Automobile Body Sheet /Casting Growth Impact On Scrap All Raw Materials Consulting 1
Automotive Potential 2013 2015 2025 Global Auto Build 81.2 M 85.0 M 100 125M NA Auto Build 15.4 M 17.0 M 20 22 M Average AL use in NA vehicle: 364 lbs. 390 lbs. 550 650 lbs. Total Auto AL NA Consumption 5.1 B lbs. 6.6 B lbs. 8 10 B lbs. Total NA Total AL Sheet.7 B lbs. 2.0 B lbs. 3 5 B lbs. Total NA Extrusion auto 27 lbs 28 lbs. 49 lbs/auto Notes: Some forecast 100 Global Build By 2020 85%+ of new application aluminum growth will be wrought alloy Of the wrought alloy growth 85% is sheet, 15% is extrusion 2013 NA auto sheet was around.3 billion pounds with F150 auto sheet may grow to.8 billion in 2014 and 1.3 billion in 2015 All Raw Materials Consulting 2
Aluminium FRP usage in automobiles, 2012 (000 tonnes) 2012 (000 tonnes) North America 230 EU 27 330 China 260 Japan 140 South Korea 130 Rest of the world 160 World 1,250 Source : Madras Consultancy Group All Raw Materials Consulting 3
NA Automotive Challenge Average Fleet 34.1 MPG By 2016 Achievable Average Fleet 54.5 MGP By 2025 Barriers The Challenge: Double MPG and cut CO2 emission by 50% by 2025 while maintaining safety, comfort, product size mix, customer features, functionality, and HP to weight ratio to maintain performance. All Raw Materials Consulting 4
Global Reduction of CO2 Key Region/Country Absolute and Annual CO2 Rate Comparison 270 EU US-LDV Japan China Grams CO 2 per kilometer, normalized to NEDC 250 230 210 190 170 150 China baseline: 185 US baseline: 219 1.5% annually EU baseline: 142 China 2015: 167 U.S. has the furthest to go! 4.7% annually Japan baseline:131 7% 130 annually 2% annually 110 3.9% annually Japan 2020: 105 US 2025:107 90 EU 2020: 95 2000 2005 2010 2015 2020 2025 [1] China's target reflects gasoline fleet scenario. If including other fuel types, the target will be lower. [2] US and Canada light-duty vehicles include light-commercial vehicles. [3] Annual rate is calculated using baseline actual performance and target values. Source: Patrik Ragnarsson Automotive & Transport Technical Manager Europe Aluminium Association All Raw Materials Consulting 5
North American Perspective The expected growth spurt for aluminum sheet penetration for light vehicles is not unprecedented in the aluminum history in North America Source Ducker Intelligence Thousands of Metric Tons 9000 8000 7000 6000 5000 4000 3000 Can Sheet North American Total Flat Rolled Aluminum Consumption History and Forecast Auto Sheet 3000 4000 5500 12 Years of no growth 6100 4500 5100 5550 6300 7400 8250 2000 1000 800 0 1960 1972 1986 2000 2005 2009 2010 2012 2015 2020 2025 12 Years 2.2 million tons 13 Years 2.8 million tons All Raw Materials Consulting 6
Weight savings is expected to provide 3 to 6 miles per gallon of fuel economy improvement by 2025. Aluminum directly or indirectly will provide much of this savings Ducker Worldwide (adjusted) 2025 Sources of Improvement in CO2 Reduction and Real Fuel Economy 15% 20% 30% 35% 50% Internal Combustion, Transmission and other Improvements HEV, PHEV and EV Weight Reduction 20 more MPG *Other improvements include drag & friction reduction, Aerodynamics, HVAC optimization All Raw Materials Consulting 7
North American Perspective Body and Closure Weight Savings Cost Curve Excludes Cost Savings from Engine Resize and other Weight Reduction Compounding Cumulative Cost The new steels are very cost effective, but do not save enough weight Hood Bumpers Doors Instrument Panel Body Structure HLSA AHSS UHSS Cumulative Kilograms Saved per Vehicle All Raw Materials Consulting 8
Critical New Programs 2013 Range Rover Aluminum Body 31.4 MPG Fuel Economy Over 900 lbs. weight savings 2015 Model Ford F150 Aluminum Body 570 pounds of finished sheet 1000 lbs total aluminum?? MPG/20 % 700 lbs. weight savings Ford: 2015 F 150 most patented truck in company history (May MICHIGAN LIVE) Huge Risk Big Reward All Raw Materials Consulting 9
NA Estimated Weight Reduction by Segment - (100) A-Segment B-Segment C-Segment D-Segment E-Segment Full-Size Full- Frame (130) (150) Other Full- Frame Net Pounds per Vehicle (200) (300) (400) (500) (600) (95) (125) Can be accomplished with AHSS and some aluminum hoods (240) (182) (300) (250) (500) (400) (200) (700) (800) Will require a significant amount of aluminum and AHSS (200) (800) Pickup trucks and large SUVs (900) Second Cut First Cut (100) (1,000) Will require even more aluminum and AHSS and even some Mg & CFRP All Raw Materials Consulting 10
Globally 11-12 Billion Pounds of Auto Sheet By 2025 Total Aluminum content for light vehicles will more than double in most regions by 2025. North America and China will use over 50% of the aluminum required for light vehicles in 2025. China is a wild card and could be plus or minus one million tons from the number shown Ducker intelligence Millions of Tons 6.0 5.0 4.0 3.0 2.0 4.9 Growth in Aluminum Content by Country or Region 3.5 4.8 5.8 China Upside 110 gco2/km 3.8 China Downside 20% fewer vehicles 2012 2025 1.0 1.1 0.7 0.5 0.7 0.9 0.6 0.0 North America EU 27 Japan South Korea China Other Europe South America India All other All Raw Materials Consulting 11
Last 30 Years Aluminium Auto Parts All Raw Materials Consulting 12
Primary Aluminum parts will be 85% of all automotive growth in next decade 4 Billion Pounds by 2025 All Raw Materials Consulting 13
