US-based aluminum sheet maker Novelis is preparing itself for a 35% hike in global flat-rolled aluminum product demand over the next decade, driven by economic development, material preference and sustainability, Steve Fisher, chief financial officer, said Thursday.
"We are expecting tremendous growth over the next five-10 years," Fisher said at Dahlman Rose's Global Metals, Mining and Materials Conference in New York, available via webcast.
Most of this growth will be driven by Asia -- due to urbanization -- the Middle East, North Africa and South America. Western/Eastern Europe and North America also will see growth, returning to pre-recession levels, said Fisher.
Between fiscal 2009 and 2014, Novelis is expecting demand growth of just under 10% in transportation, 10% in electronics and 3%-5% in cans. The North American can market is expected to be flat over the next five years, with maybe a slight decline, but that will be made up in substitution, Fisher said. The South American can market is expected to see 8%/year growth.
"We are seeing strong growth in aluminum demand in all four regions -- North America, Europe, Asia and South America," he said.
To support this growth, Fisher said Novelis is increasing its capacity by 20% by fiscal 2014 through flat-rolled product expansions in Brazil and debottlenecking. Novelis is expecting a 3%-4% capacity increase from debottlenecking and about a 220,000 mt increase from its expansion in Brazil.
Novelis in May said it will spend about $300 million to expand its aluminum rolling operations in Pindamonhangaba, Brazil, in response to the growing demand for its products in South America. The expansion will increase the plant's capacity by more than 50% to over 600,000 mt/year of aluminum sheet. The project, which includes the addition of a third cold rolling mill, a new ingot casting center, a new pusher furnace for the hot rolling mill and various ancillary improvements, is expected to come on stream in late 2012.
Novelis has seen "tremendous recovery" in North America and Europe, leading the company to be "running full out," Fisher said. While Novelis is operating at capacity, Fischer noted that assets have been rationalized and plants have closed over the past two years. "We are operating at full capacity with our current asset configuration," he said. "Our asset base is smaller today than in 2008."
On substitution, Fisher said Novelis is "seeing it in our primary areas of focus" -- cans, automotive and electronics. Every 1% movement to aluminum from other materials in cans in China can spur a 1.3 billion unit increase in consumption. "There is a significant amount of potential growth," he said.
In its second quarter of fiscal 2011 ended September 30, Novelis reported a 6% climb in shipments and a 16% rise in net sales to $2.5 billion.
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