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More auto heat-treat capacity needed: Novelis

Keywords: Tags  Novelis, Philip Martens, automotive sheet, aluminum sheet, heat-treat capacity, Michael Cowden

CHICAGO — Novelis Inc. sees additional automotive aluminum sheet finishing capacity as necessary in the United States despite announced expansions from competitors, president and chief executive officer Philip Martens said.

Novelis expects to see a compound annual growth rate of about 25 percent for automotive aluminum between 2012 and 2017 as the material becomes the "clear metal of choice" to help automakers meet fuel economy requirements, he said during a conference call on the company’s earnings results.

Pittsburgh-based Alcoa Inc. has announced plans to invest $275 million over the next three years to boost aluminum sheet capacity at its rolling mill in Alcoa, Tenn. The aluminum producer has also announced a $300-million expansion at its operations in Davenport, Iowa, which is expected to be complete by the end of 2013. The company has said the expansion at Davenport won’t be enough to keep up with forecast demand from the automotive industry (, May 2).

"The announcement from Alcoa signifies the solidification of the market dynamics that are very positive for automotive aluminum sheet in the United States," Martens said.

Atlanta-based Novelis is investing $200 million to expand its operations in Oswego, N.Y. (, Oct. 31). The company has made "quite a bit of progress" on its two finishing lines in Oswego and expects to begin commissioning this summer, Martens said. Commercially viable sheet won’t roll off the lines until the fourth quarter, but both lines are "largely subscribed" from end-users, he said.

Most of the capacity from the finishing lines will be used for 2015 model vehicles in North America, which means their impact on financial results will be felt more substantially in fiscal 2015, Martens said.

Novelis could add new heat-treatment capacity in about two years if necessary, Martens said. Given the relatively short time necessary for heat-treat expansions, Novelis can confirm and complete new contracts before going ahead with additional heat-treat projects, he added.

"We have the ability to contract first, look at the best location for that (capacity) and then install the capacity if it’s required. But I do anticipate that we will require more heat-treatment capacity in the United States," Martens said.

Also on the automotive front, Novelis has seen strong demand for its products from its facilities in Europe, in part because most of the aluminum Novelis produces for the automotive sector goes into vehicles that are sold worldwide, he said.

Novelis has also seen strong results for can stock in Europe, driven by material substitution, Martens said. However, demand for products used in the European construction sector have taken a hit as the region’s building and infrastructure markets have suffered. That negative impact has been felt mostly by Novelis’ Italian facilities in Bresso and Pieve, he added.

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