Novelis: Making No Bones About Invading Steel Producers' Territory

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On a different level, Novelis’ turning bullish in the auto sector (we listed the most recent expansion moves in Part One) is a sign of the times we live in.

The traditional steel manufacturers, who for long have supplied auto-grade steel, now find themselves up against aluminum majors like Novelis in the automotive sector. Stricter emissions norms necessitate the making of lighter vehicle – e.g. light-weighting – and that’s why Novelis is in this market.

Novelis itself makes no bones about the fact that automotive is now its primary target. It said in the press release announcing the two lines that auto manufacturers were turning to aluminum sheet “at a dramatically increasing rate for structural components and exterior body panels” because of its low weight and recyclability. The company claimed its aluminum was used in over 180 different vehicle models produced by global automakers.

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Novelis operates in nine countries, and has a reported revenue of US $9.8 billion in its 2013 fiscal year.

The company will also expand its recycling operations for automotive scrap, while making other system and facility upgrades, according to the press release Novelis put out.

Plant manager Chris Smith was quoted as saying the US $120 million investment will increase the plant’s total capacity by about 30 percent, to 400,000 metric tons, while adding 90 new jobs to Novelis’ workforce.

He said that for demand as far as aluminum for automotive applications was concerned, the catalyst was the light-weighting initiatives that a lot of the automotive manufacturers in North America had recently undertaken based on the Obama administration’s implementation of stricter CAFE standards. By 2025, the goal is to have fuel efficiency reach 54.5 miles per gallon.

When the new lines are commissioned in late 2015, Novelis’ global automotive-sheet capacity will reach about 900,000 tons per year, a three-fold increase from just a year ago.

Read more Indian perspectives from Sohrab Darabshaw.

FREE Download: The Monthly MMI® Report – covering the Aluminum market.

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