CHICAGO Novelis Inc.
could take roughly a year to digest a series of new expansion
projects that are coming online in the next six to 12 months,
but that doesnt mean the Atlanta-based aluminum producer
is looking to slow its global growth in the long term,
according to its top executive.
"The market is pulling us to
invest in more heat-treatment (capacity), and we will continue
to invest in recycling," Novelis president and chief executive
officer Philip Martens said in an interview with AMM
following the release of the companys earnings results
Demand for heat-treat capacity
to supply the automotive sector is growing throughout North
America, Europe and China, Martens said, noting that
Novelis European heat-treat operations in particular are
already close to capacity. The trend toward more aluminum use
in vehicles for lightweighting purposes will also help drive
demand, he added.
"Automotive demand is going to
exceed supply for at least the rest of this decade and then
probably the next decade," he said. "(Overcapacity in the
automotive aluminum sector) is the least of our concerns."
In China, Novelis is already
positioned for growth at its facility in Jiangsu province,
where construction is expected to be completed in 2014 (
amm.com, Nov. 7).
Novelis is today only using
about 7 to 8 percent of its 160-acre site in China, Martens
said, noting that that provides an opportunity to expand. "We
have worked with (the Jiangsu government) with a longer-term
view that we would like to have a larger capability and to have
on one site a much larger operation," he said.
But while growth appears to be
in the cards, Martens declined to specify what any future
Novelis projects at the site might entail. Asked whether a hot
end might be on the radar, Martens noted that Novelis first
wants to make sure its current plans are a success before
considering such a big investment. "Lets walk before we
run," he said.
The project in China has not
been without its difficulties, however. Novelis prices its
metal in Asia based on the London Metal Exchange and a Japanese
metal premium that has more than doubled since last June, he
said. Meanwhile, Novelis flat-rolled competitors in China
use the Shanghai Futures Exchange price, giving them a
competitive advantage at times, he said. "That has forced some
real challenges, some real margin compressions in the region
... and we need to look at these things as if they are here to
stay," he said.
For example, Novelis will have
to "double down" on its efforts to boost recycling capabilities
and seek the best possible mix of material in China, something
that growth in the automotive sector should help, Martens
But while China is a key growth
area on Novelis radar, South Korea still remains the
aluminum companys Asian stronghold. Novelis began
commissioning a 265,000-tonne-per-year recycling facility in
South Korea last year and continues to move forward with
improvement projects at its Korean rolling mills (
amm.com, Oct. 24).
"Longer-term, we will look at
Korea potentially as a low-cost manufacturing place to export
other products to other parts of the world," Martens said.
Novelis also continues to
increase efficiencies in North America, Martens said.
"Underneath the surface," much
activity at Novelis has focused on de-bottlenecking the
companys hot mills, something that will help increase
capacity, Martens said.
Separately, Novelis continues to
work towards its recycling rate target of 80 percent by 2020
amm.com, Jan. 23), Martens said, brushing aside
concerns that the effort could affect the domestic scrap
"As we have gone out and increased our scrap procurements in
the United States ... we have found that spreads have
maintained themselves in a reasonably disciplined manner," he