“Wall Street Banks Get Rid of Aluminum Price Fixing Suits” – Nasdaq, 2 September 2014

In 2013, a case was brought against Goldman Sachs, JPMorgan, Glencore PLC, the London Metal Exchange (LME), et al, accusing the banks and LME of creating bottlenecks in their aluminum warehouses in May 2009, causing metal prices to skyrocket for the accused’s gain.

More waiting time in the warehouses meant that the banks could raise the cost of the lease payments, which established a dearth in aluminum availability and forcing aluminum prices to inflate. Major industries, like the beverage can industry and the automobile industry, were impacted.

However, the presiding judge dismissed the antitrust lawsuit. The judge cited that the complaints didn’t show that the defendants were working together to increase prices. The judge’s verdict disallows the plaintiffs who are commercial end-users and consumer end-users to re-appeal their cases; ‘first-level’ aluminum purchasers, on the other hand, are permitted to re-appeal. Since LME is viewed as part of the UK government, it was exempt from the suit due to the Foreign Sovereign Immunities Act.

The Wall Street banks’ metal businesses will continue to be surveilled by regulatory commissions such as the US Department of Justice and Commodity Futures Trading Commission.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

September 5, 2014

Phinix LLC

Copyright 2014. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

Social Share Toolbar

“Aluminum Cars Take Heat from ArcelorMittal’s CEO” – Wall Street Journal, 17 June 2014

Europe, China, and the US have all cracked down on fuel economy standards; President Obama has introduced new regulations to improve the average fuel economy by 54.5 miles per gallon by 2025. Automobile companies, like Ford, are responding to the new regulations by creating a new line of F-150 pickups made out of all-aluminum bodies, and many other US car manufacturers are following suit. However, Luxembourg-based ArcelorMittal, the world’s largest steel company, is an aluminum naysayer, contending that aluminum isn’t actually lighter than new designs of steel.

Due to US and European automotive companies’ move to aluminum, ArcelorMittal is now looking to expand and invest in developing economies, like China, Brazil, Mexico, India, and the Middle East, where steel is still heavily used.

According to Ducker Worldwide, 18% of vehicles will be produced entirely from aluminum by 2025, which will surely help the automotive industry to meet Obama’s proposed fuel economy standards. Though more expensive, aluminum is argued to be a lighter metal, which will thusly help to improve fuel efficiency; in the US, manufacturers’ fuel economies must increase by five percent each year until the 2025 mark. However, as ArcelorMittal presents, the flip side to manufacturing the same cars with all-aluminum bodies is to manufacture smaller cars out of steel, which was save the car industry the added expense of aluminum.

ArcelorMittal’s focus right now is on China, where it just opened VAMA, its first steel-manufacturing plant and a multi-million dollar undertaking with Hunan Iron & Steel Co. Through VAMA, the Chinese automotive industry will have access to 1.5 million tons of steel per year, an industry that has grown by 16% since 2013.

According to ArcelorMittal, the statistic that aluminum is 30% to 40% lighter than steel is only accurate if you’re equating aluminum to steel made in 2005. Steel produced in 2014 is harder and lighter than previous versions; current forms of steel have been refined using a distinctive heating and cool process. However, the Ducker Worldwide study still projects that a majority of automobiles will be manufactured out of aluminum parts by 2025.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

June 17, 2014

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

Social Share Toolbar

“Climate change is here, action needed now, says new White House report” – CNN, 6 May 2014

The White House released a new climate change report in early May, as part of President Obama’s attempt to ready the US for the effects of climate change. Obama has made climate change awareness a cornerstone of his second-term, primarily by taking it upon himself by using executive action to implement his Climate Action Plan. The White House report details reasons why Obama wants the US to take precautionary measures against our growing sea levels and progressively unpredictable weather.

However, Obama has been butting heads with conservatives, the fossil fuel industry, and their allies over the debate of whether or not climate change is indeed real, and if carbon emissions from power plants, factories, and cars—or human activity—are the biggest culprits. Conservatives view the report as a means for Obama to push his own agenda, which they believe would damage the economy, and place the burden on middle-income families.

While polling shows that Americans believe that climate change is a result of human activities, they are less concerned about environmental issues than they are about the economy, for instance.

A Gallup poll from March produced interesting results: 34% of those surveyed believe climate change is a “serious threat” to the earth, while 64% didn’t believe that. Over 60% believed climate change is currently happening or going to happen.

The report clarifies the approach of counteracting climate change into two strategies: mitigation and adaptation. Mitigation calls for curbing the effects of climate change by reducing the cause; adaptation calls for preparing for the consequences that are currently or likely to occur. The report also analyzes the US by region, pinpointing specific impacts to each region.

The report identifies three major concerns: rising sea levels, increased droughts, and a longer fire season. The report foresees sea levels growing by one to four feet by the end of the century. Those living on tropical islands and on the coast will be the hardest hit. Miami, for example, is spending hundred of millions of dollars to prevent massive flooding. The Great Plains, too, will suffer from prolonged droughts and heat waves, which is likely to cause more wildfires and endanger agricultural and residential areas.

The report upholds regulations that limit carbon emissions, and encourages investing in programs that stop climate change in its tracks.

Developed and Written by Dr. Subodh Das and Tara Mahadevan

May 24, 2014

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

Social Share Toolbar

“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

Phinix LLC

Copyright 2013. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

Social Share Toolbar