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Oct. 16, 2013

Despite Future Investment, Aluminum Supply Could Tighten
 
Despite the planned additions to aluminum sheet capacity to serve growing demand in automotive, customers in other markets could still find aluminum products in short supply in the future, warned experts during a press roundtable at last week’s Aluminum Association Fall Meeting in Pennsylvania.

Alcoa, New York, is investing almost $600 million to ramp up its rolling capacity to meet the expected surge in demand from automobile manufacturers, who continue to seek ways to take weight out of their vehicles and improve fuel economy. A similar investment program is ongoing at Atlanta-based Novelis.

Industry executives believe that with adequate planning, in conjunction with the carmakers, aluminum makers should be able to grow capacity to meet their requirements. However, as more emphasis is placed on the aluminum sheet market, other end markets may see tightness at various times down the line.

“Between now and 2018, as some very large-volume car programs come on line, there’s some potential for spot tightness to develop as we’re building out this capacity,” said Randall Scheps, a director at Alcoa. “It won’t match exactly with the growth in demand, so I think you’ll see some tightness at points in the future.”

Moreover, the emergence of new alloys to meet the particular needs of automakers may open new markets, as engineers discover new uses for these targeted products. “When you develop a new alloy, you do it for something specific, and the car business is pulling us right now. But then other customers see how this alloy is put together, or how it looks, and it can feed a new product,” says Étienne Jacques, chief operating officer of Montreal-based Rio Tinto Alcan Primary Metal North America.

While the industry anticipates some future tightness in the sheet market, it also faces some genuine availability issues today on the raw materials front. Aluminum scrap is in short supply domestically, creating issues for the suppliers of secondary aluminum.

“Traditional items that would be consumed by secondary are being shredded and sent to mills direct,” says Garney B. Scott, president of Waverly, Tenn.-based Scepter Inc., a secondary aluminum recycling and trading company. “There’s a lot of capacity built out to support the secondary aluminum industry and it’s looking for raw materials that are nonexistent.”

Scott noted that while imports of scrap have risen slightly in the face of increased demand, the decrease in exports tells the story more clearly. Exports of aluminum scrap have fallen by 325 million pounds compared to 2012. “You’re putting a lot of pressure on these plants to find more sources, which don’t exist. If you’re recycling a very high percentage of the overall potential scrap that’s available to make the product, you have to use primary aluminum.”

Adding to the scrap shortage is a depletion of inventories, as a high percentage of obsolete cars and building materials have already hit the shredders, Scott said. In addition, downstream aluminum users have become more efficient in their processing, generating less scrap.

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Thursday, April 17, 2014