Alcoa Inc., the largest U.S. aluminum producer, will expand a plant in Tennessee to meet increasing demand for the lightweight metal in cars and trucks.
Alcoa will spend $275 million in the next three years at its rolling mill in Alcoa, Tennessee, the New York-based company said today in a statement. The expansion will create 200 jobs at the plant, the company said.
Klaus Kleinfeld, Alcoa’s chairman and chief executive officer, is working to expand revenue from its rolled and engineered products used by automotive, aerospace and energy customers as he closes smelters to reduce the cost of producing the metal amid declining global prices. Automakers are increasing their use of aluminum to make lighter, more fuel-efficient vehicles as domestic sales of cars and light trucks also rise.
Automakers this year are on pace to sell the most cars and light trucks in the U.S. since 2007, with deliveries rising 6.9 percent through April to 4.97 million, according to researcher Autodata Corp. General Motors Co. is targeting a 15 percent weight reduction of its vehicles through the 2016 model year, and Ford Motor Co. has set a goal to take 250 pounds to 750 pounds (113 kilograms to 340 kilograms) from each of its models as they are refreshed.
The auto industry will consume 4 percent more aluminum this year as the average North American car adds 14 pounds of the metal in 2013, according to research by Lloyd O’Carroll, an analyst at Davenport & Co. in Richmond, Virginia.
Vehicle manufacturers are working to make lighter cars and trucks as regulators require them to reach an average fuel efficiency for their fleets of 54.5 miles per gallon (23.2 kilometers per liter) by 2025.
Alcoa rose 0.4 percent to $8.46 at the close in New York. The shares have slumped 14 percent in the past year. Aluminum for delivery in three months also has fallen 14 percent in the last 12 months as global output exceeds the metal’s use.
Downstream segments provided 71 percent of Alcoa’s after-tax operating income in 2012, compared with 25 percent in 2003, the company said in April. Alcoa is an integrated producer which mines the ore, process it into metal and manufactures aluminum goods.
Alcoa announced in September 2011 it would spend $300 million to expand automotive-products capacity at its Davenport, Iowa, facility. Work there is expected to be finished this year, the company said in today’s statement.
Alcoa permanently closed its smelter in the Tennessee city that shares the company’s name last year as part of curtailments that reduced smelting capacity by 531,000 metric tons a year. Yesterday, the company said in the next 15 months it will evaluate making a further 460,000 tons of reductions.