Low oil prices are igniting vehicle sales. And those old, American favorites – sport utility vehicles and pickup trucks – are becoming popular again.
Increased sale have, in turn, spurred greater demand of certain metals. I already covered the movement of palladium and platinum in catalytic converters.
Now it looks like another metal is going to benefit from increased purchases of pickups and other vehicles – aluminum.
A Truck-Load of Aluminum
Ford Motor (F) is leading a revolution in vehicle manufacturing. The company is changing from constructing vehicle bodies out of steel to making them out of aluminum, as a way to improve fuel efficiency.
Ford is betting a lot on this new tactic. In fact, it's overhauling the construction the F-150 pickup – the top-selling vehicles in North America for 32 consecutive years – by using new techniques involving aluminum. The F-150 is also estimated to account for about 90% of the company's global profits.
Using aluminum instead of steel will reduce the F-150's weight by about 700 pounds, resulting in fuel savings of somewhere between 5% and 20%.
The Financial Times described the new process, saying, “Most of the aluminum pieces are screwed, riveted, or glued together, while a few critical components are welded with highly concentrated – non-spark-producing – lasers.”
The key takeaway for investors here is that the auto industry will use the metal in volumes never seen before.
Obviously, the aluminum industry is all for this change, and is eager to provide Ford with all the aluminum it wants.
New Tech Boosts Demand
Foremost among these companies is the industry leader, Alcoa (AA), which has the F-150 contract.
Serendipitously, the company also recently announced a breakthrough technological process it developed called Micromill.
Essentially, raw aluminum is put into a furnace where it's mixed with other metals and turned into an alloy. This molten alloy metal is then cast directly onto a conveyor belt, where it's flattened into coils and sold to automobile companies.
