The U.S. market for aluminum sheet is expected to be up fivefold
this year from 2012 with the development of vehicles like Ford Motor
Co's <F.N> next generation F-150 full-size pickup truck, a more
aluminum intensive model that will be shown Monday at the Detroit
Demand is expected to continue its surge as automakers look to slash
vehicle weights to boost fuel efficiency, industry executives and
"The one thing that has proven itself to be accurate is that any
forward forecast of the use of aluminum in automotive will change
upward," Phil Martens, chief executive of aluminum provider Novelis
Inc <NVLX.UL>, said in a telephone interview.
The U.S. market for aluminum sheet, which stood at less than 200
million pounds in 2012, is expected to hit 1 billion pounds this
year, and then double from there by 2020 and reach 3.2 billion to
6.4 billion pounds by 2025, according to independent industry
analyst Lloyd O'Carroll.
Other vehicles using a lot of aluminum include Land Rover's <TAMO.NS>
Range Rover SUV, Volkswagen's <VOWG_p.DE> Audi A8 sedan, Daimler's <DAIGn.DE>
Mercedes Benz CLA sedan, General Motors Co's <GM.N> Chevrolet
Corvette sports car and Tesla Motors Inc's <TSLA.O> Model S electric
Novelis, along with Alcoa Inc <AA.N>, dominates the U.S. aluminum
market, a trend that should continue for the time being as both
companies pour hundreds of millions of dollars into expanding
capacity to meet demand.
Analysts and industry officials said growth in the United States is
exponential because consumers' preference for bigger engines and
larger vehicles at a time of rising fuel economy requirements and
lower emission standards has forced automakers to push for greater
weight reductions in their vehicle designs than they can get from
high-strength steel alone.
"If you really want to save a lot of weight, like on a pickup truck,
you really have to go with something lighter than steel to take 700
pounds out," said Dick Schultz, managing director of the auto
practice at research firm Ducker Worldwide.
U.S. government standards mandate that by 2025, automakers must
increase corporate average fuel economy (CAFE) to 54.5 miles per
gallon, up from 35.5 mpg by 2016.
The key question is whether the industry can keep up with demand,
industry officials and analysts said. If not, some automotive
customers could be caught short, lacking sufficient aluminum for
their next-generation of lighter-weight cars and trucks.
Aluminum executives said they need two to three years advance notice
to meet demand to give them enough time to expand existing plants or
build new ones. If automakers do not effectively communicate their
needs, shortages could develop, analysts and industry officials
"You could have pinch points develop if all of a sudden the auto
industry rolls out a set of designs that are heavy in aluminum, if
this transformation that we see taking place gradually occurs more
quickly," said John Mothersole, director of research for the pricing
and purchasing service at IHS.
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Nevertheless, Mothersole and others do not see it becoming a
"If the automakers make the decisions quickly, then it will work. If
the automakers delay the decisions too long, then some could have
issues," said Pierre Vareille, CEO of Dutch aluminum products maker
Constellium NV <CSTM.N>, which intends to announce its plans for
entering the U.S. aluminum auto market in the first quarter.
Constellium has an aluminum plant in West Virginia that serves
Certainly, the aluminum suppliers' customers have faith.
"As we work to lightweight our vehicles, our use of aluminum and
other materials continues to grow," said Doug Parks, vice president
of GM's <GM.N> global product programs. "We stay very close to our
suppliers to be sure they can meet our growing needs, and we're
comfortable they will."
The growth in demand has Novelis and Alcoa spending big.
Last month, Novelis said it would invest $205 million to build
aluminum finishing lines at plants in New York and Germany. The
company also is finishing construction of a plant in China this
Novelis expects the auto industry to account for 25 percent of its
business in two years, up from 6 percent two years ago as it shifts
away from aluminum beverage cans, Martens said. Down the road, that
could hit 50 percent.
Alcoa is on the cusp of completing a $300 million expansion
dedicated to the auto sector at its Iowa plant. It also is building
a factory in Saudi Arabia this year and will finish a $275 million
expansion at its Tennessee plant next year.
"We're in constant communication with automakers about available
capacity," said Alcoa's head of global marketing for automotive,
Randall Scheps. "Every customer wants to know how much they can
Customers are clamoring for more, as the aluminum suppliers have
already sold virtually all of their added capacity even if those
plants are not yet online.
"The era of 'Build it and they will come' is over," analyst
O'Carroll said. "Companies are not going to add capacity with volume
and (profit) margin commitment."
(Reporting by Ben Klayman in Detroit;
editing by Leslie Adler)
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