Aluminium: How Can This ‘Weak Metal’ be Stronger Than Steel?

All last year I told you to acknowledge the presence of government and central bank meddling, but not to let this meddling consume you.

And most of all, I’ve told you not to let it get in your way of investing to grow your wealth for now and for the future.

The fact is, whatever the anti-stocks crowd says, the stock market is still the single best way to build long and lasting wealth. This year has been further proof of that…

What most folks have forgotten this year is that, while they’ve stayed fixated on money printing or the end of money printing, entrepreneurs and capitalists have just gotten on with the job of creating new ideas.

That has included innovations in 3D printing, biotechnology, and computing. But my favourite innovation this year has come from an unlikely source.

It has come from a sector few people consider innovative. I’m talking about the car industry…

Cutting Pollution Through Mining

The car industry gets a bad rap, especially in Australia where companies like Holden and Ford have decided to close manufacturing plants due to high costs and inefficiency.

When most people think of a carmaking plant their only image is of late-aged men with beards wearing overalls.

Yet the car industry is among the most innovative industries around. You only need to look at the German carmakers – BMW, Mercedes-Benz, Audi and Porsche – for proof.

The German carmakers have led the pack when it comes to innovations around safety, electronics and the shift towards driverless technology.

But perhaps one of the biggest innovations in the car industry has gone largely unreported in the mainstream press. I’m talking about the innovation that’s helping reduce pollution in a way that no government tax could ever achieve.

How are they doing that?

By using an innovative process that can help carmakers cut a car’s weight by up to 25%. Naturally, the lighter a car the less fuel it uses and the fewer pollutants it emits.

The process involves something that had previously been impossible; bonding lightweight aluminium to steel.

The result is a composite structure that’s just as strong as a 100% steel chassis.

The Key to Fuel Efficiency

Perhaps you’re thinking the same thoughts I had when I first came across this story. By the way, the innovation comes from Japanese carmaker Honda.

When I think of aluminium I think of drink cans or food cans. And when I think of drink and food cans I think about how easy it is to crush them with my bare hands.

I also think of aluminium foil, a metallic product so thin even a baby could tear it apart.

Given those properties I wouldn’t blame you for thinking there’s no way you’d get into a car that had a steel and aluminium bonded chassis. Imagine getting into a crash and the vehicle scrunching up like a drink can.

The good news is that once the aluminium and steel bond together it produces a structure that’s just as strong as a fully steel chassis and yet weighs 25% less.

That’s important for petrol-powered cars where less weight means greater fuel efficiency. It’s even more important for the electric car industry, where huge battery packs take up a significant part of the car’s weight.

That’s why electric or hybrid cars are typically small ‘micro’ cars. But with the development of steel and aluminium bonded materials and higher end composite materials (such as carbon fibre), car makers can now bring electric car technology to mid-sized family cars.

The Free Market of Ideas

The issue for Aussie investors is how to invest in this industry?

One option of course is to buy shares in Honda. Or you could buy shares in Audi, the German carmaker that’s innovating with carbon fibre – although due to the current high costs of carbon fibre, penetration into the mass market may still be a while off.

In my view, the best way to invest in this technological innovation is in the least likely place. That is, the best place to invest isn’t in some Silicon Valley high-tech start-up.

One of the best places to benefit from this trend towards is right here on the Australian market…in an Aussie resource stock.

I know, that may seem bizarre and far-fetched. I thought so too until I heard about the impact this innovation could have on the aluminium industry.

According to one of the top guys at aluminium maker Alcoa, it’s set to see the demand for aluminium from the car industry more than double over the next 10 years.

In short, Honda’s innovation means it can create components that are 25% lighter, 50% more power-efficient and 20% more rigid than steel.

That’s the kind of innovation happening right now on the Australian market. And it’s happening despite the meddling from governments and central banks.

It goes to show you that innovation doesn’t stop. The free market of ideas is a powerful thing. And thankfully so. Without this innovation by the private sector, progress would grind to a halt.

And one of the best ways to potentially profit from this latest high-tech innovation is right here in Australia by investing in the unlikeliest of places…a tiny Aussie resource stock.


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Kris Sayce, dubbed the ‘Jeremy Clarkson of Australian finance’, began as a London finance broker specialising in small-cap stock analysis on London’s Alternative Investment Market (AIM). Kris then spent several years at one of Australia's leading wealth management firms. A fully accredited advisor in shares, options, warrants and foreign-exchange investments, Kris was instrumental in helping to establish the Australian version of the Markets and Money e-newsletter in 2005. He is the Publisher, Investment Director and Editor in Chief of Australia's most outspoken financial news service, Markets & Money.

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