USA UPDATE 11 5
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In fact, Doug Richman, vice president of auto applications engineering for Kaiser Aluminum Corp., notes that for each seven pounds of aluminium sheet added to the body structure one pound of aluminium extrusions will be added. “There will especially be very exceptional growth for load bearing, highly engineered structural extrusions, which are expected to see a 450% increase between 2014 and 2025 due to real, actual, identified future programmes that are under design,” he says. In general, extrusions will be used more for various structural elements of the car, including reinforcing member, roof headers, support headers, windshield headers, body cross members and the energy absorbing crash can, Richman says. Paul Warton, Constellium’s president for automotive structures, says that the combined production of aluminium crash management systems (CMS) for Chinese, European and North American automakers is expected to reach more than 28 million units by 2018 and to account for nearly 20% of all CMS in North America (and 30% in Europe) by that date. Timothy Hayes, principal at New Yorkbased Lawrence Capital Management, projects that North American extrusion shipments to the automotive market will be up 13% to 313 million pounds this year and will increase by another 11% next year to 347 million pounds. By 2018, shipments will climb to about 450 million pounds per year. Trucks and truck trailers are another big area of extrusions growth. Increased demand for heavy duty trucks is linked to the fact that newer trucks are more efficient than old trucks due to new engine technologies and lighter weight components, including wheels, as well as lower maintenance costs, O’Carroll observes. Given that fuel efficiency standards have been increased as well for heavy duty trucks, many truck producers are seeing aluminium, including extrusions, as a good avenue for the necessary lightweighting, Mike Southwood, senior aluminium consultant for CRU International, maintains. Also, partly due to the effects of the new truck driver hours of service rules, there is a need for more trucks – as well as truck trailers. Other factors are higher trucker profits in the first half of this year and rising used equipment valuations, O’Carroll says. As a result, he is predicting that total aluminium (including extrusion) shipments to the truck market will be up 10.4% this year after declining 5.5% last year. “But even with this increase, shipments will remain 24% below the 2006 peak. Meanwhile it is pent up replacement Aluminium International Today
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demand that is one of the key drivers for truck trailer demand. Donnelly observes that with the rate of replacement dropping by two thirds during the economic downturn, truck trailer fleets have been aging. Lightweighting (including an increased amount of aluminium extrusions per trailer) to allow trucking companies to maximise their payloads is another contributing factor to what he estimates a 6-15% a year increase in extrusions to the truck trailer market in the next two to three years. Merluzzi says, “While the sector is not yet back to 2006 levels, both residential and non-residential construction is on an upward trend.” While Buchanan says, “This recovery is especially noticeable in the South,” adding that remodelling activity in the West Coast is also picking up. This is good news to extruders, Brown says, given that it is the construction sector that has been the huge laggard in the economic recovery. Hayes says there have even been mid-single digit increases this year, with the potential of even greater growth rates in the next several years, for non-residential construction, which tends to lag behind the housing market by a year or two. While the Architecture Billings Index of the American Institute of Architects slipped slightly to 53.0 points in August, it continues to portend strong growth as its July reading of 55.8 points was its highest since 2007. Hayes says that housing starts have recently been moderating slightly. This, he says, is because while they continue to be affordable, they are not as much of a steal as they were a year ago. But given the general upward trend in consumer confidence and the recent positive news on the employment front, he remains positive about demand from the residential construction market as well. With demand on the rise in most end use markets, one of the big concerns, especially relating to smaller extruders, is whether they are big enough and have the ability to move fast enough to meet customer requirements on a timely basis, Thomas Schabel, chief executive officer of Alexandria Industries, declares. The question is whether capacity will come on before things tighten too much. “Lead times are already extending out causing bottlenecks in certain areas,” Schabel says. While varying region by region, Sapa’s Landry says that on average lead times are currently out eight to 10 weeks, “although in areas of abundant capacity lead times remain short in nature.” The greatest potential for bottlenecks, according to O’Carroll, is still a year or two out when there will begin to be the
need for more medium and large presses. “There will continue to be excess capacity for small presses.” A lot also depends on the market of the extruder services as well. Even with the strong demand in the auto sector, “there is also plenty of time to see it coming and to prepare for the increase,” AEC’s Henderson says, noting that many automotive extruders are already expanding their casthouses and adding and refurbishing presses. O’Carroll says the real problem could come if nonresidential construction or the truck and trailer markets pick up faster than expected, given that there is less visibility in those market sectors. The supply of billets, which are already relatively tight, is another concern. One billet producer admitted that while the billet market is currently fairly well balanced with lead times of five to six weeks, the market will probably flip to a slight deficit in 2015 until expected capacity additions come online in 2016.
Thus far any tightness has resulted in price increases vs. any shortages. “We have been able to juggle things to meet our requirements, but as we enter into the aluminium mating season one big question we have for our billet suppliers is whether they are willing to hold some inventory,” Alexandria’s Schabel says. While down considerably since tariffs were imposed in 2011, imports continue to be a concern of U.S. extruders. “We are still chasing circumvention issues,” Henderson says. Schabel says that not only are some imports from Malaysia, Mexico and Puerto Rico suspect, but China has been exporting some 5000 series material to the United States, which, unlike 6000 series is not covered by tariffs – at least at this time. Two U.S. lawmakers – Sen. Orrin Hatch (R-Utah) and Rep. Pete Sessions (R-Texas) have urged the Commerce Department to apply anti-dumping and countervailing duty orders to 5000 series extrusions as well. t November/December 2014
10/23/14 8:52 AM