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Novelis Inc. said it intends to build the largest aluminum-rolling plant in the U.S. in nearly 40 years to supply a growing market for beverage cans.

The planned plant, near Mobile, Ala., will have a capacity to produce 600,000 metric tons of aluminum sheet a year, the company said. About two-thirds of the output will go to can makers, the company said, including Colorado’s Ball Corp., which provides empty cans to the beverage industry. The remaining third of the plant’s capacity will make aluminum sheet for the automotive industry.

Aluminum rollers in the U.S. scaled down can-sheet production for years in favor of higher-margin aluminum for pickup-truck beds, trunk lids and other components, as auto makers switched to lighter-weight aluminum from steel to improve fuel economy. The U.S. market for cans was mostly flat between 2010 and 2018, executives said.

Demand for beverage cans has rebounded since then, as the beverage industry seeks to reduce reliance on plastic containers amid consumer concerns about waste. Cans also received a boost during the pandemic when restrictions on bars and restaurants caused consumers to buy more canned beverages for consumption at home. Can production in the U.S. increased by nearly 20% from 2018 to 2021, when 133 billion cans were produced.

Of the new beverages introduced in the U.S. market in recent years, three-quarters are sold in cans, including flavored carbonated water, wine, energy drinks and drinks mixed with liquor, Novelis said.

“Beverage companies are increasingly turning to aluminum to be the packaging of choice," said Steve Fisher, chief executive of Atlanta-based Novelis. “We have a lot of confidence in the sustainable growth in this market."

Novelis said the Alabama plant will cost about $2.5 billion and is expected to start operations in 2025. The plant will eventually employ up to 1,000 people. Mr. Fisher said the plant will be built with the expectation that it will be expanded within a few years of opening.

The new plant will supply can sheet to Ball, which has opened four new can plants in recent years, with two more under construction. By the end of 2022, Ball expects its production capacity for cans to have increased by up to 25% since 2018.

“This is a huge relief for us to see further investment," said Dan Fisher, Ball’s chief executive, about the Alabama plant. “We’ll need at least one more facility this size, if not two, to keep pace with the growth by 2030."

Novelis’s Mr. Fisher said he expects U.S. can-sheet demand to outpace production by about 300,000 metric tons this year and the company anticipates the shortfall growing to 500,000 tons by 2030.

Can manufacturers have been relying more on imports of foreign can sheet. Imports last year grew by 38% from 2020 to 222,546 metric tons, according to the Aluminum Association, the industry’s trade group. U.S. demand for can sheet last year rose by 8.4% from 2020, while domestic shipments of can sheet in 2021 rose by 5.7%.

In 2018, the Trump administration levied a 10% tariff on imported aluminum to encourage more domestic production. Since then, the U.S. aluminum industry has mostly focused on investing in melting aluminum scrap to offset dwindling American production of raw aluminum from bauxite ore. The companies that have ramped up aluminum sheet production have mostly done so at existing plants that are decades old.

Aluminum-industry executives said low margins and stagnant demand kept companies from investing in more capacity until recently. An attempt by startup company Braidy Industries Inc. to build a $1.7 billion rolling mill in Ashland, Ky., a few years ago foundered because of a lack of investors.

The Novelis plant in Alabama will have the capability to melt scrap, cast the liquid metal and roll new aluminum sheet for cans and autos, the company said. The last plant with integrated melting and rolling capabilities built in the U.S. was in Logan County, Ky., during the mid-1980s. That plant is now owned by Novelis in a joint venture with Tri-Arrows Aluminum Inc., a Louisville, Ky.-based unit of a Japanese industrial consortium.

Novelis, a subsidiary of India’s Hindalco Industries Ltd., has been on an investment spree. Earlier this year, it unveiled plans for a $365 million plant in Guthrie, Ky., to melt scrap aluminum. The company opened a heat-treating plant for automotive aluminum sheet at the same site in 2020.

Novelis expects to increase harvesting of old aluminum beverage cans to support the new Alabama plant. About 45% of the cans produced annually are recovered through recycling programs. About 70% of the aluminum used to make a beverage can in the U.S. and Canada comes from recycled aluminum, according to the Can Manufacturers Institute, a trade group.

This story has been published from a wire agency feed without modifications to the text

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