Bloomberg News

Novelis to More Than Triple Aluminum Recycling on Car Demand

October 11, 2012

Novelis Inc., the largest supplier of flat-rolled aluminum products to the global auto industry, plans to more than triple recycling capacity by 2020 to meet increased demand.

The capacity may grow to 2.1 million metric tons by 2015 and to 4 million tons by 2020 from 1.2 million tons now, Derek Prichett, vice president for global recycling, said in an interview. Novelis, the U.S. unit of India’s Hindalco Industries Ltd. (HNDL), plans to make 50 percent of its products from recycled metal by 2015 and as much as 80 percent by 2020, from about 39 percent at present, Prichett said in Seoul on Oct. 9.

To meet the expanded recycling target, Novelis is building plants in Germany and South Korea and doubling capacity in Brazil, Prichett said. Aluminum demand for auto applications may grow at an average annual rate of 25 percent globally over the next five years, the fastest pace among major markets, he said.

“It’s a huge growth,” Prichett said, referring to the projected increase in auto-parts demand. “There’s been a very fast increase in that market in Europe and North America, but also it is growing very fast in Asia and in China.”

Aluminum futures fell as much as 0.8 percent to $1,993 a ton on the London Metal Exchange today, dropping below $2,000 for the first time since Sept. 7, and traded at $1,998 at 2:47 p.m. in Singapore. Alcoa Inc. (AA:US), the largest U.S. producer, on Oct. 9 cut its global demand forecast for this year to 6 percent growth from 7 percent, citing slowing Chinese demand.

‘Very Attractive’

While there are concerns about the economic slowdown in China, the world’s biggest user of aluminum, the Asian country is still “very attractive” in the long term, Prichett said. The country accounts for about 40 percent of global production and demand, according to an estimate from researcher Brook Hunt.

“When we say slowdown in growth, we are talking about slowdown to maybe only 6 to 8 percent growth instead of 8 to 10 percent growth,” he said. “If you compare to say North America at less than 2 percent growth, the Chinese market is still growing very fast even at the reduced expectations.”

The Asian Development Bank cut its forecast for China’s economic growth this year to 7.7 percent from 8.2 percent. Manufacturing in China contracted a second month for the first time since 2009, a report showed last week.

The beverage-can market may grow at an average of 4 percent to 6 percent a year over the next five years, led by Asia and Brazil, Prichett said. Demand in Asia for each of the auto and can markets may grow faster than global averages, Prichett said.

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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