Weaker Chinese demand and overcapacity in the can market will force Novelis Corp to find new markets outside of Asia for the aluminium sheet produced at its newly expanded South Korean rolling mills, Chief Executive Officer Phil Martens said. Challenging conditions in China, the world's second-largest economy, have forced the world's No 1 flat-rolled aluminium producer to put investment in Asia on hold for the foreseeable future, Martens told analysts on a conference call.
He was speaking after Novelis reported net income in its fiscal year to end-March halved to $104 million on a slight drop in sales to $9.8 billion. His comments come after an aggressive expansion in the region - Novelis will commission its automotive plant in China this year and last October completed a $400 million expansion at its two rolling and recycling plants in South Korea which supply the electronics and beverage can market.
"We're comfortable with that investment, (but) we have decided not to deploy more capital in Asia," he said. Some 40 percent of Korean material stays in the country, with a portion heading to countries in the region, including. Thailand and Australia, Martens told Reuters by telephone after the conference call.
Some metal heads to Europe and the United States, but Martens said the amount will be higher than expected. The Korean plants will also supply coils to the Chinese plant. The downbeat outlook will reinforce concerns about China's economic slowdown after a decade of meteoric growth that has fuelled demand for industrial metals. Demand for fizzy drinks in China has slowed, increasing concerns about overcapacity of flat-rolled aluminium used to make beverage cans, Martens said.