China Aircraft Production to Boost Aluminum Demand, Aleris Says

Bloomberg Jan 19----Aluminum plate consumption by global aircraft makers may rise 15 percent a year as China builds its first passenger planes to break Airbus SAS and Boeing Co.’s hold on the market, according to Aleris International Inc

“We estimate about 15 percent per year,” driven by demand for China’s first narrowbody passenger plane, the C919, Sean Stack, executive vice president and chief financial officer of Aleris, said yesterday, without giving a timeframe. Aluminum comprises about 80 percent of a plane’s weight, according to Aleris, the world’s third-largest supplier of the material.

Commercial Aircraft Corp. of China is challenging Boeing and Airbus in the $70 billion-a-year global aircraft market. Aleris yesterday started building a $300 million aluminum rolling venture in the city of Zhenjiang, 250 kilometers from Shanghai, to compete with Alcoa Inc. and other companies in supplying the plane maker, known as Comac, which expects to sell more than 2,000 C919s worldwide over 20 years.

“One third of the world’s newly produced airplanes will be used in China between now and 2029,” Steven J. Demetriou, Chief Executive Officer of Aleris, said at a briefing in Zhenjiang. “We have an agreement which will make us a major supplier to Comac over many years to come.” He didn’t elaborate.

The C919, which has 166 seats in its standard version, will compete with Boeing’s 737 and the Airbus A320. The jet is scheduled to make its maiden flight in 2014 before entering service two years later.

Beachwood, Ohio-based Aleris, which emerged from Chapter 11 bankruptcy in June, said in August that it was considering expanding in China to boost revenue and may make acquisitions.

Global Demand

Global aluminum demand may rise 8 percent this year, with Chinese consumption likely rising 12 percent, United Co. Rusal, the world’s biggest producer of the light metal, said on Jan. 18.

Aleris said it will own 81 percent of the new venture, which will have annual capacity of 250,000 metric tons of aluminum plates. Zhenjiang Dingsheng Aluminum Industries Joint- Stock Co., a local partner, will hold the balance, Aleris said.

Shipments to customers from the new plant will start by the fourth quarter of next year, Aleris said.

The venture, which will supply Comac as well as Boeing and Airbus plants, has received all the required government approvals, Demetriou said. The investment comprises loans offered by Bank of China Ltd., plus cash he said, without giving details.

Shanghai-based Comac is working with overseas suppliers on the C919, including CFM International Inc., a venture between GE and Safran SA that has won a $10 billion engine contract. Other suppliers include Honeywell International Inc., United Technologies Corp. and Parker Hannifin Corp.

Alcoa, the largest U.S. aluminum producer, agreed with Comac in Oct 2009 to jointly study aluminum structural concepts, designs and alloys for the new C919 jet.

Aleris may further expand the Zhenjiang venture to make aluminum sheets, which are thinner than plates, to supply automakers, Demetriou said. It’s already running a plant in the northern city of Tianjin to make aluminum extrusions used in train car bodies and suspension parts of vehicles.