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India and Korea can develop a mutually beneficial business relationship going forward: Shashi Maudgal

Thursday, October 3rd, 2013
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Shashi Maudgal is Senior Vice President and President of Novelis Asia. In these roles, he pro­vides leadership for Novelis as the company grows in Asia. Prior to joining Novelis in 2012, Mr. Maudgal was Chief Marketing Officer for Hindalco Industries Limited, an Aditya Birla Group company.
He built and led the company’s marketing depart­ment, led the European due diligence process dur­ing Hindalco’s acquisition of Novelis in 2007, and served as a member of the executive leader­ship team in setting strategic direction. In addition, he is a member of the Aditya Birla Group’s Business Review Councils for Grasim Vis­cose Fiber and Ultratech’s Birla White Cement.
Mr. Maudgal holds a Bachelor of Technology degree in chemi­cal engineering from the Indian Institute of Technology, Delhi, and a Master’s degree in Busi­ness Administration from the Indian Institute of Manage­ment, Calcutta. Recently he sat down with Dr. Lakhvin­der Singh, Managing Editor of Asia-Pacific Business and Technology Report. Here are excerpts of the interview.

Novelis is one of the biggest aluminum producing companies in the world. What makes the company so successful? What are the vision and values of the company?
Novelis is the global leader in rolled alu­minum products and the largest recycler of aluminum in the world. While there are a number of factors driving our success, what really sets Novelis apart in the market is the combination of our global footprint, ad­vanced technology and superior expertise.
Novelis is the only industry player with the capability to produce premium rolled aluminum products on all four major indus­trialized continents – Asia, Europe, North and South America. We are well positioned to support our global customers with high-quality products and service wherever they do business and pursue future growth. The advanced material science and engineering technology behind our products is our key competitive advantage, fueling the design and development of innovative products. Our highly-focused business model that le­verages our manufacturing excellence and expertise delivers higher value in premium product markets.
Novelis is also a growing company. Sever­al expansion plans are underway to increase our rolling capacity globally in response to the growing demand for our products. We are also investing in recycling expansions globally to increase the recycled content across all our products. It is noteworthy that our growth strategy has a strong foun­dation based on sustainability. Our vision is to remain as the market leader in high-end products and in sustainability.

How do you see the future of the aluminum industry in the world in general and in Asia in particular?
The long-term outlook for flat rolled products globally is bright. We expect the market to grow by about 6 percent annu­ally up to 2015. The can business is grow­ing by 4-5 percent particularly in emerging markets like Asia. High-end specialties are also growing at a rate of 6 percent as more engineers and designers prefer to use our metal. And the automotive market repre­sents the largest growth market for us with a 25 percent compound annual growth rate in the next 5 years as more and more auto makers are adopting aluminum for vehicle light-weighting. As the world’s largest and fastest growing FRP market, Asia will be the driving force of the global FRP market.

Novelis is the largest supplier of flat-rolled aluminum products to the auto industry. How do you see the future of the auto industry in Asia? Is the demand for aluminum set to grow in the near future?
We see a huge growth opportunity in the automotive market in Asia, particularly in China. In the automotive industry, vehicle light-weighting is a strategic trend and you cannot discuss light-weighting without mentioning aluminum. With the increasing pressure for lighter cars, less emissions and higher fuel efficiency, we see a great oppor­tunity in material substitution to aluminum. Creating more sustainable vehicles is a must for auto makers to stay competitive and alu­minum is currently the most viable option.
We already have plenty of success sto­ries in Europe and North America, working closely with automotive customers for in­novative Body-in-White (BiW) applications. Jaguar Land Rover’s all new aluminum ve­hicle is a good example. With more than 40 years of experience and expertise in automotive innovations, we are now look­ing forward to supporting our customers’ growth in Asia where the use of aluminum for BiW has just started.

Is the luxury market in China influencing the growth of your industry? What are your sales projections in China for the next five years?
In China, the CAGR for aluminum in au­tomobiles will be higher than 25 percent in the next 5 years. The growth potential will not be limited to the luxury market as alu­minum can be used extensively in passen­ger and commercial vehicles as well.

There is a general feeling among industry experts that Novelis is betting too much on the Chinese market. How sure are you of this market?
We have a positive outlook for the Chi­nese market. Our strength is in high-end markets – can, specialties and automotive – where we see a number of drivers for con­tinued growth in the years to come such as the growing demand for beer and beverage cans, global electronics makers moving their manufacturing facilities to China, the growing population, urbanization, increas­ing pressure on weight reduction in the automotive and transportation markets, to name a few. We see strong demand from our customers who are seeking to grow their business further.

