Novelis to Build $300 Million Aluminum Plant Amid Auto Optimism

(Bloomberg) -- Aluminum flat-rolled products maker Novelis Inc. plans to build a $300 million plant in Kentucky targeted at automotive customers looking to minimize vehicle weight amid more stringent efficiency rules.

“It just reiterates the industry’s view on this very strong penetration as the material of choice on vehicles,” Novelis Chief Executive Officer Steve Fisher said in a telephone interview. “We don’t see it as a leap of faith.”

The facility in Guthrie will create about 125 jobs and have capacity of 200,000 metric tons. Novelis, the U.S. unit of Hindalco Industries Ltd., expects to complete the project by 2020 as its Indian billionaire owner Kumar Mangalam Birla expands his overseas operations.

Automotive companies continue to expand the amount of aluminum used in vehicles, in particular in trucks and SUVs. An industry report projects that aluminum content in North American passenger vehicles will increase 42 percent by 2028 from 2015.

Last April, Braidy Industries Inc. announced plans for a $1.3 billion aluminum mill in eastern Kentucky, which CEO Craig Bouchard said at the time would be the first of its kind in three decades in the U.S. Two years ago, as the aluminum price was near the lowest in almost seven years, Fisher said in an interview that he didn’t expect any near-term relief from a China-led glut that was keeping the metal in a bear market.

But Chinese smelting cutbacks have helped send prices back to the highest since 2012, providing incentives for producers in the U.S. and elsewhere up and down the supply chain to restart capacity or undertake new projects.

Via Novelis, Hindalco is among bidders for U.S. producer Aleris Corp., according to people with knowledge of the matter.

To contact the reporter on this story: Joe Deaux in New York at jdeaux@bloomberg.net.

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Steven Frank

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