novALmec is the JV between Metal Exchange Corporation and Novellini Industries for the Supply of Secondary Aluminium billets in Europe

A meeting at Novellini Group’s headquarters in Romanore di Borgoforte, near Mantua, with Friedhelm Grobler, Managing Director of Metal Exchange International Zurich, and Marco Novellini, CEO of Novellini Group

by Mario Conserva

In the context of the Italian and European aluminium market, the start of the joint venture between Novellini Industries, based in Mantua, and Metal Exchange Corporation (MEC), a project which had been discussed for some time and finalized in spring 2019, was quite a surprise. Metal Exchange Corporation, a U.S. company based in St. Louis, Missouri, a structure with global relevance in aluminium scrap as well as in extrusion billets. It is a prestigious brand with more than forty five years of experience in the aluminium value chain in the United States and 13 years in Europe thanks to its subsidiary MEC Metal Exchange International in Switzerland combining in this joint venture its worldwide supply network on the aluminium scrap markets and decades of global experience in the production and marketing of billets; on its part Novellini, a leading brand in the manufacture of aluminium shower units and bathroom design components, brings to the joint venture its technologically advanced casthouse with a capacity of 22,000 tons per year of secondary aluminium billets, together with its upstream scrap processing plant and a consolidated base of clients using this product. With these credentials it will be an important and interesting supplier for the European market.

Marco Novellini (left), CEO of Novellini Group and President of novALmec, with Friedhelm Grobler, Managing Director of Metal Exchange International in Zurich
Marco Novellini (left), CEO of Novellini Group and President of novALmec, with Friedhelm Grobler, Managing Director of Metal Exchange International in Zurich

The new company novALmec will expand the existing billet casting plant up to a production capacity of more than 33,000 tons. The world in Italy dramatically changed since the interview was conducted. In the context of the Covid-19 pandemic declared by the World Health Organisation, the Italian government introduced various measures to protect the population. These were unavoidable steps, which, however, had an impact on the timeline of the expansion. The completion of the expansion was originally scheduled for end of March. Now, it is expected later in the 2nd quarter of this year.
At the heart of the Novellini Group in Borgovirgilio, near Mantua, we met Friedhelm Grobler, Managing Director of Metal Exchange International in Zurich, and Marco Novellini, CEO of Novellini Group, to talk about this initiative with a strong impact on the aluminium market.

Mr. Grobler, what are the reasons which led you to make this important choice?

“Sustainable development and growth of our business is at the heart of our company. Metal Exchange Corporation has grown from a regional aluminium scrap trading company to a global trader and manufacturer of nonferrous metals.
MEC started over 45 years ago trading non-ferrous scrap metal; after a few years we wondered what we could do to further develop our company. Two directions were taken. On the one hand, we expanded our trading activities in globally. Offices were opened in Zürich, Shanghai and recently in Singapore. On the other hand, we started to move downstream by using our scrap base: from integrated scrap recovery, recycling and remelting right up to the production of extrusions. Today, our business includes marketing, trading, manufacturing, processing, distribution and transportation services. However, all our manufacturing and processing facilities were located in the United States. . And that is the crucial point. In 2007, MEC opened a trading office in Switzerland. We successfully expanded our product and service portfolio throughout the years. .At the same time we challenged our positioning in the European market. What is our position? What is our value proposition? What is the next step in our development? With our experience in the United States and the knowledge in Europe, it was a logical step to define the casting of secondary billets as the new chapter in our portfolio. It “only” depended on a good partner. Favouring Italy as the location for a manufacturing was easy. Italy is the second largest producer of extrusions in Europe after Germany, we wanted to be present in this important context not only on the sales side. So we were faced with the option of our first investment in a production structure abroad.

