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Aluminum must boost capacity to meet auto demand

Keywords: Tags  AMM Aluminum Summit, automotive sector, Brad Soultz, Novelis, Randall Scheps, Alcoa, Laurent Musy, Constellium Kevin Moore

NEW YORK — The aluminum industry will need more hot mills in order to meet demand growth, especially from the automotive sector, according to industry executives at AMM’s Aluminum Summit in New York.

Atlanta-based Novelis Inc. has doubled its mill structure in South America and Asia and will leverage that capacity initially, Brad Soultz, vice president and chief strategy and commercial officer, told AMM on the sidelines of the conference. "Clearly, to grow this company from a 3-million-tonne system to a 6-million-tonne system, we’ll be talking about more hot mills. But there is nothing definitive other than the (expansions) we have publicly disclosed."

He declined to specify in what regions the new capacity might be added.

Soultz noted during prepared remarks that aluminum in the automotive sector is expected to grow dramatically around the world over the next 20 years. "We need to stay ahead of the OEMs (original equipment manufacturers)," he said. "This is real, and it is big."

The average North American automobile weighed about 3,800 pounds, including roughly 350 pounds of aluminum—around 9 percent—in 2012, Soultz said. By 2025, the average vehicle will weigh 3,400 pounds, of which 550 pounds (16 percent) will be aluminum.

"Aluminum is not going to take over the entire industry, but it’s certainly going to be substantial and we’re certainly investing to get there," Soultz said, noting that the growth in aluminum comes not only from more-stringent fuel economy standards but also from consumers who increasingly prefer the light metal. Consumers like large vehicles with comforts, safety features and navigation systems and other conveniences, which also makes the weight-saving offered by aluminum necessary, he said.

The next big step in aluminum’s penetration into cars and trucks is the conversion of automotive bodies from steel, said Randall Scheps, director of global automotive marketing for Alcoa Global Rolled Products. "We are really right on the edge of that beginning to happen," he said, citing gains already made by aluminum in automotive applications as diverse as heat exchangers, wheels, engine blocks and hoods.

Cars and trucks also are using more high-strength steels, Scheps conceded, but those gains are generally coming at the expense of mild steels rather than aluminum. "Steel is essentially taking share from itself," he said. "Yes, they are selling more high-strength steel, but they are losing 2 pounds of mild steel for every pound of high-strength steel that they sell. They are reaching the end of the amount of weight savings they can bring to the carmakers."

Scheps brushed off the idea that aluminum might be threatened by competition from composites, noting that automakers can use the same equipment to process both steel and aluminum. "The capital required to make this change (to aluminum) is not huge. ... But to go to composites, or do something crazy and radical, you would have to take some very large equipment and throw it out and replace it," he said.

Pittsburgh-based Alcoa Inc. has already "doubled down" on its auto sheet business in North America, Scheps said, noting that recent expansions at its facilities in Davenport, Iowa, and Knoxville, Tenn., were largely secured by signed contracts. "This is not Alcoa going out and guessing this is going to happen," he said. "This is us working very closely with the carmakers to support programs that are already on the board."

But as aluminum companies look to boost their participation in the automotive sector, they also must keep a close eye on costs, said Laurent Musy, Paris-based Constellium NV’s president of packaging and automotive rolled products. The canstock market, for example, is demanding but also standardized, a trend that could play out in the automotive sector as well, he said. "We may see a global trend of, on the one hand, very sophisticated and tailor-made solutions and, on the other hand, some type of standardization to bring cost down for the bulk market."

In addition to boosting capacity and lowering costs, the aluminum industry must work more closely with automotive companies, said Kevin Moore, president of East Lansing, Mich.-based All Raw Materials Consulting LLC and a former executive at Detroit-based General Motors Co. "You’d better get in bed with our design engineers," he said. "The steel engineers were in our design rooms solving problems, best friends, and made us comfortable. It’s a big investment (with) big risk but big gains. It’s one thing you’ve got to do."

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