U.S. auto sales to drive aluminum demand -Novelis

NEW YORK Thu May 3, 2012 1:50pm EDT

NEW YORK (Reuters) - Novelis Inc. NVLX.UL, the world's largest maker of aluminum sheet, said strong U.S. automotive sales this year would help drive U.S. demand for products using aluminum at a pace consistent with an expected 2 percent growth in U.S. gross domestic product.

"We look at the U.S. economy, all things considered, as stable and running at about a 2 percent GDP, maybe 2.5 percent. Nothing exciting, but still growing," Chief Executive Phil Martens told Reuters in a recent interview.

He projected global aluminum demand growth of 4 percent to 5 percent in each of the next five years, which would exceed U.S. demand growth.

In the United States, the aluminum chief was particularly upbeat about the automotive sector's use of aluminum. He forecast that demand will grow dramatically over the next three to five years as the industry shifts to lighter materials to boost fuel efficiency and to reduce emissions.

"We've moved from let's watch this, to let's study it, we're not sure what the scale will be but its going to exceed our expectations. Now we're trying to figure out how to best support it long term," he said of the movement toward more aluminum use by automakers.

Martens also assessed consumer buying patterns in the company's two other main markets, saying beverage cans have been relatively stable for six months and consumer electronics demand continues to grow.

But he noted that U.S. consumers can be skittish.

"We still think the consumer in general has the ability to be scared. You have to be very cautious, because last year in the first half we were cruising along and then this debt ceiling debate came along and threw everyone for a loop," the CEO said.

Last summer, a debate over the debt ceiling threatened to derail U.S. government spending, which had many Americans cutting personal spending as they worried about their jobs and the overall economy.

He said consumers took about four to six months to regain their confidence and return to more normal spending habits.

Novelis has decreased its focus on the soft U.S. housing sector, he said. Over the last three years, it has sold or closed 10 facilities that do not fit its core strategy.

Though U.S. consumers have been drinking about the same amount of beverages in aluminum cans for at least six months, their electronics purchases keep growing and Novelis has seen a continued rise in sales into the consumer electronics industry.

The company supplies electronics products makers in southeastern China from its Korean and European operations.

He predicted a continued rebound in auto sales from 10 or 11 million units two years ago, although he was less optimistic than other analysts, who have predicted a 16 million seasonally adjusted annualized rate (SAAR) of vehicle sales this year.

On Tuesday, automakers reported U.S. auto sales rose in April to a 14.4 million annual rate. <ID: nL1E8G12LU>

"You have to look at that as the consumer is back in the market. Certainly, not at the pace of before the crash of 2008. But clearly there's increased buying power there," the CEO said.

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GRAPHIC: U.S. light vehicle sales

link.reuters.com/buz87s

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As part of its goal to tap the rapidly expanding Chinese auto industry, Novelis announced in mid-April plans to build a $100 million aluminum rolling facility in that country with full production of heat-treatment sheet anticipated for fall 2014.

With more aluminum being designed into vehicles and global auto demand projected to grow at a compound rate of 20 percent, Martens expects global aluminum consumption in the sector will rise at a compound annual rate of 25 percent over the next five years.

Last year, Novelis announced plans to expand its auto heat-treatment aluminum line for the U.S. auto industry. Even with the expanded capacity both in the U.S. and China, Martens said it may still fall short of the demand projected for the 2015 to 2020 time frame.

"Every time we've announced these expansions and we continue with the advanced design discussions with OEMs around the world--like Audi, BMW, and Jaguar/Landrover, we always come back to the table saying, 'We're probably short on capacity.'"

(Reporting By Carole Vaporean; Editing by David Gregorio)