CHICAGO Novelis Inc. will look to meet automotive demand by making its existing plants more flexible and adding automotive finishing capacity before it considers boosting hot mill capacity, a company executive said.
The model for such future investments will be the Atlanta-based aluminum companys operations in Oswego, N.Y., which will officially unveil two new automotive heat-treatment lines Oct. 24, Marco Palmieri, Novelis senior vice president and president of Novelis North America, said recently in an interview with AMM.
"What we look for in North America, any investment that we make, will be similar to the lines we are commissioning (in Oswego)," he said.
The two lines in Oswego are expected to add 240,000 tonnes of automotive finishing capacity and complement the existing automotive finishing capacity of about 50,000 tonnes at the companys plant in Kingston, Ontario, Palmieri said.
That capacity is already committed to automotive customers, including Britains Jaguar Land Rover Ltd., German automakers Mercedes-Benz and BMW AG, and Detroit-area automakers Ford Motor Co., General Motors Co. and Chrysler Group LLC, he said.
Palmieri declined to comment on any specific vehicle platform or provide a specific timetable for any future investments.
While the new lines at Oswego are dedicated to automotive sheet, the upstream side of the complex will retain capability to make can sheet and other products, he said. And that model could be applied to other Novelis facilities.
"You take the most value from them, use the capacity available and then you think about new investments," he said.
Given expected "explosive" demand growth from the automotive sector due to stricter emissions standards, additional heat-treatment capacity and "sooner or later some hot mill capacity" will be required in North America, Palmieri said.
A large hot mill investmentPalmieri estimated the cost at more than $1 billionlikely wont be needed for "a few years" and also depends on market trends in the automotive sector and in the can and specialty markets, he said.
The specialty market, which includes everything from electronics to building and construction materials, is on aggregate growing at roughly the same rate as gross domestic product in North America, Palmieri said. But the North American can market "is in decline a bit," he said.
Changes in demand trends in any of the markets could alter the calculus of when new automotive capacity might be necessary, he added.
Novelis also sees its success in the automotive arena tied to its ability to segregate scrap used in automotive products, Palmieri said. If 6000-series scrap, for example, is mixed with other grades, "you basically cannot use the mix," he said.
Novelis closed-loop system of recovering scrap should help, Palmieri said.
"You need to work with all of the supply chainthe stampers, the logistical system, our receiving docksand make sure we keep it segregated. Its not a new technology, but its a lot of work to make sure that segregation is there all the time," he said.
Still, closed-loop systems alone wont be enough if Novelis is to achieve its stated goal of having 80 percent recycled products by 2020, Palmieri said. As part of that effort, Novelis is already using scrap other than used beverage cans at its recycling centers in Greensboro, Ga., and Berea, Ky., he said.
For now, Novelis will focus on getting the best automotive scrap it can recover from existing operations, Palmieri said, brushing aside the notion that it might make an investment in recycling in North America on par with its undertakings in Germany (amm.com, June 7).
"But going forward, we have to look at that possibility," he said.