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IHS Markit sees supply crunch coming for electrical steel; potential disruptor of OEM electrification plans

The rapid growth of the hybrid and electric vehicle segment could potentially cause demand for electrical steel to outpace supply from 2025, according to a new report by a team of analysts from the Automotive Supply Chain and Technology team at IHS Markit. This potential shortage could severely affect OEMs’ electrification plans if not addressed by adding more capacity and investment in new capacity, the IHS Markit team said. Increasing additional production capacity is the only measure to address the structural imbalance between capacity and the major demand ramp-up for electrical steel.

Electrical steels (earlier post) are special steels optimized for specific magnetic properties, including a small hysteresis area for low power loss per cycle, low core loss and high permeability. Electrical steels are found throughout a modern vehicle—from the small motors which drive mirrors and seats to the larger machines that are used in the propulsion systems of hybrid or full EVs. Traction motors and generators in those alternative drive trains are particularly dependent on highly efficient electrical steels.

While electrical steel is estimated by IHS Markit to account for only 1% of the 2 billion metric ton 2020 global steel market, its supply is being considered as an increasingly critical input to OEMs’ electrification plans as well as various energy transition initiatives.

The commercial electrical steel market is divided in two major categories: grain-oriented electrical steel (GOES) market and the non-oriented electrical steel (NOES) market. GOES is used in static machinery such as transformers, which require unidirectional magnetization, while NOES is used in rotating machinery such as motors and generators, which require multidirectional magnetization.

Carmakers have an obvious direct exposure to NOES, the IHS Markit team said, but they are indirectly also exposed to GOES, which is critical to support the rollout of EV charging infrastructure.

NOES is a direct material input used in electric motor manufacturing for both hybrid and electric vehicles, as well as in many low-power motor applications. Some 35 to 45 low-power motors are fitted on average per car, with about 20 in the B segment and 80 in the E segment.

The critical difference between the different motor types is in the NOES grade being used. Mild hybrid motors use less than US$10 of high-grade NOES, while battery-electric vehicles will use anywhere between US$60 to US$150 per motor of an extension of high-grade NOES—referred to as xEV grade—which in some configurations can even represent more than US$300 NOES content per vehicle. This xEV grade is where capacity constraint concerns are emerging, the IHS Markit report said.

Of the more than 11 million tons of NOES produced in 2020, only 456,000 tons of that was xEV-grade NOES. In their report, the IHS Markit authors discuss different reasons for a possible xEV-grade NOES capacity crunch:

  • Limited room for new entrants. Only 14 companies are currently capable of manufacturing xEV-grade NOES that meet global OEM requirements. Major barriers to entry exist caused by capital expenditures associated with cold rolling, annealing, and coating equipment, manufacturing know-how, OEM-supplier relationships, and patent protection.

  • Concentrated manufacturing footprint. Some 88% of the manufacturing is concentrated in Greater China, Japan, and South Korea and then exported to other regions usually in the form of steel coils. Supply is extremely limited in North America.

    Cleveland-Cliffs is the only US producer of NOES via its 2020 acquisition of AK Steel; Cliff’s NOES and GOES manufacturing share common production equipment. Cleveland-Cliffs is focused more on GOES production to address the increasing regional demand for electrical transformers, thus reducing available xEV-grade NOES capacity. However, in November, the US Department of Commerce’s Bureau of Industry and Security noted that Cliffs may stop producing GOES due to unprofitability in part due to years of pressure from lower-cost imports.

  • Scope to change material or steel supplier is limited. Owing to the correlation between the efficiency of a motor and an EV's operating range, differences in core loss (a critical measure of the input electrical energy wasted as heat during magnetization) between competing NOES products suppliers can have significant impacts on OEM purchasing decisions, particularly for OEMs that purchase electrical steel laminations in high volumes.

  • Downstream processes also face bottlenecks. There only 20 motor core lamination stampers which can cater OEM needs, only five companies that can produce these unique stamping presses and fewer than 10 independent tool shops with the competency to fabricate the unique stamping dies that can support state-of-the-art motor designs.

The IHS Markit team sees concern around capacity constraints emerging around 2023.


It is highly unlikely mills can support market demand from 2025 onward without significant additional investments. However, adding capacity in 2025 requires mills to make decisions imminently. The situation looks even more dire when factoring in that most xEV-grade NOES mills can only sustain 90% capacity utilization over extended time periods.

Due to the exponential growth of electrified vehicles in the coming years, there remains a risk of electrical steel supply not meeting demand between 2023 and 2025. Despite projected capacity increases, a structural shortage of 61,000 tons is likely to occur in 2026. Without further major investments, this shortage could rise dramatically to 357,000 tons in 2027, culminating to a 927,000 tons shortage by 2030.

—“Electrical steel – Another temporary supply chain shortage or a threat to OEMs’ electrification plans?”

More detail is available on the IHS Markit website, and the full report is available to AutoTechInsight subscribers.



Oh-kay, that's interesting.  I have some small familiarity with GOES, and understand how this is going to make life VERY interesting.

As in the Chinese curse, "May you live in interesting times and come to the attention of powerful people."


It is indeed interesting. I think that it is possible to use powdered metallurgy in some cases where the iron powder particles are coated with an insulating material and pressed into shape. But then maybe there would be a shortage of this material. It might also be possible to use axial flux motors with coreless stators (no steel needed). If you also use Halbach array rotors, you do not need magnetic steel to close the magnetic circuit so the motor can be made completely without steel.

A Halbach array is basically an array of magnets that produce a strong magnetic field on one side of the magnetic array. Most common use is the rubberized refrigerator magnets but it can be used in high performance motors.



Powdered iron cores have long been used in high-frequency transformers.  I believe the finest powder is made by decomposing iron carbonyl.  You probably pay a price in permeability, though.


I should have added that one of the problems with both the coreless stator designs and the Halbach arrays is that they require more magnetic material which may also be in short supply.

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