climate Action Plan, car companies’ products have to average 54.5 miles per gallon by 2025. This, however, requires huge design changes that are going to be a big blow to profit margins.

America’s best-selling vehicle, the Ford F150, is getting a complete redesign. from the inside out. It will be the first truck and large-volume vehicle to have an all-aluminum body, which will lower its weight and increase its fuel efficiency. Obama’s Climate Action Plan requires full-size trucks to have a better fuel efficiency, up to 30 mpg from the current 20 mpg.

Switching to aluminum, though better for the environment, is an expensive move. As we reported last month, converting to aluminum means higher material costs and new manufacturing machinery. While the price tag is high, Ford can’t fight the new regulations, and is instead doing all it can to effectively market the innovation behind its newly redesigned products, the F150 and Mustang—the latter redesign offers a never-before-seen turbocharged four-cylinder engine. Each sale of the redesigned F150 contributes an additional $10,000 to Ford’s bottom line.

GM, on the other hand, is creating a whole new midsize truck to meet Obama’s requirements, which they believe will be less costly. Chrysler, instead, is spending more on nine-speed transmissions and diesel engines.

Obama had hoped that the market for electric cars would increase; as a bid in that direction, an element of the Climate Action Plan allows automakers to acquire mpg credits for manufacturing zero-emission vehicles. However, the demand for electric vehicles is still low, proving that that kind of car is still a niche product. Pricing for electric cars start at $40,000 and only increase from there.

While it is always painful to have a winner and loser, the “materials selection war” (steel vs. aluminum) is a long-term societal consideration and climate change mitigation, where aluminum is the ultimate winner. These trends will force America to increase the recycling of post-consumer aluminum products—as opposed to landfill and scrap export—and to also increase the design and manufacturing of recycle-friendly alloys.

There is simply not enough expensive and energy-intensive primary aluminum capacity available to meet higher aluminum demand of 100 million, and growing, cars per year.

See also:
Will All-Aluminum Cars Drive Metals Industry?
A Clean Car Boom
GM Planning Strict Diet for New Pickup Trucks

Developed and Written by Dr. Subodh Das and Tara Mahadevan

February 12, 2014

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Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

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Celebrating Phinix’s 100th Blog Post

Read the Original NewsletterScreen shot 2013-07-18 at 11.15.07 AM

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Alcoa & Boeing Form Aluminum Recycling Program

Last week, Alcoa and Boeing announced the formation of a joint program to increase the use of recycled aluminum in the construction of Boeing airplanes. The program will send aluminum alloy scrap material, as well as advanced alloys, from Boeing facilities and third-party generators to Alcoa’s Lafayette, Indian facility, where the materials will be melted and recycled into restored aerospace parts.

In the beginning, both companies anticipate the program will be able to recycle almost 8 million pounds of aluminum. It is also possible for the program to include transport of scrap metals from Boeing sub-contractors, and other types of aluminum scraps.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

June 28, 2013

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“Health-Conscious Americans Hurt Aluminum Can Market” – Reuters, 20 February 2013

America has been worried about its weight problem for years, and one of the broader solutions for the US’s growing obesity will affect the aluminum industry. Aluminum can sales in the US are slated to decrease in 2013 as people are opting for water, iced teas and other healthy alternatives to soda. Many anti-soda initiatives have also emerged across the US, including Mayor Michael Bloomberg’s ban on sodas over 16 ounces in New York City and Disney’s pledge to limit junk food ads on its TV shows, and are hurting aluminum and soda industries. This will be the third consecutive year that the US aluminum can industry will feel a blow, since water and iced tea are usually found in plastic or glass bottles rather than aluminum.

Yet, the US still has the rest of the world beat when it comes to can consumption. Around 1.7 million metric tons, or 5% of global annual aluminum consumption, is used to make cans for the US and Canada per year. The typical American consumes 160 liters of soda every year — two-thirds more than the UK drinks annually, and far more than developing countries like China and India consume, which is less than 5 liters a year.

Large US aluminum companies – NovelisAlcoa and Ball Corp — are taking investments elsewhere, to other big soda-consuming areas of the world like Asia and Brazil. Sporting events, such as the 2014 World Cup and 2016 Olympics, will greatly boost sales for these companies. Alcoa anticipates that can consumption will increase in Europe by 2-3% in 2013, and in China by 8-12%. Ball Corp shut down two of its US beverage packaging plants in 2012 in order to open new plants in Vietnam, China, Brazil and Italy; Novelis is also opening new plants in South Korea and Brazil. All three companies expect can consumption in those regions to steadily grow.

Another method that aluminum can companies have adopted is repackaging. While juices, teas and beers are not ordinarily found in cans, many of these items are re-emerging on the market in canned forms. Aluminum producers are also looking into recreating the standard can by altering the size, shape and labeling of cans. Taking it a step further, aluminum producers are marketing cans as more recyclable in comparison to glass and plastic bottles, which has convinced some craft breweries to shift to aluminum.

The key actionable and sustainable strategies for aluminum can sheet and can producers are:

1. Keep increasing aluminum can recycling rate to match world champion Brazil at 98.3%, thus avoiding frequent trips to landfills.

2. Promote, market and actively support ongoing public campaigns to lower obesity rates, especially among children.

3. Collaborate with non-profit interest groups to convey the message that the aluminum industry is a part the health-conscious solution.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

February 25, 2013

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

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