TOKYO (Reuters) - Japanese aluminum products makers such as UACJ Corp and Kobe Steel are boosting output capacity in the United States in a bid to snare market share as automakers turn to the lighter metal to meet stricter environmental rules.
The move is set to intensify competition with rivals such as Alcoa that are aggressively investing in the world’s second-biggest automobile market, and with steelmakers defending their traditional auto business through the use of lighter products.
UACJ, Japan’s biggest rolled-aluminum products maker, began production of sample aluminum sheets for autos last month at a new $150 million plant in Kentucky, built with Dutch partner Constellium, with an annual output capacity of 100,000 tonnes.
The company also spent $155 million earlier this year to buy SRS Industries, a Michigan-based U.S. manufacturer of automotive aluminum structural materials.
“We are also considering an expansion of the joint venture with Constellium, possibly adding two more finishing lines to triple capacity to meet rising demand,” UACJ Senior Managing Executive Officer Takayoshi Nakano told Reuters in an interview.
Faced with tougher environmental rules, car makers in the U.S. and Europe are turning to aluminum over steel for exterior body panels and structural components. Aluminum can cut the weight of a car by about 30 percent and can be more easily recycled, reducing its life-cycle emissions.
While aluminum has been used in premium-brand cars for decades, the latest moves by fabricators follow the success of Ford Motor’s best-selling F-150, its first aluminum-body pickup truck.
UACJ is betting aluminum sheet used in passenger vehicles will rise at least ten-fold to a million tonnes by 2025, after automakers in the United States start adding them to popular sedans from around 2019 or 2020.
Nakano said the company aimed to win about 20 percent of the U.S. aluminum automotive sheet market.
“Our expectation is the trend in the U.S. and Europe to use aluminum for auto bodies and structural frames will eventually spread to other areas like China and Southeast Asia where we want to take the lead,” he said.
Kobe Steel, which makes both aluminum and steel, said in May it will invest $46.7 million to build an aluminum plant in Kentucky to build parts for car frames and bumpers, and also wants a plant for aluminum sheets.
“We are still looking to invest in the U.S. market to make aluminum sheets, although the timing is not known yet,” Kobe Steel President Hiroya Kawasaki told a news conference on Tuesday.
Other companies are also boosting their automotive sheet capacity to meet expected demand growth, even though aluminum typically costs at least twice as much as steel.
Alcoa, which has been shutting aluminum smelters due to falling prices, completed a $300 million expansion in 2014 at its Davenport, Iowa sheet products plant and raised capacity at its rolling mill in Alcoa, Tennessee in 2015.
In 2013, top rolled aluminum producer Novelis [NVLX.UL], a unit of India’s Hindalco Industries, said it would spend more than $300 million to boost capacity at its automotive sheet plant in Oswego, New York.
“We expect aluminum use per vehicle will grow to 500 pounds (227 kg) by 2025 from 390 pounds in 2015,” said Tom Boney, chairman of the U.S. Aluminum Association’s transportation group, citing tougher emission targets and wider consumer acceptance in terms of safety.
Investment in the Japanese market, however, is limited due to close ties between automakers and steelmakers, who have focused on developing lighter, stronger steel, along with improving fuel efficiency by upgrades to engines and parts.
Nippon Steel & Sumitomo Metal Corp, Japan’s top steelmaker, has developed a 25-percent stronger high-tensile steel, which means automakers can use less to cut weight, and plans sales around 2020, a spokesman said.
But Kobe Steel’s Kawasaki said Japanese automakers are under pressure to further cut vehicle weight and are expected to adopt aluminum for structural frames from 2020 or 2021.
Reporting by Yuka Obayashi, additional reporting by Joseph White in DETROIT; editing by Aaron Sheldrick and Richard Pullin