PALM BEACH, Fla. Aluminum industry executives are optimistic about 2014, especially given expected demand growth from the automotive sector.
The aerospace industry outlook might be somewhat softer today than it was a year ago, but the sector remains a "good place to be," especially given strong build rates and historically high order backlogs, Reliance Steel & Aluminum Co. chairman and chief executive officer David H. Hannah said.
"Were looking at a better 2014 with regards to aerospace than maybe what youre hearing from some of the mills," Hannah said Oct. 28 during a panel discussion at the Metals Service Center Institutes aluminum products division conference in Palm Beach, Fla. "The dynamics for us are a bit different than for the mills. But eventually what is good for us is whats good for them."
Expected strong demand from the automotive sector also is bolstering the Los Angeles-based service centers outlook, Hannah said. Reliance doesnt sell metal directly to the automotive sector but processes "a lot" for mills that is shipped to automotive customers, he said.
"Its the only part of our businesses where we are processing more metal this year than we did last year or the year before. And we think auto has some legs," he said.
In addition, the semiconductors and electronics market, while it "hasnt really done much this year," is showing signs of improving, even if the sector isnt expected to "take off at a rapid rate," Hannah said.
Reliances energy business, like aerospace, has "backed off" from where it was a year ago but is "still strong on a relative basis," he said.
"The dog of the group is the construction side, and it ... probably will continue to be. It just hasnt recovered," Hannah said, noting that nonresidential construction volumes remain 20 to 25 percent below levels seen before the financial crisis.
ThyssenKrupp Materials NA Inc. president and chief executive officer Hans-Josef Hoss largely agreed with Hannahs outlook, also noting the U.S. market is becoming more export oriented, especially on the automotive side and an aerospace market that historically has been export oriented. In Europe, however, the Southfield, Mich.-based company has seen margins erode in Germany, the one market that has largely withstood the regions economic downturn, as other European countries have looked to export there, he said.
While the United States remains a better market than Europe, the region is showing signs of stabilizing, Hoss said. "We see that in Spain, we see that in the U.K. ... we see that in France," he said, noting that the trend should also bolster the German market. "So in total, Europe will be better off next year."
Atlanta-based aluminum producer Novelis Inc. sees a bright future in 2014 regardless of where automotive build rates go because of a "dramatic substitution effect" under way in North America to aluminum from traditional materials, continuing substitution in Europe and a developing trend toward substitution in Asia, chief strategy and commercial officer Brad Soultz said. "Thats good for all of (us) who are working in the supply chain in aluminum," he said.
In beverage cans, another big market for aluminum, North America might be in the midst of a flat or slightly declining market, Soultz said. But in the rest of the world, the can market is seeing mid-single-digit growth as can lines switch from traditional materials such as steel to aluminum, he said.