Appliance innovations drive demand for metal products

September 2011 - As the summer months wind down, positive economic news is in short supply. On Aug. 15, USA Today released the results of its quarterly survey of top economists, and the 39 economists polled from Aug. 3 to Aug. 11 put the chance of another downturn at 30 percent—twice as high as three months ago.

Ongoing market turbulence has taken an immediate toll on consumer confidence. Bloomberg reported on Aug. 18 that “consumer confidence in the U.S. economic outlook slumped in August to the lowest level since the recession, raising the risk that spending will dry up.”

Weaker consumer spending translates into fewer dollars spent on durable goods, numbers that continued to decrease in June, according to the U.S. Census Bureau. Couple that with high material prices and appliance manufacturers are stuck between a rock and a hard place. Both Whirlpool Corp., Benton Harbor, Mich., and Electrolux AB, Stockholm, recently announced plans to raise major appliance prices to offset rising costs for materials such as stainless and copper and weaker-than-expected demand.

“We expect global economic volatility to continue in the near term,” commented Jeff M. Fettig, Whirlpool chairman and CEO, in the company’s second quarter 2011 results, reported July 21. “We are rapidly adjusting to a much more challenging global economic environment. Our primary focus is to expand operating margins, which we expect to do throughout the second half of the year. While demand remains positive globally, we expect to continue to see demand volatility as consumers around the world remain impacted by economic uncertainties and high inflation. We believe the announced and implemented price increases, innovation launches, cost reductions and productivity improvements will drive positive margin improvement throughout the second half.”

Demand drivers
A stagnant housing market continues to contribute to appliance buyers’ uncertainty. According to the U.S. Census Bureau, June sales of new single-family homes were just 1.6 percent above June 2010 numbers, and the National Association of Realtors reported July existing-home sales declined from an “upwardly revised June pace but are notably higher than a year ago.”

“Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified buyers, ignoring a large share of otherwise creditworthy buyers,” said Lawrence Yun, NAR chief economist, in a press release. “Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate economic activity and create jobs.”

Shelby Pixley, director of end user sales at ArcelorMittal USA, Chicago, says, “Appliance manufacturers are increasing investments in North American production as a result of government incentives and other factors, such as geo-political stability when compared to Mexico. As a result, an increase in demand for steel by these new or reconditioned factories may be seen as they come online. The appliance market also relies on a stronger housing market, although there is a steady replacement volume that has kept U.S. demand stable.”

Brenda Reagan, appliance and Mexico territory sales manager for American Nickeloid Co., Peru, Ill., a supplier of continuous coil products including prepainted metals, preplated metals, prepolished metals, vinyl-metal laminates and specialty coated metals, points out the appliance market often shows strength during cooking and refrigeration season, “but all other months seem to have declined in the past few years.”

However, rental properties are picking up some of the slack. The National Multi Housing Council’s Quarterly Survey of Apartment Market Conditions indicated apartment market conditions continued to improve in July, with NMHC Chief Economist Mark Obrinsky pointing out in a press release, “Demand for apartment residences continues to rise, even as the overall economy remains hampered by the aftermath of the housing bubble. For the fifth time in the last six quarters, all four survey measures of market health showed improvement over the prior three months. Markets are tighter, debt and equity capital are more available and sales volume is rising.”

“Because more people are renting and moving from homes to apartments or condos, many landlords are upgrading their properties to cater to previous homeowners, which means upgraded kitchens with higher-end appliances than normal rental units,” Reagan says.

Material requirements
Innovative products will continue to drive demand for both appliances and the materials used to manufacture them. Top trends for 2011, according to the National Kitchen & Bath Association, will be French door refrigerators and induction cooktops.

“With increasing competition abroad, U.S. appliance manufacturers are focused on product innovation and differentiation by releasing new platforms more often than ever before, similar to the automotive sector,” Pixley notes. “These activities result in more interaction between appliance manufacturers and suppliers, like ArcelorMittal, to support these activities and provide new solutions.”