Automotive Aluminum Growth Grades of alloys gaining in popularity : 319, A 356, and A 390 Major focus is on 319 with restriction in Iron content 0.4%, Zinc 0.4% A356/B356 alloy with Iron being tightened to 0.2%! Major growth of foundries in the High Integrity Die casting business. Many European auto suppliers are building new foundries in NA Structural castings facilitating the use of aluminum panels Typical examples are: Inner door structures, Suspension components Subframe assemblies Compartment side inner rails Shock mounting housing, casting towers, front suspension housing Body pillars etc. All Raw Materials Consulting 14
Automotive Aluminum Growth Ford has reduced the weight of a concept fusion by 23.8 % majority of it coming from the use of aluminum Popular new cast alloys are primary based and are driven by proprietary compositions. Aural 2,3,5 alloys (A 365 )( Rio Tinto Alu Suisse ) Silafont 36,AA 365 (Rheinfelden) Calypso 61D Castasil 37 Trimal 05 Mercalloy A367, ADC 3SF All these alloys have low iron less than 0.12 and very low copper (.03.05) Copper is controlled to lower levels as this affects weldability These alloys are currently in the primary manufacturers domain and command a higher premium over 20 c/lb than the normal foundry alloys. There will be a growing trend to reduce cost and will tend to move to high recyclers having access to prime scrap. All Raw Materials Consulting 15
OEM Supply Chain Global or Regional Sourcing? Depends on region: NA more transplants and auto component business moving back to the continent especially given energy and improving labor cost advantages Japan continues to source more parts globally (tsunami impact) China will source all components possible locally Europe sources high tech locally, commodities globally All Raw Materials Consulting 16
Infamous Scrap Gap There will be a significantly more serious Scrap Gap effecting aluminum market fundaments: 1960 s 1970 s Late 1980 s (Major UBC recycling) Late 1990 s/early 2000 s 2015 Aluminum Sheet Closed Loop Recycling Is there a difference this time? Fundamentals suggest Probably Primary producers using enough scrap closing gap between primary and secondary alloys Price spread between P1020 and Secondary past 2 years is unprecedented Unless significant additional scrap becomes available (unlikely), new fundamental price spread between primary and scrap will continue Drivers of sustainability: Significant global recycling of beverage cans Auto Sheet Producers committed to significant use of scrap All Raw Materials Consulting 17
As NA approaches a steady state on aluminum sheet shipments for light vehicles, end of life aluminum sources and the closed loop recycling of engineered scrap will decrease the need for primary aluminum to 45% in 2035 from 80% in 2015 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Body and Closure Metal Sources Old Scrap Prompt Scrap Primary Input End of Life Scrap Prompt Scrap Input Primary Input 0% 2015 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2035 All Raw Materials Consulting 18
Impact On Aluminum Scrap Industry There will be an Evolution NOT a Revolution Near Term Impact: Engineered Scrap: Closed loop recycling directly between OEM/Tier 1 stampers and rolling mill Post Consumer Scrap: Minimum current generation with limited segregation by alloy All Raw Materials Consulting 19
Impact On Aluminum Scrap Industry Long Term Impact: Engineered Scrap: Closed loop recycling directly between OEM/Tier 1 stampers and rolling mill Scrap management and alloy converter Direct Sale Post Consumer Scrap: Traditional manual segregation Advanced segregation by alloy if economically viable If aluminum scrap can not be used in primary applications secondary alloy $ likely to disconnect from primary alloy $ All Raw Materials Consulting 20
Questions Will political environment change taking pressure off CAFÉ and light weight solution? Will aluminum price increase be cconsumers pay for the higher cost of light weight vehicles? Will primary alloy and sheet production satisfy aluminum growth? Will Primary sheet producers and OEMs manage closed loop scrap effectively? Will primary aluminum sheet producers develop process able to recycle post consumer scrap efficiently? Will scrap industry develop efficient post aluminum intensive alloy separation? All Raw Materials Consulting 21
Kevin s Forecast Over Next 10 Years Significant penetration for Al and AHSS in large, premium and many mid priced vehicles Mild steel use will retain much of the high value small vehicle market especially Europe and Asia Consumers will accept higher limited cost aluminum vehicles due to improved MPG, performance and comfort. Primary aluminum production will increase Battle for rolling mill capacity between consumers, producers will aggressively expand. Battle for scrap will intensify, supply is finite Steel/Aluminum producers partner for total solution Scrap industry will develop efficient post consumer scrap recovery by disassembly and scrap processors Closed loop recycling will require significant participation from scrap management companies and aluminum scrap converters All Raw Materials Consulting 22
Thank You Kevin Moore All Raw Materials Consulting kevin.moore74@aol.com 248 534 7217 All Raw Materials Consulting 23