By Diana Kinch and Francesca Freeman
LONDON--Aluminum demand is strong despite record-high
inventories of the metal, and will be further buoyed in coming
years by increased usage in the automotive and aerospace
industries, where it is winning ground over steel and copper in a
bid to lightweight vehicles and products, participants at CRU's
World Aluminum congress in London said.
"Demand's a great story," said Tim Reyes, president, Alcoa
Materials Management, part of aluminum producer Alcoa Inc. (AA),
which is investing heavily in expanding its rolling and processing
facilities, even while considering cuts to its primary metal
production capacity amid global oversupply. Processor Aleris
International Inc. and smelting and processing group Hindalco
Industries Ltd. (500440.BY) of India are also investing in
downstream production capacity in a bid to meet demand which is
expected to grow eightfold in the next decade in segments such as
autobody sheet.
Global consumption of aluminum is expected to continue growing
for three to four years at the current rate of 6% annually, led by
China, up from 5% growth in 2012 when total usage reached 47.26
million metric tons, according to CRU. Growing demand should help
whittle down global stockpiles of as much as 12 million tons, as
some aluminum producers cut metal production amid weak prices.
"Demand [for aluminum] is the bright spot; it's growing faster
than for the other major metals," said CRU Strategies managing
consultant Colin Pratt. "This is because of lightweighting in cars
and aeroplanes and rapid growth in emerging markets. Aluminum is
going into wheels, radiators, engines, including in luxury cars,
and replacing steel in body panels."
Aluminum usage is booming in automobiles and aeroplanes due to
legislative drivers to reduce emissions and increase fuel
efficiency, said Philippe Meyer, vice-president and chief
technology officer of Aleris Rolled Products Germany GmbH, an
aluminum rolled and extruded products producer.
"In the U.S. the Cafe legislation will introduce mileage targets
[per liter of fuel for cars] to reduce emissions by 2016 and we
will have the same kind of norms in the EU in coming years, and
there's similar moves in India and China," Mr. Meyer said.
"Aluminum autobody sheet consumption will multiply eight times over
the next ten years."
Current global consumption of autobody sheet is around 350,000
tons a year and the expected expansion will need to be supported
"with active investment," he said. Aleris is currently investing
$200 million in expanding capacity to meet demand, including in a
new aluminum cold rolling plant in Belgium.
Alcoa is investing $300 million in a new automotive sheet
production facility in Iowa and $275 million in a similar facility
in Tennessee to meet North American demand that should quadruple by
2015, Mr. Reyes said. Alcoa is also investing in automotive sheet
production at Ma'aden, a joint venture with the Saudi Arabian
government, he said.
Despite the emergence of ultralight steels for automotive
applications, aluminum is winning ground against steel among some
car producers. "We're coming in with a hurricane on aluminum, "
Adrian Tautscher, a project leader at Jaguar/Land Rover, told the
congress. Steel rivets will nonetheless stay in cars, he said.
The aircraft industry meanwhile currently uses some 360,000 tons
a year of aluminum extruded products and this will grow 5% a year
over the next five years as manufacturers also seek to reduce
weights and boost fuel efficiencies, Mr. Meyer said.
Urbanization in emerging nations is also boosting aluminum
demand, CRU said. In India, demand for the metal is growing 11% to
12% a year--similar to annual growth rates for aluminum in China--
particularly due to rapid electrical sector growth as new
aluminum-bearing transmission lines are built, said Hindalco's
chief marketing officer, Sachin Satpute.
"In India, the economy is growing 6% to7% a year, and aluminum
consumption is growing way above this because the power industry is
growing 12% to 15% a year, and that's still not enough [to meet
infrastructure demand]" Mr. Satpute said.
Hindalco is investing $9 billion to boost alumina output and
triple its primary aluminum capacity to 1.8 million tons a year in
an expansion to be completed 2015, which will also involve new
rolling mill capacity to meet demand from sectors including energy,
transport and packaging.
"Aluminum will be growing faster than copper at Hindalco," said
the executive of the Indian diversified industrial group.
Write to Diana Kinch at diana.kinch@dowjones.com or Francesca
Freeman at francesca.freeman@dowjones.com
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