Barbara Novellini, President of Novellini Spa, with her brother Marco Novellini, CEO of Novellini Group
Barbara Novellini, President of Novellini Spa, with her brother Marco Novellini, CEO of Novellini Group

The selection of our partner was a fundamental point, we were looking for someone with a mentality very similar to ours. Today, we are very happy that we were able to start a close collaboration with Novellini five years prior to the joint venture. On both sides we were convinced that we were on the right track. We are more or less of the same size, about 700 employees, we share the same principles, both companies are second-generation private family businesses, with identical shared values of seriousness, transparency, approach to safety, respect and social responsibility.
From our standpoint this investment in novALmec is a crucial step to strengthen the position of Metal Exchange Corporation in the European market, which, together with the recent opening of the Singapore office and the activities of our existing offices in Zurich, Shanghai and St. Louis, strengthens our strategy’s global imprint”.

Marco Novellini, with the factory in Romanore your family was one of the world’s leading manufacturers of shower units. You decided to join aluminium producers in 1996, immediately choosing a high quality approach. What prompted you to make this leap forward?

“My father and mother founded the company in 1966. The transition from capable craftsmen to small industrial company based on windows and mosquito nets occurred in 1972. Our history as a family business ever since its origins has been based on the management of all the different entrepreneurial aspects, with an approach towards the highest quality. The production of shower units, together with wellness products, remains our current core business and for these products design and quality are mandatory. With the experience gained in aluminium, glass, seals and their assembly, my parents quickly realized that bathroom design could develop as an interesting market for the future. Once the production of bathroom furniture started, we began to integrate all the necessary components for the total bathrooms. We began with glass and gaskets, extruded aluminium profiles were the first natural evolution towards downstream activities, while the billet production foundry was the final step, practically the completion of an integrated aluminium supply chain. With our technical basis of deep knowledge of the final product and single components, it is clear that the quality of the materials is the basis of our production mentality and philosophy. Our casthouse was installed 17 years ago, it was a period when the level of technology was on the rise and we remained true to this philosophy. Today we look even further ahead and to remain on the top by looking at the best we felt that a partner like MEC was the right direction and the ideal choice. We provided the necessary revamping of the plant and in 2-3 months we will be fully operating with the new foundry setup. The overall imprint of the production activity is sustainability: we proudly manufacture excellent recycled aluminium with a low carbon footprint and technologically suitable for any kind of use, for this reason light metal is now considered strategic and fundamental for the construction of cars and more”.

Is the production of billets for extrusion totally destined to Novellini’s internal demand, or are you also looking at the external market?

Marco Novellini answered again: “Of course we are also looking at the external market, we were able to verify that with our quality levels and service we can be very attractive and competitive. Credit for this goes not only to the technological level of our plants, which we have always maintained at the top of the state of the art, but for us the experience of our operators is above all a fundamental asset . We are constantly looking for the best, as regards scrap we have highly experienced technicians in key positions such as Quality Manager and Supply Chain Manager, because the control of incoming scrap and subsequent processing by our technicians is the first and most important value to achieve a controlled and quality process. The team is growing, having of course a perfectly equipped laboratory for casting quality control”.

You are also suppliers to companies in the automotive field, what are the main alloys you can supply?

Marco Novellini: “Today we can supply alloys in the 6000, 3000 and 1000 classes for the automotive industry and industry in general. Given our approach to quality, we are not only commodity manufacturers, but we supply a product with a high content, suitable for the most refined needs of our customers. We plan to produce other more complex alloys in the near future, according to our customers’ requirements and in keeping with our current type of plants”.

What can you tell us about your production capacity, investments and economic results?

Friedhelm Grobler replied: “We started with novALmec from 22 thousand tons, with the new revamping we have increased our capacity by 50% and will therefore be able to produce over 33 thousand tons of billets annually. It is correct to say: “small is beautiful!”Our results are, of course, influenced by the LME values, however it is clear that what matters to us is not so much the turnover as the economic result. As a remelter, you have the LME on both sides of your value chain. The first phase of our investment covers the volume expansion as well as some investments in equipment enhancing and guaranteeing the quality of our products. The second phase will cover the study of new alloys and specifications to be produced and services to be offered, thereby seeking interesting markets and niches for us and our customers. The second part of the project will be together with our customers and based on the motto of the founder of Metal Exchange, Morris Lefton: Nisi adieris non intellegis (“If you don’t go, you don’t know.”). Visit the customer. See their operations. Understand their needs”.

