A Fire Disrupts 40% of Aluminum Supply to US Auto Industry

U.S. automotive stocks collectively declined on Tuesday local time following news that a factory supplying up to 40% of the aluminum sheets for the country's automotive industry had suspended production after a fire, which is expected to have ongoing negative impacts on automakers. At the same time, sourcing foreign supplies would require paying up to 50% in import tariffs.

As of the latest update, Ford Motor, the most affected, fell over 6%, General Motors dropped 2%, while Ford's supply chain partners also saw declines: Dana, a supplier of super-heavy-duty axles, fell over 4%; seating supplier Adient dropped over 6%; and BorgWarner, a supplier of turbochargers and transfer cases, declined over 5%.

As background, Novelis' Oswego, New York plant experienced a fire on September 16. As a result, major areas of the plant have been shut down, with the outage expected to last until early next year. The most severely damaged building housed the plant's hot-rolling mill, where aluminum sheets for the automotive industry are produced, and it is currently inoperable.

In response, Toyota stated it is working with other aluminum suppliers to mitigate the impact of the fire. A spokesperson said: "Our supply chain team is fully engaged on this issue. The situation is currently stable, but we are not completely out of the woods yet."

Regarding the supply constraints, Novelis said it is mobilizing its overseas plants to supply aluminum to U.S. customers. The company has rolling mills in Europe, Brazil, and South Korea, but currently faces the challenge of the U.S. imposing a 50% tariff on imported aluminum.