Aluminum Demand May Gain 10% Over Next 5 Years, Novelis Says

Oct. 11 (Bloomberg) -- Aluminum demand may climb by 8 percent to 10 percent annually over the next three to five years on buying from Asia, led by China, and as more of the metal is used in cars and cans, according to Novelis Inc.

“We are seeing some demand increases in automobiles and we continue to see year over year increases in terms of consumer electronics, cans and transportation and construction alike,” Philip Martens, chief executive officer of the company that turns aluminum into products for Coca-Cola Co. and Ford Motor Co., said in an interview today in Seoul. Prices may be “moderate” in a range between $2,300 and $2,500 a metric ton over the next six months, Martens said.

Increased demand may help lift aluminum prices which have fallen about 10 percent this year, the smallest drop among the six industrial metals traded on the London Metal Exchange, amid concerns that the global economic slowdown may cut demand for raw materials.

“If you go out for five years, we see a fantastic outlook for aluminum,” Martens said. Novelis will expand its rolling capacity by 33 percent by 2014 or 2015 and remains committed to the plan, he said.

Aluminum will have the biggest annual demand increase among industrial metals through 2015 as its surplus turns to a shortage, according to researcher CRU. Consumption will outpace supply in 2015 as demand grows an average 7.6 percent a year, Paul Robinson, CRU non-ferrous metals group manager, said Oct. 3.

China Operations

Novelis expects Asia to become its biggest market by about 2017, overtaking North America and Europe, Martens said. It will ultimately seek rolling operations in China, he said.

“The fortunate thing is that markets here are growing dramatically,” Martens said. “We see some significant growth opportunities in China.”

Alcoa Chief Executive Officer Klaus Kleinfeld said in July global aluminum demand will increase 12 percent in 2011 and double by the end of the decade as Asian countries build more office blocks and buy more aircraft, cars and trains.

“Shifting demand” is also driving growth in mature markets such as the U.S., where the auto sector is moving towards light-weight materials, Martens said. “Aluminum is just one of those materials at right place and right time.”

Fuel Economy

President Barack Obama in July announced that he would raise the fleetwide fuel-economy average for passenger vehicles to 54.5 miles per gallon by 2025 as part of his plan to reduce dependence on foreign oil. Global sales of cars and light commercial vehicles will rise 4 percent this year, and a further 10 percent in 2012, Westlake Village, California-based JD Power estimates.

Novelis plans to double its global capacity for auto products to about 400,000 tons by 2015, it has said. The transportation industry accounts for about 26 percent of aluminum consumption, according to the LME website.

The U.S. unit of Hindalco Industries Ltd., India’s largest aluminum maker, supplies more than half of all flat-rolled aluminum products used by the automotive sector to make parts such as doors and roofs, according to the company.

Aluminum for delivery in three months dropped 1.2 percent to $2,232 a ton on the LME at 6:49 p.m. Seoul time.