26
8 Breaking the Barriers: Unlocking New Possibilities for Aluminum Notes for a presentation by Brian W. Sturgell President and Chief Executive Officer Novelis Inc. CRU 11th World Aluminum Conference Montreal June 13, 2006 Approx time: 27 min. (including video insert)

Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

  • Upload
    lecong

  • View
    224

  • Download
    0

Embed Size (px)

Citation preview

Page 1: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

8

Breaking the Barriers:

Unlocking New Possibilities for Aluminum

Notes for a presentation by

Brian W. Sturgell President and Chief Executive Officer

Novelis Inc.

CRU 11th World Aluminum Conference Montreal

June 13, 2006

Approx time: 27 min. (including video insert)

Page 2: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

Breaking the Barriers: Unlocking New Possibilities for Aluminum

Breaking the Barriers: Unlocking New Possibilities for Aluminum

Brian W. SturgellPresident and Chief Executive OfficerNovelis Inc.CRU 11th World Aluminium ConferenceJune 13, 2006

Good morning ladies and gentlemen.

My name is Brian Sturgell and I’m CEO of Novelis, the world’s largest aluminum

rolling company, supplying millions of tons of aluminum sheet and foil products to

hundreds of manufacturing customers through the talent of thousands of skilled

employees working in dozens of facilities around the world.

Safe Harbor StatementSafe Harbor StatementStatements made in this presentation which describe Novelis’ intentions, expectations or predictions may be forward-looking statements within the meaning of securities laws. Novelis cautions that, by their nature, forward-looking statements involve risk and uncertainty and that Novelis’ actual results could differ materially from those expressed or implied in such statements. Important factors which could cause such differences include, but are not limited to: competitive factors, ability to consistently meet quality standards of Novelis FusionTM

technology in a commercial environment, ability to achieve the benefits described for multi-alloy sheet, ability to achieve market penetration in potential industries, uncertainties of potential litigation, achieving necessary patents on the Novelis Fusion technology, the Company’s ability to meet Novelis Fusion sales forecasts, the Company’s economic ability to install Novelis Fusion casting centers worldwide, the price of aluminum; global supply and demand conditions for Novelis Fusion products; demand and pricing within the principal markets for the Novelis Fusion products; changes in government regulations, particularly those affecting environmental, health or safety compliance associated with the Novelis Fusion; economic developments; relationships with (and financial or operating conditions of) customers and suppliers; competition from other aluminum rolled products producers as well as from substitute materials such as steel, glass, plastic and composite materials; the level of our indebtedness and ability to generate cash; and other factors relating to the Company's ongoing operations. The financial information provided in this news release was prepared by management and has not been audited. Reference should be made to Novelis' registration statement on Form S-4 filed with the Securities and Exchange Commission for a discussion of other major risk factors.

Page 3: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

This is our Safe Harbor statement. Our attorneys will be pleased to know that I

have officially cautioned you that results may vary from any forward-looking

statements in my comments today regarding Novelis.

Niels Bohr Niels Bohr

But rather than talk today about Novelis, I’d like to briefly talk about Niels Bohr,

who, in 1911, was a brilliant, young, newly minted doctoral graduate of

Copenhagen University.

The story goes that Bohr was actively discouraged by his professors when he

expressed an interest in devoting his life to the study of physics. “Newtonian

mechanics and classical physics are inarguable,” they told him. “There are simply

no major discoveries left to be made in physics….especially now that we’re

closing in on the proofs for ‘interstellar ether.’”

(PAUSE)

Page 4: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

They advised him to invest his substantial intellect in some developing science,

like chemistry, where there might yet be a chance to make a real impact.

“Perhaps,” they told him, “you could get an element named after you.”

Well, you may know the rest of the story. Niels Bohr ignored this counsel and

went on not only to study physics, but to revolutionize all of physical science. He

did the work that would give birth to quantum mechanics which not only

supplanted classical, Newtonian theory, but became the underlying mathematical

framework of computational chemistry, particle physics, nuclear physics, and

other fields that have brought so many advances to the contemporary era.

