Dive Brief:
- Novelis’ largest aluminum plant will resume hot mill operations sooner than expected following two fires last fall, CEO Steven Fisher said on a May 19 earnings call.
- The company has already started commissioning the Oswego, New York, location, and will have coils coming off the mill in the next few weeks to support “pent-up” demand in the automotive and beverage packing industries, Fisher said.
- Novelis expects a “total negative cash flow impact” of $1.7 billion from the fires, including repair, clean-up and idle worker costs, according to an investor filing. The September and November fires primarily affected Oswego’s hot mill, finishing and motor room areas. No injuries were reported from the incidents.
Dive Insight:
While Oswego’s hot mill operations have been idle over the past several months, Fisher said Novelis has focused on recovery and mitigation efforts by rerouting shipments globally and leveraging alternative sourcing to meet customer demand.
During the quarter that ended March 31, Novelis saw higher automotive and beverage packaging shipments across its Europe, Asia and South America segments over last year, according to an earnings presentation. This was partially driven by increased demand from North American customers.
Net sales totaled $4.8 billion during the quarter, up 4% from a year ago. This was driven by higher aluminum prices that offset lower shipments related to the Oswego plant disruption and tariff impacts, Novelis reported. The company posted a net loss of $84 million for the period.
For its North America segment, Novelis saw shipments decline 19% during the quarter compared to last year. The segment made $74 million in adjusted earnings, down 51% from a year ago.
Despite short-term financial pressures, Fisher said the underlying business is solid and Novelis expects to return to positive free cash flow by March 31, 2027.
In addition to Oswego recovery efforts, Novelis is also making progress on its new recycling and rolling plant in Bay Minette, Alabama. The $5 billion investment is expected to create up to 1,000 jobs and produce up to 600 kilotons of finished aluminum goods per year.
“We are energized by the progress we are making to restart Oswego in the coming weeks and the commission of Bay Minette later this year,” Fisher said. “This is all in order to support strong customer demand for sustainable aluminum products.”
The Oswego plant has the capacity to produce 1.7 billion pounds of aluminum sheets per year and is a major supplier for the automotive and beverage industries.
Following the November fire, Ford Motor Co., one of Novelis’ largest customers, released a statement assuring customers that it would continue to source finished materials from the plant and other alternative sources. The automaker in February reported a $2 billion headwind from Novelis supply disruptions.
“From an operational standpoint, we have completed all major mechanical assembly work, and are now in the commissioning process, testing the equipment systems and connections,” Fisher said about Oswego recovery efforts.
