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Novelis mulls capacity growth for automotive

Keywords: Tags  Novelis, Steve Fisher, General Motors, Ford, Midwest premium, CME Group, aluminum sheet, Nathan Laliberte

NEW YORK — Novelis Inc. expects the automotive industry to account for 20 percent of its product mix by 2017, but the company would have to consider significant investments in capacity to capture market share beyond its current contractual obligations.

"That 20-percent estimate is based on contractually committed volume," Novelis vice president and chief financial officer Steven Fisher told AMM in an interview. "We are certainly in a position to discuss other opportunities with major manufacturers, but in that sense, we would have to evaluate our overall capacity capabilities."

Novelis would need to add significant global infrastructure if Detroit-based General Motors Co. were to produce a mass-market aluminum-bodied pickup, Fisher said. "We do not yet have the capacity to handle a GM aluminum pickup truck," he said.

However, GM expects aluminum usage in mass-market vehicles to increase significantly over the next decade, GM engineer Susan Hartfield-Wunsch said during a panel discussion at AMM’s Aluminum summit, adding that capacity for aluminum sheet could be a "big issue" if the company decides to utilize the material on a large scale (, Feb. 19).

Material for Dearborn, Mich.-based Ford Motor Co.’s aluminum-bodied 2015 F-150 "has been flowing but is still in more of a test period," Fisher said. "We expect things to ramp up very quickly once Ford goes into full production and begins making deliveries to showrooms in the fourth quarter."

Efficient transportation of aluminum from Novelis facilities to Ford production plants will be a major logistical challenge over the next 12 months, he added. "It is a big challenge and one that we are very focused on putting all the resources we need into. We’re in good shape so far, but there is still a lot of work to be done."

Near-term headwinds facing the company—and its rapidly expanding automotive footprint—include volatile terminal markets and spiking Midwest aluminum premiums, Fisher said. "The extreme volatility (of the Midwest premium) is just really not good for anyone, especially our end customers," he said, adding that recent volatility had led to "an overall lack of market transparency."

Chicago-based CME Group Inc.’s new aluminum futures contract, which debuted May 6 (, May 6), could "go a long way" to reducing volatility if the contract becomes actively traded, Fisher said.

"We are supportive of the contract and think it will provide another view of the market," Fisher said, noting that Atlanta-based Novelis plans to take active positions in the contract. "We will absolutely utilize the contract once our risk management department completes its approval process," he said.

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