Niels Bohr Niels Bohr

I should also mention here that there actually is an element on the periodic table

named for Niels Bohr. Bohrium is Atomic Number 107, if you’d care to look it up.

Page 5: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

0

1000

2000

3000

4000

5000

6000

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Maturing MarketsMaturing Markets

Flat Rolled Products Demand in North America

kt

1994-2005 CAGR (N-A):

0.9%

CAGR 12.5%

9.1%

3.2%1.6%

1.6%1.6%

-0.1%

So, why am I talking about Niels Bohr? Here’s why: I love his story because, in

some faint echo, we’ve been living it lately. This tale illustrates a timeless axiom

in the history of science, be it manifest in pure research or industrial technology:

There is only innovation or stagnation; there is little in between.

No one who has been following our industry can deny that the danger signs of

stagnation are apparent, and that our industry’s life cycle may be close to its

peak.

We estimate that total world aluminum demand grew by 4.3% in 2005, to

approximately 44 million metric tons. The big driver, of course, continues to be

China, where demand growth remains in double digits, although declining. In the

Western World, however, demand for aluminum increased only by about 2% last

year, below its long-term rate of 2.5% for the past decade. Demand for rolled

products, our segment of this industry, has been growing steadily, but slowly. In

Page 6: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

North America, for example, the compound annual growth rate for rolled products

in the past ten years has been under 1%.

A Need for InnovationA Need for Innovation

What is needed in our industry is a quantum leap, some explosion of innovation

that turns conventional wisdom on its head and makes fools of those who claim

that all the meaningful discoveries already have been made. Such a

development could exponentially expand the applications of aluminum – and help

the manufacturing world fully realize and exploit all its obvious advantages over

steel and other competing products. Advantages like light weighting, formability,

recyclability… you know that list.

Page 7: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

Innovation TimelineInnovation Timeline

1900 1950 20001850

We at Novelis are true believers in the future of aluminum and the ability of this

remarkable metal to leap into scores of applications that are not yet even

imagined due to the currently understood constraints on the industrial process.

Innovation TimelineInnovation Timeline

Charles Martin Hall/

Paul Heroult, electrolytic

process1886

1900 1950 20001850

But such constraints did not dissuade Charles Martin Hall and Paul Heroult in

1886 from inventing the electrolytic process that made the manufacture of

aluminum economically feasible for the first time.

Page 8: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

Innovation TimelineInnovation Timeline

Charles Martin Hall/

Paul Heroult, electrolytic

process1886

Direct Chill

Casting1938

1900 1950 20001850

Such constraints could not retard the advance of DC Casting in 1938 which

allowed aluminum to make its first serious incursion into specialized steel

applications.

And such constraints did not hold back the Continuous Casting technologies of

the 1950s which brought aluminum into full and direct competition with steel

sheet in many applications.

Innovation TimelineInnovation Timeline

Charles Martin Hall/

Paul Heroult, electrolytic

process1886

Direct Chill

Casting1938

Continuous Casting1950s

Novelis Fusion2006

1900 1950 20001850

Page 9: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

This morning, Novelis announced a technological advance that we believe will be

added to the litany of game-changing innovations I just recited. We call it Novelis

Fusion technology, and we’re very excited about it. Let me tell you why.

Alloys Provide Desired FeaturesAlloys Provide Desired Features

Historically, products in our industry have been manufactured with a view to

optimizing specific characteristics requested by our customers — strength,

formability, appearance, etcetera. We assign such characteristics to the rolled

aluminum sheet by carefully blending aluminum with alloying elements whose

properties correspond to the desired features. For example, adding copper,

manganese or iron improves hot strength. Tensile strength is increased through

the addition of magnesium, and so on.

The limits here – the Newtonian physics, if you will – in our state-of-the-art

industrial processes, lie in this inescapable fact: Some of the attributes most

desired by our customers work against each other at the metallurgical level.

