Aleris considers expansion in US to meet rising automotive demand

On 13th Jan, Steven Demetriou, Chairman & Chief Executive of Aleris International, said that they are considering the expansion of its automotive aluminum capacity in United States. His positive outlook comes as the aluminum industry is struggling with the low London Metal Exchange (LME) prices, that is close to or below the many smelters' production cost, surplus global output capacity and shortage of scrap metal. The automotive sector is expected to compensate for the sluggish construction and packaging sector.

Although automakers have replaced the use of steel with lightweight aluminium and is considered "biggest opportunity since the 1970s". At the Detroit auto show, Ford unveiled its F-150 pick-up truck, that has body and load bed made almost of aluminum. This is the first of its kind for such a big-volume vehicle. This move was witnessed as a major victory for the aluminum market as it fights to gain market share from lower-priced but heavier steel.

Legislation requiring the deep cuts in Europe and U.S auto fuel efficiency is forcing the carmakers to reduce their vehicle weight. The rising demand for vehicles in the emerging economies such as China and India is driving the market.

"The industry is looking at how to capitalize on this. We are looking at new capacity in the U.S. for this growth," he said. He did not want to talk further on the plans, but suggested that Aleris may look for a secure a long-term partnership with one of the major automakers. Car makers requiring auto body sheet produced at hot-rolling mills will need local capacity, he said.

The steel industry is also engaged in the development of new high-tech products in the long term to defend its share of auto sector against aluminum. Though Aluminum is expensive, but a third of the conventional steel’s weight. But aluminum firms foresee significant area for growth, as analysts say metal accounts for about 8 percent of the typical car’s weight versus nearly 60 percent for steel.

The outlook will foster growing confidence about the auto sector, as overcapacity in packaging forces companies to retreat from making lower-margin products like foil. Novelis has commissioned two completely new automotive sheet finishing lines in Oswego, New York and is even building an auto sheet finishing plant in Changzhou, China which will start its production process in the middle of 2014 with capacity of 120,000 tonnes per year. Seems a lot the aluminum industry has in their pipeline!