Novelis ramps up auto and specialty, exits foil

Atlanta-based Novelis, a subsidiary of Aditya Birla Group's Hindalco Industries, plans to grow its auto and specialty aluminium businesses to a quarter each of its overall shipment size, closing down its foil and other businesses.

The auto and specialty aluminium are currently 9 per cent and 12 per cent, respectively, of the overall shipment. The foil and other businesses are second largest of its shipment size (or about 17 per cent) after its beverage cans business (62 per cent).

By 2020, the company's beverage cans' shipment share will shrink to 50 per cent, while auto and specialty will grow to 25 per cent each, according to the company's presentation.

Novelis had closed down its plant in Brazil that produces primary aluminium at the end of December 2014 for focusing on high-margin products. According to an official, the company is transforming from a linear business model to a closed-loop business model focused on recycled content.

The closure was driven by systemic issues affecting the entire primary aluminum industry in Brazil impacting cost of operations and overall competitiveness.

The trend is that the manufacturing capacities are shifting from the western countries to Asia and the Middle East to take advantage of the lower operating costs.

Overall, Novelis shifts its portfolio to premium products for dealing with the cost factors. The company has recently added auto finishing lines in China and the US for accelerating the production.

China's first plant dedicated to the production of heat-treated aluminum automotive sheet was commissioned last October. With this, Novelis is the only company to produce automotive aluminum sheet in all three of the world's major automobile producing regions - Asia, Europe and North America.

Novelis made the aluminium body affordable to Ford Motor Co. by using recycled scrap instead of buying virgin aluminum mined from bauxite. At its Oswego plant in the US, Ford had built up its innovative F-150 pickup.

It is 317 kg lighter because its steel body panels have been replaced by lightweight aluminum, making it more fuel efficient as well.

The F-150 pickup is Ford's jewel in the crown, generating more than $20 billion in revenue annually and 40 per cent of its annual profits.

The company has achieved its mid-decade goal of 50 per cent recycled content in its products in the third quarter.

It intends now to grow the portfolio of high-recycled content products. The new recycling facilities in Germany and Brazil are ramping up the capacity.