Page 10: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

The Value of Mag AlloysThe Value of Mag Alloys

Take magnesium, for instance. We love magnesium alloys because many of our

customers love its strength. Magnesium atoms don’t just adhere to aluminum,

they actually occupy the spaces within the aluminum lattice that forms the bulk of

the rolled sheet, greatly enhancing the strength of the finished product. “High-

mag” alloys are great for applications that demand toughness and fatigue

strength. Anything that vibrates, oscillates or occasionally takes a jolt is a great

candidate for high-mag alloys. Think cars, trucks, planes and trains.

So, if a little magnesium is good, a lot of magnesium should be great, right? Well,

wrong.

When combined with aluminum in an alloy, magnesium has the bothersome

propensity to oxidize and cause corrosion under certain conditions, leading to a

dull appearance. Magnesium is a highly reactive metal, and manufacturers of

pick-up trucks and bullet trains are understandably concerned about the

durability and appearance of their products.

Page 11: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

Conventional Cladding: An Inadequate SolutionConventional Cladding: An Inadequate Solution

The standard solution to this ‘antagonism of attributes’ is to combine the high-

strength, high-mag core with some low-corrosion “clad” layer before feeding the

ingot into the rolling mill. This “cladding” process should, in theory, suppress the

tendencies of the core alloy to oxidize.

These metal “sandwiches” are very costly to make and are notoriously difficult to

work with in a rolling mill. Not only do they take a lot of labor and hot mill time,

but they also don’t provide an adequate solution to the problem.

These layers sometimes slip apart during the stressful rolling process. But even

when they stay together, the bond between the two is interrupted by oxidation of

the interface of the core and clad.

It’s a conundrum that has left those of us in the aluminum rolling industry

scratching our heads …. for more than 60 years.

Page 12: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

The result? We have had to ask our customers and their product designers to

make trade-offs. You want to make the hull of a boat that’s very strong? Maybe

even bullet proof? Terrific. That means high-mag alloy, around 4 percent. You

want to put that boat in the ocean where it will be subjected to a highly corrosive

environment? No problem. That means a low-mag alloy, around 2 percent.

You want those properties in the same sheet of metal? Sorry. You have just

requested a product that defies laws of physics. You’re out of luck. You must

choose between high strength and low corrosion. You must compromise.

But what if, like Niels Bohr, we refuse to accept the limitations of our metal and a

manufacturing process developed over the past 100 years?

The Promise of Novelis Fusion TechnologyThe Promise of Novelis Fusion Technology

Now for the quantum leap.

(Display car door sample)

Page 13: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

This portion of an automobile door boasts extremely high resistance to corrosion,

stress and cracking. It also is very strong and very formable. At its core is a high,

high-mag alloy – 5.7 percent. Nobody offers an alloy that rich in magnesium

because of the propensity for oxidation.

But this product also is encased by a corrosion resistant layer, measuring just a

few microns, that not only forms a perfect, slip-free bond with the core ingot

during the rolling process, but also acts as a barrier to the diffusion of the

magnesium to the surface of the metal sheet. It also has the added benefit of

increasing life of plant tools that no longer need suffer the wear and tear caused

by the magnesium that diffuses to the surface.

Now, I’ve been going on about magnesium, but the same phenomenon of

conflicting attributes plagues other alloys in our industry. Magnesium just

happens to be the most notorious culprit when it comes to such metallurgical

misbehavior. If we can lick these problems with magnesium, then copper, zinc,

silicon and the rest will be a piece of cake.

Page 14: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

This is…This is…

Page 15: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

The trade-off illustrated here with magnesium alloys is but one example of the

challenges we face in designing a product to specification. Properties that are

desirable at the surface often are not those we would prefer in the core. If we can

tailor our alloy combinations to the exact needs of both the surface and the core,

we will have changed the game of aluminum manufacturing.

Novelis Fusion alloys do just that.