Appliance buyers still see stainless steel as a safe investment, as well. James Wainscott, chairman, president and CEO, AK Steel Holdings, West Chester, Ohio, pointed out during the company’s second quarter 2011 results conference call, “Our specialty steel products serving the automotive and appliance markets were in strong demand during the second quarter, and we expect that demand strength to continue into the third quarter. Commodity and 300-series stainless sales were held back a bit in the second quarter by the nickel surcharge, which became effective July 1. Buyers simply waited on the sidelines, but with nickel prices now beginning to head higher, we’ve recently seen an uptick in buying activity. ... Some of our specialty stainless steel applications, including stainless products for appliance and industrial manufacturers, are in high demand with lead times out as far as the October timeframe.”

“Stainless steel is strong as consumers still want this look,” Reagan says. “[An] alternative product to stainless steel would be something to consider as long as it is price competitive. American Nickeloid has had success in supplying anti-fingerprint coated stainless steel to the appliance industry as well as a variety of stainless steel look-alike products.”

Reagan says the company “is always working on developing new products. Currently, American Nickeloid is in the pre-production stages of development with a product that will meet most appliance specifications but is less costly than stainless steel.”

Pixley also says ArcelorMittal’s Global Research and Development Group is concentrating on products that provide enhanced aesthetics, functionality or energy efficiency to meet the needs of the current and future appliance market.

“RoHS [Restriction of Hazardous Substances] regulation is becoming the norm for appliance companies, and we have anticipated this need by moving toward heavy metal-free steel solutions, like chromate-free passivations for hot-dip galvanized steels,” he points out. “Through new product development transfers across the company, ArcelorMittal ensures its customers the most advanced technologies regardless of geography,” he notes.

“One example is our current R&D work on potential PVD-applied coatings that can offer enhanced functionalities such as high-temperature capability, scratch resistance and easy-to-clean properties. The only operable PVD steel coating line in the world belongs to ArcelorMittal in Belgium,” Pixley continues.

Ultimately, the goal of appliance manufactures is to entice consumers to buy, and they are “always looking for the next best thing and want to be the first to market,” Reagan says. “There are always new products under development as well as working on enhancing existing products. Technology in all appliances seems to be the new interest right now.” MM

Listen carefully
There are normal noises associated with appliances, such as whirring, sloshing and general mechanical sounds. However, there’s a fine line separating an efficient whir and an annoying rattle.

“Appliances produce an array of sounds,” says James Moore, supervisory consultant for Acentech Inc., Cambridge, Mass., a multidisciplinary acoustical consulting firm. “Some of them are mechanical in terms of gears and mechanical beater brushes and things of that nature. Some of them are electromagnetic in terms of the motors, and there’s also airflow noise if it’s related to the primary function of the device, like a vacuum cleaner, or associated with a cooling fan on a motor.”

Consumers also expect their appliances to make certain sounds, such as tumbling clothes in a washing machine or dryer and pumping water in a dishwasher, to assure them that the devices are doing their jobs.

“We work in product sound quality where the perception of sound is important,” Moore says. “Things aren’t expected to be quiet, but you want them to sound appropriate for their use and the nature of the device. If a vacuum cleaner made no noise, you wouldn’t think it was cleaning.”

Just enough sound
A consumer’s perception of quality can be tied to how much or how little sound an appliance makes. To minimize vibration and extraneous sounds, manufacturers can add damping materials to their products.

“The use of damping materials is relevant to the noise that gets radiated by the appliance,” Moore notes. “An appliance basically takes electrical energy and converts it to mechanical energy and accomplishes something useful. That never happens perfectly efficiently, so there is some energy that is lost, which winds up as vibration. Housing panels on appliances typically do not have a lot of excess metal on them for reasons of cost and weight, so they have a tendency to vibrate more and are also efficient radiators of noise due to their larger area.”

Adding damping materials reduce the vibration associated with resonances in the housing panels and also increase the total weight of the panel, which helps with reducing vibration. The manufacturers must consider the added cost and weight of damping materials along with improvements with consumers’ perception of the noise as a selling point.

Moore says there are a variety of options for damping vibration, including MPM sheets, a sandwich construction of “thin layers of metal with a polymer damping layer in between.

“Most of the materials that get used, though, are highly-damped black polymer materials that are pasted on to vibrating panels. In addition, there are other materials that are potentially more effective per unit added weight called constrained layer damping, which have a polymer material with a thin, constraining aluminum foil on the outside.”

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