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More rolling capacity needed in aluminum: execs

Oct 09, 2013 | 01:02 PM | Michael Cowden

Tags  aluminum, capacity additions, investment criteria, eletrical power, Randall Scheps, Klaus Kleinfeld, Aluminum Association, Etienne Jacques Alcoa

FARMINGTON, Pa. — More rolling mill and even primary capacity may be needed to keep pace with expected growth in aluminum demand, industry executives indicate. But in order to invest in new capacity, producers must also be able to secure better electricity rates, they stressed.

"Certainly some rolling capacity will have to be created. The issue is making sure that the aluminum industry is involved with the car companies in their product planning cycle so that there is enough time to create that capacity," said Randall Scheps, automotive marketing director at Pittsburgh-based aluminum producer Alcoa Inc. Scheps made the comments during a press roundtable with other industry executives at an Aluminum Association meeting Oct. 9 in Farmington, Pa.

Alcoa is investing close to $600 million in North America to create that capacity, Scheps said. "And there is certainly potential to do more. The real trick is early involvement so we have enough time to get it done."

The company has already invested $300 million to expand automotive capacity at its operations in Davenport, Iowa, and another $275 million at its facility in Alcoa, Tenn., Scheps said.

Alcoa’s expanded auto capacity at Davenport is fully committed even though the expansion isn’t yet in operation, Alcoa chairman and chief executive officer Klaus Kleinfeld said during the company’s third quarter earnings call Oct. 8. Capacity being added as part of the company’s Tennessee expansion is also largely committed although the project broke ground only weeks ago, he said.

More capacity may also be needed on the primary front, said Etienne Jacques, chief operating officer of Montreal-based Rio Tinto Alcan Inc.’s primary metal North America business. The need for more capacity in North America is due in part to a tight scrap market and also because it could displace the more than 1 million tonnes per year in imports from the Middle East, Russia and elsewhere, he said.

"We need to increase our primary production, so Rio Tinto Alcan has projects in the north to increase that," Jacques said. "But to do so, you need a good competitive energy price."

Rio Tinto Alcan has already pushed for lower electricity rates from the province of Quebec (, Oct. 4), warning that higher costs are making the province less competitive with smelters elsewhere around the world.

"Yes, we have some plans. Maybe not as many as we would like in North America. But we need some others," Jacques said, noting the strong contributions the aluminum industry makes in terms of employment and economic contributions in the regions where it is located. "When a plant is there it’s there for generations," he said.

Besides new capacity, there is a possibility to build a sustainable manufacturing plan around the aluminum industry in the United States and Canada, said Layle "Kip" Smith, president and chief executive officer of Franklin, Tenn.-based Noranda Aluminum Holding Corp. Smith noted that the sector creates roughly 500,000 "very good" direct and indirect jobs and that roughly one-third of all U.S. manufacturing depends on products made by the aluminum industry.

"But the key to a successful aluminum industry, and in fact for many industries, is affordable energy and, in our case, particularly electricity," he said. "And among all of the smelters globally, we need to be competitive with power, and we need that power to be sustainable and to be available to us over the long haul."

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