To view the Novelis FusionTM

video, please visit www.novelis.com/fusion

(Roll video – 4 minutes)

Impact of Novelis Fusion TechnologyImpact of Novelis Fusion Technology

Supplants cladding

Page 16: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

2

I love the animation in that video that shows the two molten metals being cast

simultaneously. Like pouring beer – from an aluminum can, of course – into a tall

glass. Oh, if it were only that easy. It actually is a complex process that Novelis

now has developed.

The impact of Novelis Fusion technology is immediate and many fold. First it

supplants the costly and awkward conventional cladding process. Anything

manufacturers now are making with conventionally clad sheet can be made

better with the Novelis Fusion process.

Impact of Novelis Fusion TechnologyImpact of Novelis Fusion Technology

Makes possible “impossible”combinations

Second, there are many alloys that will not submit easily to being clad through

conventional means, most commonly in cases where there is high magnesium

content in either the clad layer or the inner core material. Novelis Fusion

technology makes these and other formerly “impossible” combinations

commercially possible for the first time.

Page 17: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

3

Impact of Novelis Fusion TechnologyImpact of Novelis Fusion Technology

• Supplants cladding• Makes possible “impossible” combinations• Supplants cladding• Makes possible “impossible” combinations• New product possibilities for designers

New product possibilities for designers

And third, and in my mind most importantly for the industry, it opens up brand

new areas for designers of our customers products. It gives product developers

uncharted worlds to explore. We can now envision aluminum rolled sheet

featuring attributes that never were requested because they were known to be

almost impossible to produce.

Well, they’re possible now. That’s why we have chosen for our marketing tag

line: “Infinite possibilities.”

Page 18: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

4

ArchitectureArchitecture

How does this play out in industrial applications? Let’s start with architecture.

When we showed a sample of Novelis Fusion material to a company that

supplies the architectural market, they got very excited. Architects love aluminum

panels that are strong, dent resistant and can be anodized to help create

different colors and finishes. However – here we are in the world of trade-offs

again – architectural panels that have good aesthetics happen to be, due to

necessary metallurgical compromises, not as strong as architects would like

them to be.

But once the architecture experts realized they could have both looks and

strength, they saw the applications immediately.

We have architecture customers already in trials with a Novelis Fusion product

and they are thrilled with the improved formability and better surface

characteristics that they’re seeing. The product gives a cleaner, crisper bend,

without the “orange peel” effect that conventional materials exhibit.

Page 19: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

5

Strength vs. FormabilityStrength vs. Formability500

400

300

200

100

0.00 2.00 4.00 6.00 8.00 10.00

Stre

ngth

(MPa

)

High Mg Alloy(similar to 5456)

Formability (% Elongation)

Our customers are also pleased with the strength that a Novelis Fusion product

can provide.

Take a look at these Stress/Strain curves. Here we see that strength of a high-

magnesium alloy is very strong – over 400 Mega Pascals on the vertical axis. But

its formability, this horizontal axis, goes only to 6% elongation.

Strength vs. FormabilityStrength vs. Formability500

400

300

200

100

0.00 2.00 4.00 6.00 8.00 10.00

5005

Stre

ngth

(MPa

)

High Mg Alloy(similar to 5456)

Formability (% Elongation)

Page 20: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

6

When we look at a lower magnesium alloy, in this case 5005, we get formability

approaching 8%, but the strength falls far short of the ideal.

Strength vs. FormabilityStrength vs. Formability500

400

300

200

100

0.00 2.00 4.00 6.00 8.00 10.00

5005

Stre

ngth

(MPa

) Fusion (5005/5456/5005)

High Mg Alloy(similar to 5456)

Formability (% Elongation)

Now let’s look at the Novelis Fusion solution – a 5456 high-mag alloy core with a

highly formable 5005 external layer. Strength and formability in one product.

That’s what we mean by the end of trade offs. You can have it all, for the first

time, in industrial quantities.

