Novelis Tells a Bright Story of Aluminum's Future

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Now that the dust has settled from last week’s Harbor Aluminum Conference in Chicago, I find it hard to conclude anything other than a bright rosy future for aluminum (particularly if you are a producer or supplier). Rest assured, I didn’t drink the Kool-Aid, but when one looks at the factors driving aluminum prices and the six-ways from Sunday that the team at Harbor develops its price forecasts, it becomes hard to come to any other conclusion than aluminum prices face far more upward price risk than downside price risk. Of course global economic meltdown, raw material supply constraints, warehousing games and hijinks played by the Big 3 triumvirate of Goldman Sachs, JP Morgan and Glencore (The Wall Street Journal has an excellent primer on the subject right here) along with the dumping of 60m barrels of oil not withstanding, the picture painted by Novelis at the conference bodes well for aluminum consumption.

Nobody tells a story quite like Erwin Mayr SVP, Chief Strategy and Commercial Officer of Novelis. We’ve selected a few of the most interesting trends noted by Mayr:

  1. Aluminum use has grown faster at 5% than other metals including nickel, copper and steel at three percent and zinc and lead at two percent
  2. By 2015, Asia will represent 50% of the global FRP (flat rolled products) market
  3. Eleven million tons of new FRP demand between 2010 2020 (moving up to 30m tons beyond that)

Mayr goes on to specifically call out the market trends that banks find the most interesting with regard to the future of the aluminum market. He specifically points to the following:

  1. Increasing urbanization and the need for better infrastructure and transportation
  2. Sustainability as a response to rising demand and depleting resources wind mills (e.g. housings are made of aluminum), cars with aluminum, solar panels etc
  3. Emerging markets create a multi-polar world new large growth markets spreading wealth globally; global logistics development airplane flying, fuel energy markets LNG carriers, commercial containers
  4. The ascent of the young consumer and social media global electronics over 100,000 tons in electronics markets
  5. The on-going struggle between protectionism and globalization in particular, increased tariffs, restrictive quotas and harmonization

At last year’s Harbor Conference, Mayr offered up several “what-if scenarios driving aluminum demand (we reported on those then) we have re-posted some of those here as well as added new ones Mayr presented last week:

  1. What if every Brazilian consumes as many cans as US citizens do? That would equate to an additional 1m tons of aluminum (can sheet)
  2. What if all car hoods are made of aluminum not just 20% for luxury cars? In addition 50% of all car doors are made of aluminum what if they are all made of aluminum auto sheet? Aluminum demand will increase to 140m car doors
  3. What if by substitution all steel cans (e.g. tinplate) switch to aluminum? We’d see an additional 4000-5000 kt of aluminum sheets
  4. What if solar applications globally replicated Germany’s current usage? FRP demand would increase by almost 10%
  5. What if Chinese per capital aluminum FRP demand equaled the level of Germany’s demand?  Global FRP demand would double

Join us for a FREE upcoming webinar: “High Performance Metals & Alloys Market Outlook and Primer, featuring speakers Scott Fasse of United Performance Metals and Jorge Vazquez of Harbor Aluminum. Click here for additional details and to register.

Disclosure: The author has no positions in aluminum

–Lisa Reisman

 

 

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