Macro trends like demographics, shifts in global wealth and,
especially, sustainability will impact the way all business is
For the aluminum industry, these trends will combine to
create more demand than even the most aggressive projections
have so far realized.
With all the newly commissioned smelters and mills in China,
India and other developing countries, there's a lot of
hand-wringing about the dangers of overcapacity. However, I
believe these macro trends will, over the next few decades,
create so much demand that we could easily encounter an
aluminum manufacturing capacity shortfall.
The burgeoning populations of India, China, Brazil, parts of
Africa and Southeast Asia correlate with a rise in
urbanization. Indeed, for the first time in history more than
half the world's population now lives in cities vs. rural
areas. Moreover, because it's concurrent with rapid
industrialization, urbanization means economic advancement for
those waves of people moving from the countryside to
In just the next few years, more than 2 billion people will
graduate from subsistence lifestyles to lives that people in
the developed world would recognize as working class. They'll
want housing, beverage containers, packaged food, appliances
and a host of other products demanded by an ascendant consumer
In transportation alone-products like shipping containers,
trucks, commuter trains and automobiles-the opportunity is
bigger than most observers have recognized.
China and India are on pace to become the third- and
fifth-largest consumer economies by 2020, and to challenge or
surpass the United States and the European Union in gross
domestic product by 2050.
But all that growth comes at an environmental cost. China
will produce 44 percent of the world's total greenhouse gas
emissions by 2020 and 46 percent by 2050, and India will double
its share over the same period. The evidence linking greenhouse
gas emissions to environmental degradation is compelling.
Which leaves us with the urgent dilemma of sustainability.
The last three centuries of human history have demonstrated
clearly that the cure for poverty is industry. Unfortunately,
we are now in urgent need of a cure for industry.
Alternative energy sources like wind power, solar power and
even nuclear power are solutions that show marvelous potential,
but all work more efficiently if the objects of their
propulsion are lighter weight. Light-weighting is already
inextricably entwined with the next generation of
environmentally conscious design. The auto industry is well
along this road.
Because aluminum offers light-weighting without compromising
strength, the percentage of aluminum in vehicles manufactured
in the United States has been slowly climbing for decades-from
2 percent in 1975 to a projected 10 percent in 2020. Obviously,
the more aluminum supplants steel in the manufacture of cars,
the more light-weighting we can achieve.
Sustainability concerns are pushing this percentage to a
tipping point. We may see a sharp turn in the next few years
that makes our current demand projections look extremely
conservative. The discussions we've been having with automobile
manufacturers are more than encouraging on that point. These
original equipment manufacturers (OEMs) are looking at more
than design advantages. Around the world, government regulators
are beating the drum for light-weighting in a way that makes
aluminum the most obvious solution.
When the European Union set CO2 emission standards in the
early 1990s, and then 10 years later set end-of-life standards
for recycling, it resulted in a new generation of hybrid
designs featuring light-weighted, aluminum content. New U.S.
regulations have set a 35-mile-per-gallon standard for the year
2020, which would increase fuel economy by 40 percent. The most
plausible path forward for design engineers is the
incorporation of more aluminum components.
China is still industrializing, still urbanizing, still
inventing itself. We can't expect China to patiently graduate
through generations of technology that have characterized the
Western industrial experience. The Chinese will
institutionalize the most efficient solutions contemporary
technology can provide. And that standard incorporates
state-of-the-art light-weighting, and therefore a lot more
Indeed, we are already seeing a sort of leapfrog effect in
developing nations where the incremental trend lines of Western
business history are being superseded by wholesale adoption of
Novelis Inc. foresees an emerging generation of consumers
and regulators ready to assign greater value to aluminum in
automobiles, trains, trucks, beverage containers, personal
technology, appliances, construction and packaging. In a
sustainable business model, this demand is for a metal that is
strong, malleable, versatile, recyclable and-most importantly
in a world constrained by fuel-light weight.
The global recession has clouded a lot of crystal balls, but
our best-informed outlook is extremely bullish for our company
and our industry. We believe this will be our time to
Adapted from the Feb. 1 keynote speech delivered at the
Platts Aluminum Symposium on Marco Island, Fla., by Philip
Martens, president and chief operating officer of Novelis Inc.,