Novelis Is the Sheet: Automotive Aluminum Finally Sees Producer Dollars

A revolution has been quietly going on in the aluminum industry.

While growth has been broadly positive across most sectors, rolled aluminum sheet used for automotive applications has been experiencing double-digit growth.

Novelis, the world’s largest roller of aluminum sheet for the automotive industry, estimates the total tonnage used in the sector at about 450,000 metric tons, but is anticipating that 25% annual growth will see that figure tripled by the end of the decade.

As a result, rolling aluminum mills in that sector are finally taking the step of investing in new aluminum production capacity. The shortage of automotive sheet capacity in Europe has been a feature for some years, so Novelis’ announcement that they are converting some of their capacity at Gottingen, Germany, to produce automotive sheet is hardly ahead of the market, but will come as welcome news to consumers.

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According to a article, Novelis currently produces automotive sheet in Europe at its Nachterstedt, Germany, and Sierre, Switzerland, facilities. Initially, 20,000 tons will be manufactured annually in Gottingen, while a second planned phase will expand capacity to 40,000 tons annually.

Nor is Europe the sole beneficiary of the firm’s response to rapidly rising demand – Novelis is adding capacity in North America at its Oswego, New York, plant, which will see an additional 240,000 tons and a new plant under construction in Changzhou, China, will have a capacity of 120,000 tons.

At the same time, Novelis is investing heavily in raising recycling rates, increasing the percentage of its rolled sheet made from recycled aluminum from 33% in 2011 to as much as 80% by 2020. While such high recycling rates will enhance the firm’s environmental credentials, especially with the automotive industry (where the recyclability of cars in Europe is being mandated), more importantly for the bottom line, the move will secure Novelis’ supply base.

The firm is not vertically integrated, buying its slabs from Rusal, Rio Tinto Alcan and Emirates Aluminum. Boosting the use of recycled aluminum secures the firms’ supply chain as if it was operating primary smelters.

Alcoa Joins Novelis in Investment

However, Novelis is not alone in placing heavy bets on the future of automotive aluminum consumption.

Alcoa will invest $275 million over the next three years to expand and convert capacity at its rolling mill in Alcoa, Tennessee, having previously announced a $300 million expansion of its Davenport, Iowa, plant, which is set to be completed by the end of this year.

Government legislation is driving the uptake in lighter materials as automotive firms seek to improve fuel economy by a number of means, aluminum light-weighting being one of them. For aluminum producers at least, this appears like a recipe to print money.

Automotive sheet, while not fetching the premiums of aerospace, is certainly taking preference when decisions on production space arise between normal commercial and automotive orders.

today's metal prices - MetalMiner IndXOne good reason for that is the aluminum price premium that mills are securing for good quality automotive-grade sheet – not a market that emerging market suppliers have managed to penetrate…yet.

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