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Aluminum not priced out of auto market: exec

Keywords: Tags  Novelis, Tom Boney, aluminum, Bernstein Investment Research & Management, Ford Motor, Volkswagen, Acura, steel auto

NEW YORK — Novelis Inc. lambasted an analyst’s claim that aluminum usage in automotive production is unlikely to exceed steel usage until cost efficiencies improve.

"It’s simply not credible to suggest aluminum is getting priced out of the auto market at the very moment when aluminum is winning historic gains in automotive," Tom Boney, vice president and general manager of Novelis’ North American automotive business, told AMM in response to a report issued by Bernstein Investment Research & Management senior analyst Paul Gait.

If "steel can do everything aluminum does but cheaper, how do you explain aluminum’s more than 40 years of uninterrupted market penetration growth?" Boney asked.

The report claims that aluminum demand is at risk largely due to high costs associated with establishing infrastructure used to manufacture and service automotive aluminum.

"Even at reduced aluminum prices, any automotive manufacturer looking to substitute steel with aluminum is faced with high retooling costs and higher manufacturing costs vs. steel," Gait said in the report, adding that steel demand will continue to outpace aluminum demand until the associated costs of aluminum manufacturing can be significantly reduced.

However, Boney said that aluminum usage in North America is likely to grow exponentially over the next decade.

"Due to its performance, efficiency, sustainability, safety and durability advantages, auto aluminum is at an all-time high, and a survey of automakers themselves confirms its use is expected to at least double by 2025," he said.

Meanwhile, Gait predicted in the report that the majority of global growth in automotive production will occur in emerging markets, where advanced aluminum technologies can be largely cost-prohibitive. "The growth from these emerging markets accounts for all expected growth in global automotive production, and it is likely virtually all of it will be heavily reliant on steel," he said.

Chinese and Indian automotive manufacturers are looking to move to high-quality materials, "but this shift is almost certainly going to be in favor of high-quality steel before any move to aluminum," he added, noting that relaxed emissions standards in those countries has led to an environment where manufacturers are not pressured to "reduce weight and improve efficiency."

If there is a major switch out of steel and into aluminum, "we are much more likely to see this in Europe and the U.S.," Gait said, describing these as "low to no growth" markets over the next decade.

"We’re even seeing a substitution out of aluminum back into steel by higher-end manufacturers, including Volkswagen (AG) and Acura. The VW Golf 7 design replaces aluminum with high-tensile steel, which is up to six times stronger than conventional steel," Gait said.

The argument against aluminum growth runs counter to aluminum usage by several major manufactures, including Dearborn, Mich.-based Ford Motor Co., which recently announced plans to transition a number of models to aluminum from steel, including its F-150 pickup truck (, Jan. 13).

"While newer steels simply cannibalize more traditional steel products, high-strength, low-weight aluminum alloys are gaining on both," Boney said. "The unveiling of the aluminum-intensive 2015 Ford F-150 signals aluminum’s ascension in mass market vehicles, with much more to come."

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