The transportation and energy
sectors have driven the aluminum market so far in 2012, and all
signs point to growth continuing through much of the rest of
the year, market players say. In fact, only continued
sluggishness in the construction sector is keeping the industry
from sounding the bells for an all-out, full recovery.
North American aluminum
extrusion markets are showing convincing signs of sustainable
growth, with demand expected to rise further in 2012, billet
producers and extruders told AMM at the Aluminum
Extruders Council conference in Scottsdale, Ariz.
Aluminum extrusion demand will
grow by 5 to 8 percent this year on the back of strong demand
from the truck and trailer and automotive industries, said Jeff
Henderson, director of marketing for Sapa Extrusions North
America, a Rosemont, Ill.-based division of Swedish aluminum
extruder Sapa Group. All end marketswith the exception of
building and constructionwill experience growth this
year, he said. "We still believe there are a lot of houses in
the supply chain and its still being worked through.
Hopefully, the economy will continue to improve."
Although housing prices are low,
it will still take time before confidence returns to the
building and construction markets, Henderson said. "We think
any real recovery in building and construction is two to three
"(Building and construction) is
still a ways off," a producer source agreed. "But everything
else is solid."
Tightness in the North American
billet market, which participants attributed to a number of
outages and increased demand (AMM, Feb. 6), was
another topic of discussion in Scottsdale. Billet markets have
been busy since the end of January, although some question how
long this will continue.
"Its been a nice start to
the year. There has been a burst of orders as restocking takes
place," Henderson said. "Well see how it plays out. We
understand it could get better, but weve also seen false
starts before. Certainly, weve seen a more compelling
argument this year that this recovery (is real). Unemployment
figures are coming down, and were seeing some economic
The producer source agreed that
all evidence supports a legitimate recovery this year. "People
are buying cars. Thats always a good gauge," he said.
Anti-dumping duties on some
Chinese extrusions also have contributed to the renewed
strength in extrusion markets, industry participants said. The
duties, implemented in May 2011, have been positive for
domestic extruders, according to International Trade Commission
data, which showed U.S. imports of Chinese aluminum extrusions
plunged 98 percent to just 4,217 tonnes last year from 181,613
tonnes in 2010.
In another corner of the
aluminum market, United Co. Rusal deputy chief executive
officer Oleg Mukhamedshin told AMM his company remains
fairly bullish on 2012, forecasting global growth of 7 percent
in primary aluminum consumption and anticipating that all
regions outside of Europe will experience a pickup this year.
Rusal predicts aluminum consumption will increase by 11 percent
in China, 10 percent in India, 6 percent in Russia and 5
percent in North America, Latin America and Japan, although
European consumption will be flat.
Despite a reasonably optimistic
outlook, the Russian producer has stated publicly that it is
contemplating cutting its total aluminum production by 6
percent in the next 18 months, although Mukhamedshin said that
number isnt set in stone. "We should decide by the end of
the year," he said, adding that if the company goes ahead with
capacity curtailments it likely would occur at its high-cost
smelters in Europe.
But as Rusal ponders its
production levels, others are increasing capacity. Titanium
Metals Corp. (Timet) aims to boost its role in the engine
market with new melting capacity while also installing new
titanium powder capabilities.
Timet has commissioned a plasma
cold-hearth melt furnace at its Morgantown, Pa., facility that
president and chief executive officer Bob OBrien said
will increase its ability to meet a growing demand for
"complex, high-temperature alloys" that will be used
extensively in the newest generation of aircraft engines.
Dallas-based Timet is already a
major source of titanium produced by another cold-hearth
technologyelectron-beam meltingvia an existing
furnace in Morgantown. The company said in documents filed last
year with the Securities and Exchange Commission that
electron-beam technology accounted for 46 percent of its total
annual global melting capacity of 68,450 tonnes (nearly 151
million pounds), with more conventional vacuum-arc remelting
accounting for most of the balance.
Most observers agree that an
upturn in titanium consumption that began in 2010 has been due
largely to engine-related demand rather than airframes.
At the same time, Timet has
purchased "certain assets, intellectual property and know-how"
that will allow it to produce value-added titanium and other
specialty alloy "Prep" powder, the company said. The technology
is believed to refer to the plasma-rotating electrode process,
although a Timet executive didnt respond to a request for
Timet didnt reveal who
sold it the Prep assets, although the company said it has begun
installing and upgrading the equipment and expects the powder
facility to be operational by the second half of this year,
allowing Timet to "efficiently achieve near-net-shape
manufacturing of complex parts."
Timet isnt the only
producer adding to its cold-hearth melt capacity. The largest
plasma-arc melting capacity of any U.S. titanium producer is
believed to be held by Pittsburgh-based Allegheny Technologies
Inc., which noted recently that a fourth plasma-arc melting
furnace is in the qualification stage at its ATI Allvac
facility in Bakers, N.C. The furnace will support "growth in
demand for high-value products in 2012," according to ATI,
which also has electron-beam melting capacity in Richland,
Meanwhile, a third titanium
producer looking to increase its profile in the engine market,
Pittsburgh-based RTI International Metals Inc., is augmenting
its existing plasma-arc melting capacity with a new
electron-beam furnace that is due to be completed by year-end
and be operational in 2013.
RTI vice chairwoman, president
and chief executive officer Dawne S. Hickton said during a
conference call with investors that the companys new
cold-hearth electron beam furnaceinstrumental in its
efforts to increase RTIs jet engine businessis on
track to start up at its RTI Alloys subsidiary in Canton, Ohio.
Meanwhile, RTIs new Martinsville, Va., mill products
plant became operational in the first quarter, delivering its
first forged product.
Additionally, slight gains in
primary metal prices and strong demand from auto consumers
allowed secondary aluminum alloy prices to tick up earlier this
year. "Scrap is tight and demand is good," one source said.
Another source expects
heightened auto demand to push ingot prices to six-month highs.
"Automotive is very busy," he said. "Prices are up and down
right now, but will go up 2 to 4 cents through the second
Nevertheless, producers, traders
and analysts overall are predicting modest growth for the
Alcoa Inc., Kaiser Aluminum
Corp. and Century Aluminum Co.s top executives are
optimistic due to strong forecasts for the automotive,
aerospace and transportation sectors.
Most market participants agree
that China is the country to watch in 2012. Many are confident
that China will drive aluminum growth because the country does
not have its own sustainable aluminum industry, which could
provide opportunities for Western companies to partner with
There also are opportunities in
Chinese infrastructure. "We think the China infrastructure
build-out has several more years left," one industry executive
said, forecasting 14-percent growth for 2012. "The interior of
the country is far from being built. That will drive all
Gayle Berry, vice president of
commodities research at Barclays Capital, agreed. "In terms of
China, Im very positive," she said, adding that
impressive growth rates there were offsetting soft vehicle
Still, some point to a potential
real estate bubble forming. "We need to watch China," one
market participant said. "Theres evidence that says the
Chinese economy is slowing down. The real concern is about the
extent to which their building and property market has been
overheated. . . . Its key to whats
going to happen in terms of price."
China also has its own debt issues, according to David
Wilson, former head of metals research at Société
Générale SA who now is director of metals
research and strategy at Citis investment research and
analysis division. "Debt is not just a Western World issue.
Its a big issue in China," Wilson said at a Metal
Bulletin conference in Paris late last year. Most of the
countrys regional governments are carrying massive debt,
yet questions remain about whether the Chinese central
government can even afford to bail out regional governments, he