Metalnewsnet 14 Jan:

Primary aluminum production in North America fell 18% last year to 4.76 million metric tons but tepid demand hasn't been able to reduce excess aluminum ingot and mill product inventories. Aluminum Association data show that's because new orders dropped by about 19% last year. The key question for this year, according to the analysts, is how much key aluminum-using automotive and aerospace industries will rebound from the recession.

The latest Purchasing.com buyers' survey found that only 6% of the U.S. end-use firms are planning to purchase more aluminum these days. Looking globally, analysts in London and New York today suggest that the excess warehouse stocks and over reliance on Chinese demand trends by investors probably will limit the metal's price rally as the first quarter progresses.

Aluminum prices reached a monthly peak of $1.36/lb on the London Metals Exchange in March 2008. LME ingot prices slumped 56% to 60¢/lb by February 2009 as the global economy went into recession and the price has only slowly risen. So far this month, it's averaging $1.03/lb but mostly because of speculative investment. Demand continues to be buffeted by headwinds as certain end markets such as aerospace and industrial gas turbines continue to experience weakness from destocking, says analyst Mike Gambardella at J.P. Morgan Securities.

Alcoa, the major aluminum producer, reported poor fourth-quarter results on Monday, noting that it had cut production and trimmed its workforce in the past year as carmakers, aerospace companies and other customers pulled back. The firm showed a $277 million loss, reporting lower sales in the construction, aerospace, commercial-building and gas-turbine markets. Analysts say the aluminum maker's results show that it hasn't roared back into profitability yet, despite massive restructuring, layoffs, idling of plants and steep cuts in capital spending and dividends.

Writing to clients after the Alcoa report, Fraser Phillips, managing director of RBC Capital Markets' global mining research, says: "Aluminum continues to labor under the weight of significant excess inventory and capacity and we expect aluminum prices to continue to suffer as a result."

(from purchasing)

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