Auto makers’ aluminium orders fall short of expectations, says Novelis CEO

Auto makers are still ordering aluminium for their cars, but not as much as hoped, the chief executive of one of the world’s top aluminium companies said in an interview.

“The market got a little bit ahead of itself,” said Steve Fisher, who last year took over as CEO of Novelis, maker of over half the world’s automotive sheet aluminium.

The announcement by Ford Motor Co. a couple of years ago that it would make its best-selling F-150 out of the metal had aluminium executives salivating and predicting an avalanche of new orders.

But as steelmakers countered with new lightweight steels and lower oil prices lessened the push for lighter cars, auto makers have been hesitant to convert more vehicles to aluminium, and the metal is still niche compared with steel.

Instead, said Mr. Fisher, customers now "want a range of materials” to make their vehicles lighter.

An example of auto makers’ approach, he said, is General Motors Co.’s new Cadillac CT6. Novelis this month announced that it is a supplier for the vehicle, which is 62 per cent aluminium, and uses “advanced joining techniques” to combine that metal with steel and other materials. That makes it 220 pounds lighter than if it used steel, says Novelis.

New regulations meant to reduce automotive emissions are driving a push by auto makers around the world to make cars lighter. Aluminium offers substantial weight savings compared with steel, long the main ingredient in cars, although it is typically three times as expensive.

Novelis, a unit of India’s Hindalco Industries Ltd., has made one of the biggest bets on automotive aluminium, spending over $550 million since 2011 to triple capacity, adding five production lines, and upgrading a plant in upstate New York to supply the F-150. On Monday, it will formally commission a third line at the New York plant.

Novelis produced 788,000 tons of rolled sheet in the quarter ending March 31, up 4 per cent from a year earlier, its highest quarterly output ever, along with a net profit of $29 million, the same as a year before. The company says it now has over 50 per cent of the global automotive aluminium market.

Mr. Fisher said the company still predicted a compounded annual growth rate for automotive aluminium of 20 per cent through 2020. The lightweighting, he said, has been driven by three factors: “performance of the vehicles, global fuel economy regulations, and appetite for electric vehicles.” Tesla Motors Inc. has been successful making electric cars out of aluminium, Mr. Fisher noted.

The company faces some headwinds, as global oversupply has dented aluminium prices. Even though shipments increased, Novelis posted an 11 per cent drop in revenue to $9.9 billion in fiscal 2016, as average base aluminium prices dropped 16 per cent.

Mr. Fisher said the U.S. beverage can market has been “relatively flat” as Americans drink fewer fizzy sodas because they aren’t as healthy as bottled water, but that the market was improving in Asia and Europe, and could be helped by the Euro 2016 soccer championship.