NEW YORK North American automotive aluminum sheet producers believe that stepped-up demand could lead to the addition of several wide hot mills in the United States over the next decade as current capacity is insufficient.
"There have been multiple announcements made to serve growing demand from major auto manufacturers, including Ford (Motor Co.), (General Motors Co.) and Toyota (Motor Corp.)," Wes Oberholzer, president and chief operating officer of Muscle Shoals, Ala.-based Wise Metals Group LLC, told AMM. "However, nobody has announced any increases to wide hot mills in North America, and nearly all the wide hot mills are running at nearly full capacity."
Despite the costs associated with building a new wide hot mill, Oberholzer believes spiking demand will lead to the construction of at least one new hot mill in the next five years. "Everyone is anticipating explosive auto growth. The market will find an answer, and it will likely be a combination of (aluminum) imports and the construction of one or two additional wide hot mills to increase capacity," he said.
Moreover, some industry analysts believe that current automotive sheet capacity is not sufficient to meet increased demand within the sector, which could result in profitable growth opportunities for aluminum producers able to increase capacity rapidly.
"We believe that the structural trend of automotive lightweighting is an important demand driver for aluminum going forward," analysts from New York-based Bernstein Research said in an Aug. 28 report, adding that aluminum rollers in North America and Europe likely will see significant demand increases. "Automotive sheet is a high value-added product, requiring technology and expertise that is not going to be easily replicated by Chinese aluminum rolling players."
Others, including Atlanta-based Novelis Inc., said optimization of existing assets and product portfolio adjustments will ensure sufficient hot mill capacity to serve automotive needs.
"With the dramatic growth potential we see for automotive sheet, it is certainly possible that new hot mill capacity will be required in the future," a Novelis spokesman told AMM. "However, Im not prepared to speculate on that."
The spokesman added that Novelis is forecasting global demand for aluminum sheet in automobiles to grow at a compound annual rate of 30 percent for the next several years (amm.com, Aug. 7). "As a percentage of Novelis annual shipments, we expect automotive to grow from the current 9 percent to about 25 percent by 2020," he said, adding that the company is "prepared to make the investment needed to keep up with that demand."
Pittsburgh based-based Alcoa Inc. expects demand for automotive aluminum sheet in North America to quadruple by 2015 and increase tenfold by 2025 from 2012 levels. To capture that growth, the company has invested $300 million in an automotive expansion in Davenport, Iowa, which is now complete (amm.com, Jan. 14), and $300 million in a second automotive expansion in Tennessee, which is on schedule for completion in mid 2015. Alcoa said in July that this added capacity will grow auto sheet revenues to $1.3 billion in 2018, up sixfold from 2013.