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Analysts see steady U.S. aluminum market for '13

Keywords: Tags  U.S. aluminum market, Kamil Wlazly, Lloyd O’Carroll, Davenport & Co., Aluminum Association,

While the U.S. aluminum market could remain in a holding pattern until after the presidential election, industry observers are at least cautiously optimistic, with the strong transportation sector driving much of the growth.

“We expect modest but steady growth for the rest of this year into next year,” Aluminum Association spokesman Stephen Gardner said.

Lloyd O’Carroll, senior vice president of research at Davenport & Co. LLC, Richmond, Va., agreed, noting that U.S. aluminum demand has continued to rise even though the rate of growth isn’t quite as robust as it was earlier this year. He expects U.S. aluminum industry shipments will rise about 8 percent this year, but will increase just 4 percent in 2013 due to the impact of the debt crisis in Europe and slower growth in China.

On the other hand, the Federal Reserve’s qualitative easing could start filtering into the U.S. economy and have a positive effect on domestic aluminum consumption, said Kamil Wlazly, senior metals analyst for Metal Bulletin Research. Wlazly noted that the domestic aluminum market has been fairly flat during the second half of this year and that watchful distributors aren’t likely to make many purchases until November. “But producers are generally bullish that things will improve after the election,” he said.

O’Carroll said that while certain markets, most notably the automotive and aerospace sectors, remain quite strong, manufacturing in general isn’t doing well enough to improve the aluminum supply-demand balance, even with the housing market slowly showing signs of improvement.

“We see good, solid growth in the next 12 to 18 months,” Gardner said, especially in the transportation markets that benefit from aluminum’s lightweight properties. There have already been some pockets of improvement for certain markets that have been struggling since the economic downturn started, including such building and construction sectors as metal roofing and multi-family housing starts, he said.

O’Carroll wrote in Davenport’s latest quarterly aluminum outlook report that the market also was being aided by aluminum prices moving substantially higher after drifting lower during much of the summer, largely crediting a major fiscal announcement from the Chinese government as well as monetary spending announcements from the European Central Bank and the Federal Reserve. He added that recent production cuts at aluminum smelters also helped support prices, albeit to a lesser extent.

Looking forward, O’Carroll predicts that the LME cash aluminum price will average $2,047 per tonne in the fourth quarter--down about 16 cents per pound from a year earlier--and then rise to an average of $2,390 per tonne in 2013 due to projections for a slight global deficit next year.

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