Automakers increasingly interested in green aluminium: Novelis

[The place where we see some enthusiasm and willingness - selectively, not across the board - is the automotive segment," Dev Ahuja, executive vice president and chief financial officer, told Fastmarkets on Thursday August 3. [We do have customers who are wanting to have a commitment on the tonnes [of carbon per tonne of aluminium]. They are open to discussing a pass-through of the green premium."

At a level of 4 tonnes of carbon dioxide equivalent (CO2e) per tonne of aluminium produced or lower, [there would be an openness and willingness to pay a premium," he said.

Novelis is also focused on increasing the amount of recycled content in its automotive sheet products, Ahuja said, citing the company`s partnership with Sortera Alloys.

The Atlanta, Georgia-based aluminium flat-rolled producer and recycler mainly purchases aluminium scrap to produce its sheet products, as well as primary aluminium and sheet ingots, according to Ahuja. Scrap typically represents 61% of its raw materials mix.

Destocking in the beverage can market was a main reason behind lower revenue during Novelis` fiscal first quarter, ended June 30, according to the company`s earnings report released on Thursday. Quarterly revenue dropped by 19.61% year on year to $4.09 million, from $5.09 million in 2022. Net income in the quarter was $156 million, nearly half of the $307 million posted in the same quarter in the preceding year.

[We do believe the worst of the can destocking globally is behind us," Steve Fisher, president and chief executive officer, said during the company`s earnings call on Thursday. [This quarter there was a lot of destocking that occurred in South America. We feel comfortable now that this is more-or-less in the rearview mirror, and we will start to see the volumes return - and have seen the volumes return - in the orderbooks in late June and July."

The company also noted weak economic conditions in some specialty markets, including building and construction, but said demand for premium automotive sheet remains strong, evidenced by record automotive shipments.

Shipments of rolled products totaled 879,000 tonnes in the first quarter, down from 962,000 tonnes in the first quarter of the previous year, with declines in all regions, including North America, Europe, Asia and South America.

[Overall demand trends are starting to look very healthy, most importantly because the destocking phenomena has come to an end," Ahuja told Fastmarkets.

In June, the aluminium recycler signed a long-term agreement with Coca-Cola Bottlers` Sales & Services Company to supply Coca-Cola`s authorized North American bottlers with aluminium can sheet.

Novelis`s Bay Minette project in Alabama remains on track for commissioning in the latter half of fiscal 2026, Fisher said during the earnings call.

About two-thirds of the facility`s multi-year contracts will be signed with companies in the beverage can industry, and one-third with automotive, according to Fisher. The company will finalize its last contract for the beverage can industry [in the next month or so," while automotive contracts will be finished over the next 12-18 months, he said.

[It is possible that we could be at full capacity at this facility within a couple of years, which is quite aggressive," he added. [Last year we were struggling with some supply issues off and on. Right now, I can tell you that supply availability is very good. Scrap spreads are steady-to-positive."

[Customers have committed enough volumes to be able to use up all of the canned production capacity that we are planning to have," Ahuja told Fastmarkets. [We are well on track to be able to get the entire capacity committed."

Fastmarkets` assessment of aluminium scrap used beverage cans, domestic aluminium producer buying price, fob shipping point US was 67-71 cents per lb on August 3, up by 4.55% from 64-68 cents per lb a month earlier but 9.21% lower than 74-78 cents per lb a year prior.

(The fifth paragraph of this report was updated on Saturday August 5 to clarify the scrap percentage of Novelis` raw materials mix.)