Aluminum stands to benefit from planned
upgrades in both U.S. and overseas electrical grids, being the
material of choice for transmission cables and many of the
towers that support them.
"For the first time in a decade there are
long-term strategic projects being planned" for the nation's
transmission grid, Roger W. Gale, president and chief executive
officer of energy consultancy GF Energy LLC, Washington, said.
"There will be a great deal of projects on the drawing board
for the next 10 years," which should lead to greater market
share for aluminum products. "I think most of the high-voltage
cable will be aluminum. There's no question for the cable and
for a large number of the towers the material of choice will be
Projects are planned for both New England in
particular and the Northeast in general, but potentially the
biggest projects are in the West, where there is an effort
under way to bring coal in "by wire"-generating power in
coal-fired plants away from population centers and supplying it
to demand centers via overhead transmission lines.
"These are the biggest projects by voltage,
but they are also the most politically challenging in terms of
environmental and right-of-way issues," Gale said. Most
communities do not want such projects nearby, playing the
perennial "not in my backyard" game.
Tony Rizzuto, an analyst at Bear Stearns
& Co. Inc. in New York, also sees aluminum gaining from
increased grid building. "The aluminum market will benefit-it's
all tied to infrastructure," he said. "We see very good growth.
North American cable producers are sold out and we see similar
In reviewing Alcan Inc.'s earnings, Citigroup
analyst John H. Hill singled out the cable business as one of
the bright spots in the company's engineered products business
unit, noting that aluminum is benefiting from substitution for
copper. The cable business is part of Alcan's Engineered
Products Group, which posted record earnings in the first
quarter, but Alcan and other major cable producers do not break
out figures for cable sales in their results.
One thing that might impact aluminum's growth
in the power transmission market is the difficulty in
capitalizing large projects, especially those crossing state
lines where they might be subject to different regulatory
systems, said Patricia DeMarco, an independent energy
consultant in Pittsburgh.
Projects that cross state lines can bring up
difficult questions, like who will pay for what portion of a
project. Further, if a project crosses states in which one has
deregulated electricity and the other does not, which set of
rules will govern? "I think there is a need for increased
transmission capacity, but we are facing difficulties in the
adding of capacity," DeMarco said.
In addition to the difficulty in capitalizing
such projects, DeMarco said that resistance at the local level
to such projects has become much more rigorous, both for
environmental and aesthetic reasons. Many localities have
become much more organized in their opposition to large
infrastructure projects in their midst. Some point to the
negative environmental impact of burning fossil fuels to
generate electricity, as well as studies that suggest the
presence of high-voltage power lines can have adverse health
effects on wildlife, livestock and humans.
Still others maintain that such large
infrastructure projects are a blight on the landscape, as
evidenced by the rising opposition to offshore windfarms in
highly traveled tourist areas such as Martha's Vineyard, the
Florida coast and California's Malibu coastline.