US sheet maker Novelis sees strong long-term aluminum outlook

US aluminum sheet maker Novelis is looking to a strong long-term outlook in the aluminum market, with automotive up almost 25%, specialty products up 6% and 4-5% in beverage can through 2015, said Nick Madden, senior vice president and chief procurement officer.

Speaking at the Platts Aluminum Symposium in Fort Lauderdale, Florida, on Monday, he said he saw structural global flat-rolled product demand growth of 6% or more from 2011-2015, largely driven by Asia, South America and the Middle East. That would add 6.5 million mt to flat-rolled product demand in the next few years.

"Even if the growth then slows to more traditional 4%, the market will be 30 million mt by the end of the decade," Madden said.

Madden noted that Novelis' current metal balance is one-third slab, one-third prime and one-third scrap, but "as our business evolves you will see scrap becoming the major component. In 2011 we are already up to 37%, and we expect this to surpass 40% in our next financial year."

He said there has been a lot of change in the industry in the last 10 years, with most of the rolling business now decoupled from formerly integrated companies. "A critical mass of rolling assets has now formed outside integrated companies, and we see the development of an active third-party slab market."

Madden said the third-party aluminum slab market is developing but that "slab casting casting needs to grow. The challenge for the industry is that the slab-casting capacity growth is not commensurate yet with the growth in [flat-rolled products]."

He said that more than two-thirds of the slab casting is in Europe and North America. According to Novelis estimates, slab represents about 18% of primary casting capacity, while prime is close to 50%.

"When we look at the 12 million mt smelter projects which are expected to come onstream in the next few years outside China -- the bulk being in Middle East and Asia -- we see the slab [capacity] shrinking, with just 1.5 million mt of capacity added," he said. "This will be offset by reductions in Europe of at least 400,000 mt, so slab capacity growth is not keeping pace with the [flat-rolled product] market."

Specifically by sector, in consumer electronics, "aluminum is all the rage," Madden said. " Not only do designers love the sleek look and feel, but aluminum casings save weight, remove heat and add to recyclability -- a major selling point as the electronics industry finally gets a handle on the tools and technology necessary to install sustainability in design."

In automobile manufacturing, the percentage of aluminum in cars has been steadily climbing for decades, Madden said. "Now, regulators are beating the drum for improved fuel economy and reduced emissions in a way that makes light weighting with aluminum an obvious part of the solution."

In packaging, "the aluminum beverage can still chills, tastes, stacks, trucks, seals and keeps better than any other product, including plastic and glass," Madden said. "And we've been getting better at manufacturing. Unit weight has declined 40% over the last 25 years without compromising strength or quality."

By region, Asia will be "by far the biggest market for aluminum flat-rolled products," with an additional 4 million mt added in the next few years," Madden said, also citing strong expansions in South America, the Middle East and Africa.

"There is likely to be a hiccup in Europe in the next 12 to 18 months, and we see the outlook for North America and Europe more closely aligned," Madden said. "Clearly we see a slowing in Europe in 2012 as Europe works through the debt issues, but this is compensated by continuing strong growth in other markets."

Madden concluded, "The compelling drivers of growth continue to paint a positive picture for the next four years. We will see some slowing in 2012 but the growth drivers are sustainable."