Japan's aluminium fabricators beef up U.S. output, betting on rising auto use

UACJ

15/07/2016 07:10

By Yuka Obayashi 
    TOKYO, July 15 (Reuters) - Japanese aluminium products 
makers such as UACJ Corp  5741.T   and Kobe Steel  5406.T  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  AA.N  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-aluminium products maker,  
began production of sample aluminium sheets for autos last month 
at a new $150 million plant in Kentucky, built with Dutch 
partner Constellium  CSTM.N , 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 
aluminium 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 aluminium over steel for exterior 
body panels and structural components. Aluminium can cut the 
weight of a car by about 30 percent and can be more easily 
recycled, reducing its life-cycle emissions. 
    While aluminium has been used in premium-brand cars for 
decades, the latest moves by fabricators follow the success of 
Ford Motor's  F.N  best-selling F-150, its first aluminium-body 
pickup truck. 
    UACJ is betting aluminium 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. aluminium automotive sheet market. 
    "Our expectation is the trend in the U.S. and Europe to use 
aluminium 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 aluminium and steel, said in 
May it will invest $46.7 million to build an aluminium plant in 
Kentucky to build parts for car frames and bumpers, and also 
wants a plant for aluminium sheets. 
    "We are still looking to invest in the U.S. market to make 
aluminium sheets, although the timing is not known yet," Kobe 
Steel President Hiroya Kawasaki told a news conference on 
Tuesday. 
     
    BOOSTING CAPACITY 
    Other companies are also boosting their automotive sheet 
capacity to meet expected demand growth, even though aluminium 
typically costs at least twice as much as steel. 
    Alcoa, which has been shutting aluminium 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.  urn:newsml:reuters.com:*:nL1N19X1JZ 
    In 2013, top rolled aluminium producer Novelis  NVLX.UL , a 
unit of India's Hindalco Industries  HALC.NS , said it would 
spend more than $300 million to boost capacity at its automotive 
sheet plant in Oswego, New York. 
    "We expect aluminium 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  5401.T , 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 
aluminium 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) 
 ((Yuka.Obayashi@thomsonreuters.com; +813-6441-1798; Reuters 
Messaging: yuka.obayashi.thomsonreuters.com@reuters.net)) 
 
Keywords: JAPAN ALUMINIUM/