Aleris sees strength in auto, aero, NA building sectors

Aleris International Inc. has high hopes for the rest of 2013 thanks to recent expansions, a strong outlook for the automotive and aerospace sectors, and a pick-up in North American building activity.

The aluminum company sold approximately 140 tonnes of plate from its new rolling mill in Zhenjiang, China, in the first quarter, generating approximately $1 million in revenue, executive vice president and chief financial officer Sean Stack said in a conference call May 9.

The facility, expected to have hot metal capacity of 250,000 tonnes per year, will be able to produce 35,000 tonnes of value-added commercial plate in its first phase, chairman and chief executive officer Steven J. Demetriou said. Initial production will be aimed at the engineering, transportation and shipbuilding sectors, he said. The mill will continue to ramp up production of commercial heat-treat and non-heat treat plate throughout 2013 to fulfill orders in Asia, Europe and North America, he said.

Meanwhile, the plant has begun the qualification process with several major global aerospace customers and is expected to start selling aircraft plate by the second half of 2014, Demetriou said.

While backlogs at major aircraft producers remain at “record levels,” the aerospace supply chain is “dealing with a bit of an inventory overhang” in the short term, Demetriou conceded. But he stressed that growth fundamentals for rolled products, at 6 percent per year through 2016, remain robust.

Given that expected demand growth, the Cleveland-based company is approaching its current capacity limits in Europe and will therefore be constrained in its abilities to grow at the same rate as the aerospace sector in the second half of 2013, Demetriou said. That situation should be alleviated when the Zhenjiang rolling mill is selling aerospace-qualified material, likely by the second half of 2014, he estimated.

On the automotive front, light-vehicle build rates are expected to grow by 3 percent in North America in 2013 even as they slip by the same amount in Europe, Demetriou said. But tougher government-mandated fuel economy standards should boost aluminum demand in the sector overall, a trend which should benefit the company’s expansion of wide auto-body sheet capacity in Belgium (amm.com, March 14), he said.

And on the building front, steady gains in North American housing construction should be good for Aleris, which Demetriou characterized as one of the largest suppliers of sheet to the building and construction sector. “We have the capacity to grow with further recovery,” he said.