One little side benefit of high commodity prices is companies start to quickly ramp up product substitution and new product innovation. Two years ago, when nickel skyrocketed, many firms moved toward 400 series stainless alloys and other product substitutions. High oil prices have a dual benefit - they change consumer behavior which in turn changes corporate behavior. Of course there is nothing quite like a little adversity to spur some much needed innovation.

And though we have talked about this before in terms of metal product substitutions within the automotive industry, the innovation seems to be moving at a fast and furious pace. Consider the case of platinum metals used in car exhaust systems. Several Japanese automakers are making use of nanotechnology to significantly reduce the amount of precious metals used per car. Though steel remains the 800 lb gorilla in this industry, platinum metals at $200 per car, or $10b annually for all automakers, is no drop in the bucket. More stringent emissions requirements have driven the platinum metals growth within the industry by more than 8 percent just last year, according to this Reuters article. The article goes on to say companies like Nissan, Mazda, Japan’s Mitsui Mining and Smelting and Toyota all have various projects in the works to drastically reduce platinum metals usage in exhaust systems.

Good for them! Now if the automotive OEM’s can start chipping away the quantity of steel per average vehicle (more than 2000 pounds), we’ll be in even better shape!

–Lisa Reisman