Household AppliancesHousehold Appliances

Page 21: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

7

Consider for a moment dishwashers, ranges and refrigerators.

The current rage in household appliances is the stainless steel finish.

Conventional uni-alloy aluminum solutions are not able to compete with stainless

steel because in order to meet the strength requirements with an alloy that

provides the right surface finish, the aluminum would have to be a heavy gauge,

making it difficult to form and costly to use.

With Novelis Fusion multi-alloys, however, we can:

• match the strength of steel,

• provide all the necessary formability,

• deliver a brushed surface finish much like stainless,

• and we can do it at a total product cost that is competitive.

Furthermore, we can start developing the next “look” -- the next stainless steel, if

you will -- for the appliance industry. We are currently working with a European

producer of high-end appliances who has asked us to do just that. Specialty

finishes may include brushed, patina, bright and micro-matte. In addition, we may

be able to downsize the sheet, say by 10%, which would deliver a significant

savings.

Result: it opens up a whole new range of design options for our customers.

Page 22: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

8

AutomotiveAutomotive

Finally, let me show you an example in the auto industry.

One persistent challenge for automotive body panels has been the lack of a true

“flat hem” –- the hem is where the outer panel is wrapped around the edges of

the inner panel on a hood or a fender, for example. Automakers like flat hems

because it allows the appearance of a nice tight fit, or “transition”, between body

panels. Here, high formability is essential, as the metal must bend at a severe

angle without surface cracking.

It’s very difficult to do with current aluminum technology, because the alloy

needed to provide the necessary strength in the panel, limits its formability.

Trade-offs again. But Novelis Fusion technology is once more the answer.

Page 23: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

9

AutomotiveFusion products make flat hemming possibleAutomotiveFusion products make flat hemming possible

Here we see a comparison of two pieces of conventional alloy material on top,

and two pieces of Novelis Fusion material on the bottom. All have been bent a

tight 180 degrees and you are looking at the face of the bend. If you look

carefully – and trust me, our customers do -- you can see that the conventional

material has surface cracks, while the Novelis Fusion sample doesn’t.

AutomotiveFusion products make flat hemming possibleAutomotiveFusion products make flat hemming possible

And here’s a side view of a flat bend. You can clearly see the thin clad layer in

this treated sample. And you can see there are no surface cracks.

Page 24: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

10

An aluminum flat hem used to be something of an oxymoron in our business. Not

any longer.

Novelis Fusion in Industrial ProductionNovelis Fusion in Industrial Production

So, in summary…Today, Novelis is not just talking about Novelis Fusion

technology. This is not a mere concept. We are in the marketplace. We are

casting and rolling Novelis Fusion ingots in our facility at Oswego, New York, and

we are delivering product to our customers.

This innovation was brought to market by a talented but stubborn group of

incorrigible nonconformists in our company who refuse to look at process

metallurgy with a traditional view.

We believe their approach to the challenges of our industry epitomizes the sort of

R&D that is bound to produce still more game-changing breakthroughs in the

years to come.

Page 25: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

11

The Next Generation of Products The Next Generation of Products

Novelis obviously stands to be the prime beneficiary of this innovation, at least

initially. Going forward however, we expect that — as has been the case with

earlier technological breakthroughs — this latest step will ultimately increase the

fortunes of many parties and help enhance the growth prospects of our industry.

Novelis Fusion technology marks a new milestone in the history of aluminum

fabricating. With its promise to improve current products and deliver a stream of

new products, Novelis Fusion technology breaks the barriers and unlocks the

possibilities for the next generation of aluminum applications.

Page 26: Breaking the Barriers - Amazon S3 · Breaking the Barriers: Unlocking New Possibilities ... “you could get an element named after you.” ... requested a product that defies laws

12

Thank you for letting me share this news with you today. I believe that you’ll be

hearing a whole lot more about it in the years to come. Enjoy the rest of the

conference.

Now, assuming, there’s time, I would be happy to take a few questions.

# # #