From left: Rick Merluzzi, CEO, Metal Exchange Corp., and Mike Lefton, Executive Chairman, Metal Exchange Corp.
From left: Rick Merluzzi, CEO, Metal Exchange Corp., and Mike Lefton, Executive Chairman, Metal Exchange Corp.

Speaking of markets, what do you think your main market will be in the future?

Friedhelm Grobler: “As far as the area of operation is concerned, Italy will always be our main market, also considering transport costs and the fact that most customers are found within a short distance from our foundry. We cannot really say that we shall move towards specific fields of application, even because we do not want to limit ourselves to a single sector. For example, the automotive industry is under pressure , even though new applications in the field of electric cars will imply a remarkable increase in the use of aluminium. Besides, every one of our customers who supplies car manufacturers has increasingly high demands. We are able to meet these demands, but above all to develop materials and supplies in cooperation with our business partners. Our company must remain flexible and receptive as regards changes and innovations in the industry.
We have foundries and extrusion plants in America and now, with the joint venture in Europe, we will be able to increase the exchange of information and improve synergies between different markets and experiences; this will certainly bring advantages to all our customers in the near future, the exchange of know-how is one of the cornerstones of this joint venture”.

We asked Friedhelm Grobler for a comment on the current state of the market: we already witnessed unfavourable times in the past, but at this stage the situation seems rather difficult; in Germany in particular the automotive market is stationary.

“In principle, the situation of the extrusion market in Italy has a great capacity to absorb moments of stagnation because it is less tied to a single sector, as is the case in Germany. Building, mechanics, furniture, construction, electro-technical products, pneumatics, transport, infrastructure, and, allow us to say, shower units, this multiplicity is Italy’s asset compared to other European industrial countries. As mentioned before, our strategy is to move on different markets, single specialization can involve risks. If the workload of our customers is reduced, it becomes more and more expensive and difficult to manage supplies from distant countries, which still have long delivery times. This means that even in a time of crisis, our service is useful and allows the reduction of stocks and therefore a reduction of costs. Today it is more difficult to understand what will be needed for production in three or six months and it is certainly more advantageous to purchase in the short term based on the actual workload. Quality is a must. Flexibility is key and our size allows for flexibility and service. We are the supplier in the market”.

Could you provide us with further information about the American parent company?

“As I mentioned earlier, MEC has about 700 employees divided between manufacturing and trading activities. The latter covers various metals in various shapes and various position in the value chain of aluminium and includes various agency agreements such as the one we have with Emirates Global Aluminium (EGA) for their aluminium sales in the United States. On the manufacturing side, We have a foundry located near Detroit, which is a key supplier of foundry alloys to the auto industry and a variety of die casters as well as deox products to the steel industry. Then, we have Pennex Aluminum which is one of the country’s leading aluminium extruders. It consist of two casthouse casting billets for the Pennex extruders as well as for third parties, two extrusion plants and two fabrication facilities. The plants are located in Pennsylvania and Ohio. Market served include Tier 1 automotive such as Tesla, transportation, building and construction, electrical and machinery and consumer durables. The fabrication facilities offer a wide range of services from prototype production to automated, high speed CNC and robotic work cells. From job shop to production part quantities, Pennex has the capabilities to supply customer made fabricated, finished component”.

To conclude, we asked Marco Novellini to keep us up to date with developments in the Novellini Group.

“Novellini’s core business is linked, as we said before, to products for bathroom design, a market which completely changed during the past ten years. The basic products of the market, characterized by low cost and medium quality, are now mainly imported from China. For this reason we have redesigned our shower units, reducing the amount of extruded aluminium per component, in practice we have gone from an average of about 7.5 kg per component to the current 3.5 kg, abandoning the market of products less rich in content and at a lower price. We now produce around 1.1 million parts per year. Also for the bathroom segment we have grown considerably in the Wellness sector, in bathtubs, in design heating systems; our strategy in recent years has in fact focused on the design, production and sale of medium and medium-high end products. Design, service, quality and functionality are our key objectives today. In Italy the building sector is still in a static phase, even if the renovation market is providing us with satisfaction. To conclude, the main markets besides Italy are for us Holland, France and Germany. In Holland in particular, we now have a market share of 38%”.