Aluminum demand to grow modestly in 2010: Novelis

NEW YORK Mon Mar 8, 2010 9:24pm EST

NEW YORK (Reuters) - Novelis Inc NVLX.UL estimates global demand growth for aluminum at a modest 4 percent pace in 2010, with the emerging markets driving the growth, and it expects the aluminum price to reflect that view with a slight positive uptrend.

Speaking to Reuters Mining and Steel Summit on Monday, Chief Operating Officer Philip Martens said, "We do see the outlook in the global marketplace picking up, but it depends on the region. It's slightly more on the optimistic side than four or five months ago."

The COO said Atlanta-based Novelis views aluminum as a long-term growth business.

"Off 2009 levels, in terms of a compounded annual demand growth rate, we probably would expect to see something like 4 percent," said Martens.

Order books at Novelis, a subsidiary of Hindalco Industries Ltd (HALC.BO) in India and focuses on flat-rolled aluminum products, have turned up quite a bit in recent months. Novelis is the largest supplier of aluminum sheet to auto manufacturers in North America and Europe.

Aluminum demand has increased the most in emerging countries, driven by greater urbanization and increased buying power by people moving into the working class.

Martens said that with an outlook that is stable and a long-term view of growth, Novelis was bullish on the aluminum market worldwide, a change from 6 to 9 months ago when the best outlook would have been cautious and almost pessimistic.

The aluminum price has gone up about 70 percent in the last six months to a trading range between $2,000 to $2,100 per tonne. Novelis sees a slight improvement in prices going forward, with London Metal Exchange inventories not flooding the market, the COO said.

In four months that view could be different, he said.

"As the markets recover, there will be demand pull from people like ourselves and demand pull from our customers. Everyone is working to have that as well matched as possible, but it should lead to an upward pull on the price."

Novelis looks for 6 to 8 percent overall aluminum consumption growth in South America, coming largely from new demand in beverage cans, primarily for beer, which is running at a faster 8 to 10 percent growth rate.

"Where we are right now, we are seeing some markets go flat out, like in South America and our Asian operations. And we project that to continue going forward," said Martens.

For industrial products, new jobs in Brazil should lead to more aluminum products, and vigorous capital investment in Brazil, Argentina, and Venezuela's automotive sectors is also boosting the need for aluminum sheet.

In Asia, Novelis is seeing 6 to 10 percent pick up in aluminum use, including the Middle East, from a similar mix.

The fastest growing sector worldwide is coming from consumer electronics, like LED televisions, cameras, laptops, and cell phones, that are mostly manufactured in Asia, with short cycle length leading to double-digit growth.

Martens added that automotive and industrial product sectors' aluminum demand remains reasonable in Asia.

Novelis has a more stable outlook of the North American market with 1.5 to 2.5 percent aluminum demand growth rate, where its can position remains strong and the auto sector is starting to increase. But other markets, like industrial products, have been flat to struggling. Novelis projects small growth in 2010 North American shipments.

In Europe, Novelis looks for 1 to 2 percent demand growth coming from increases in auto production, canned stock, and lithography sheet as advertisement picks up.

Martens characterized the outlook for Europe as cautious, with uncertainty about economic recovery, though shipments have increased slightly.

(Reporting by Carole Vaporean; Editing by Marguerita Choy)

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