PALM BEACH, Fla. Flat-rolled aluminum demand from the automotive sector is one of the biggest growth opportunities to hit the aluminum market, with supply chains expected to tighten across the board, according to Skana Aluminum Co. president and chief operating officer Robert Gamba.
Big domestic mills that invest heavily in downstream heat-treat processing for automotive body sheet are poised to benefit, but so are other suppliers, he said in an exclusive interview with AMM at the Metals Service Center Institutes aluminum products division conference in Palm Beach, Fla. "Nobody has in any significant way increased their rolling capacity, so ... the domestic players are going to have some decisions to make about whether they can continue to supply some of their existing customers."
Domestic mills hot mill capacities generally are spoken for downstream by their own cold mills and their existing customer base, Gamba said. "So where are all these billions of pounds of extra capacity for heat-treat going to come from in terms of hot-band supply? There is a limited amount of domestic hot band available."
Its important not to underestimate just how big demand from the automotive sector might be, he said. Ford Motor Co.s new F-150 pickup alone could use about 1,000 pounds of flat-rolled aluminum per vehicle, equivalent to a pre-stamped weight of around 1,300 pounds or more, and Ford sells about 750,000 F-150s annually, Gamba said. "So right there, youve got nearly 1 billion pounds of flat-rolled aluminum."
A "big vacuum" could develop as automotive shipments start in earnest, Gamba said. "The market looks like its going to be really tight from the moment the big guys start shipping from their continuous annealing lines, which could be as soon as the second quarter of next year, so we are extremely bullish about the medium- and long-term."
As automotive aluminum programs ramp up, it will impact consumers in other industries, Gamba predicted. "You are seeing (nonautomotive) guys who think this is coming ... considering alternative suppliers" because it could be difficult for big mills to continue to supply or justify supplying lower-margin businesses. "The opportunity for us is in common alloy sheet and coil applications that are currently supplied by mainstream U.S. mills but may no longer be."
Lower-value-added segments, such as building products and some distributor coilstandard 3003 and 5052 items, for examplecould be marginalized, Gamba said. "I imagine those would be areas where mills might try to replace that volume with higher-value-added heat-treat production."
While a rise in automotive shipments could lift all boats, one threat is common alloy sheet and coil imports from Indonesia, which have ramped up in 2013, and material from China, which also is ticking up, Gamba said, questioning whether that material is coming into the North American market at fair prices. While value-added marketsManitowoc, Wis.-based Skana Aluminums nicheremain healthy and the volume it has sold has increased, prices on commodity coil have been impacted by import pressure and domestic mills responding to that pressure, he said.
"There has definitely been some financial damage to some mills," Gamba said. "Were not filing anything yet. But were in the initial stages of talking to other U.S. producers about whats going on here with the potential of an anti-dumping suit."