Investors applaud but dangers lurk in de-integration

Jun 01, 2010 | 05:59 AM | David Brooks

According to Rio Tinto Alcan's chief executive, aluminum is not yet out of the woods and it may take quite a while, perhaps even a couple of years, until inventories return to healthy levels.

A quick examination of Rio Tinto Alcan's major markets reveals why Jacynthe Côté is wise in her caution. The sector is heavily dependent on three major markets—transportation, construction and packaging—none of which has proven particularly robust this time around.

The trials and tribulations of the U.S. automotive industry have been well reported and it is widely recognized that it may take a number of years for automotive build rates to return to their previous highs. Construction can hardly be described as a safe haven, either, and orders for can sheet—the most important part of the packaging business for aluminum—actually fell 5 percent in March while shipments of sheet, plate and extrusions grew.....

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