Recently Novelis broke ground on its first aluminum auto sheet plant in China. Can you please tell us about this plant? When is it expected to begin production? Is it mainly for the Chinese market, or will it also cater to the needs of other Asian countries?
Our Changzhou plant is designed to meet the rapidly growing demand for rolled alu­minum used in vehicles. The US$100 million investment in China is due to the require­ment of our global customers like Audi, Daimler, GM, JLR, Ford, PSA and others.Our customers see strong demand and ex­pect Novelis to provide them with local sup­ply in the region. With the plant starting to produce alu­minum for BiW in China in late 2014, Nov­elis will be the only global supplier with local production lines in Europe, North America and Asia. Novelis is also the first company in the industry to build a facility in China for production of automotive alu­minum sheet. We hope to supply to cus­tomers all over Asia, not just China.

How is your business in Korea? Can you please give us your future plans for the Korean market? Why was Korea selected as the HQ for Novelis Asia, and how much is the aluminum produced here actually used for the Korean market?
Korea is a strategically important mar­ket for us. We entered the Korean market by acquiring two existing facilities. With the good assets, skilled and dedicated employees, geographical advantages and good infrastructure, Korea was an attrac­tive destination for investment. Novelis’ continued investment and global network on top of these strong fundamentals have made our Korean operations even stronger over the past years. Today, we are leading the high-end products market in Korea and are exporting more than half of our sales throughout the Asia-Pacific region.
Recently, we opened a new integrated recycling and casting facility at Yeongju, which is Asia’s largest beverage can recy­cling operation with an annual capacity of 265,000 tons of aluminum sheet ingot. The state-of-the-art recycling facility demon­strates our commitment to sustainability and will help strengthen our leadership as the largest aluminum recycler in the world. In addition, major expansions at our two Korean rolling plants are under­way with the commissioning scheduled for 2013. With the expansions, our annual capacity will grow to one million tons. Our $400 million investment in Korea, includ­ing both recycling and rolling expansions, demonstrates our commitment to our Ko­rean operations and supports Novelis strat­egy for sustainable growth in the region.

How do you see the demand of aluminum in Asia? What are your projections? Apart from China do you see any other growth area in Asia such as Thailand or Vietnam?
Asia has a huge growth potential, repre­senting about 50 percent of the global FRP market. In particular, China and Southeast Asia are becoming the principal driving forces. Thailand and Vietnam are impor­tant markets for us with solid growth in can. Novelis is currently building a small facility in Vietnam to process used bever­age cans for recycling in an effort to in­crease aluminum recycling in the region. This is another example that Novelis offers a sustainable option for customers while supporting their business growth.

Novelis is the U.S. unit of India’s Hindalco Industries Ltd. (HNDL). Can you please also tell us about your operations in India? What percentage of the Indian aluminum market is currently captured by Novelis?
Hindalco Industries Limited is one of Asia’s largest integrated producers of alu­minum and a leading copper producer. Hindalco is a flagship company of the Ad­itya Birla Group, a multinational conglom­erate based in Mumbai, India. Hindalco’s product range includes rolled products, extrusions, foils, primary aluminum in­gots, billets and wire rods. A strong pres­ence across the value chain and synergies in operations have given Hindalco a domi­nant share of the domestic value-added products market.

As you know India and Korea are celebrating the 40th anniversary of their diplomatic relationship. How do you see the future of India-Korea Business ties?
It is encouraging that there has been growing interest and exchange between the two countries over the past years. India and Korea can develop a mutually benefi­cial business relationship going forward. India has a huge growth potential with its young population representing big po­tential buying power, a rich pool of talent and advanced software technology, while Korea has world-class technology and ex­pertise in manufacturing and infrastruc­ture. Combining these complementary strengths through a strategic cooperation would generate more business opportuni­ties in the future.

 
Recently Indian companies have started investing in Korean companies, but investment is much smaller than Korean investment in India. According to you what are the potential areas where Indian companies can invest profitably in Korea?
Indian investments in Korea will de­pend on the distinctive competitive ad­vantage that they can leverage, or growing businesses that fit with an Indian firm’s global plans. At first glance, I see the IT area as an ongoing opportunity.


As a foreign investor how do you find the business environment in Korea? Is it ‘foreigner business friendly’?
Yes, Korea is foreigner business friend­ly. The government is willing to support foreign investors and we feel welcomed in the communities where we operate, maintaining a good relationship with the local government. Korea has basically good business infrastructure, an excellent workforce and an open-minded culture to­ward foreigners.

 

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