Norwegian aluminium producer Sapa will invest £9.6m to reopen a factory in Wales to meet growing demand from carmakers producing electric vehicles.

From this year, the factory in Bedwas will provide metal for hybrid black cabs in London produced by the London Electrical Vehicle Company, which is owned by China’s Geely.

The opening comes three years after Sapa closed the plant as aluminium prices fell to their lowest level since the financial crisis because of overcapacity in the market, especially in China.

This year, prices have risen 24 per cent, mostly because the Chinese government has cut domestic production to try to reduce pollution. Investors are also optimistic about demand from electric vehicle makers.

The Bedwas factory will focus on processing aluminium extrusions into car parts and is backed by £550,000 from the Welsh government. More than 130 jobs will be created over five years, Sapa said.

“We are actually cost-efficient and cost competitive with the general world,” said John Thuestad, executive vice-president of extrusion at Sapa.

London has said that no new diesel cars will be given taxi licenses starting next year. Mayor Sadiq Khan has launched a £42m fund to give grants to owners of diesel black cabs so they can trade them in for less-polluting models.

In addition this month, Uber said its vehicles in London will be 100 per cent hybrid or fully electric for its budget UberX fares by the end of 2019. This will affect at least 40,000 cars that are currently on the app in London, it said.

The London Electrical Vehicle Company, which was formerly called the London Taxi Company, opened a £325m plant in Coventry this year to produce the electric black cabs. The company will use aluminium in the body of the cars.

Sapa has been working with the company’s engineering team for 18 months on the new cabs, which have a lithium-ion battery made by Korea’s LG Chem as well as a petrol engine to enable them go further before having to recharge.

Steel is the main metal used in most cars. But using aluminium is “one of the most effective ways to improve the energy efficiency of electrical and hybrid vehicles,” because of its lighter weight, according to Sapa.

Still, the steel industry has also said it will benefit from electric cars. India’s Tata Steel said in July that demand for advanced steels from vehicles will increase by about 2.6m tonnes by 2050, as manufacturers look to “save weight in the most cost-effective way possible”.

Sapa is the leader in extruded aluminium products used in construction and carmaking. It was formed in 2013 as a joint venture between Norsk Hydro and Orkla, a Norwegian consumer goods supplier. In July, Norway’s Norsk Hydro agreed to buy the 50 per cent stake in Sapa it did not already own.

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