NEW YORK Aluminum producers and fabricators are gearing up for an expected spike in demand from building and construction end markets following the destruction caused by Hurricane Sandy, though the overall economy remains the biggest factor in the aluminum sectors health.
"No one likes to talk about it, but there is a huge economic boost (in manufacturing) when you have these disasters. Its the silver lining," one primary aluminum producer told AMM. "And extruders will see the benefit of that."
An aluminum extruder source agreed, noting that the rebuilding could help trigger some growth in a recently lackluster segment.
"Obviously the commercial building sector is looking very strong next year to replace whats been lost. Out east, anything related to building and construction will see a significant spike," the extruder said.
Construction markets experienced sharp boosts after Hurricane Katrina in 2005 and Hurricane Andrew in 1992, and sources expect a similar trend to happen as early as May.
"Things are just starting to pick up for (building and construction). Now, for a terrible reason, they will pick up even more," the extruder added.
Automotive is another aluminum-intensive industry that could benefit from Sandy as thousands of cars stand to be replaced. Although steel makes up the majority of most vehicles, aluminum producers and analysts estimate that the average content of aluminum per vehicle is still about 343 pounds today and growing with many consecutive models.
"I saw pictures of hundreds of yellow cabs flooded in a parking lot. My first thought was, I wonder if they were GM, Chrysler or Ford," an aluminum distributor said. "(Whoever made them) will have to make a few hundred extra cabs."
However, most agree any uptick in automotive demand as a result of Sandy will have little overall impact on the aluminum sector given the current rates of automotive production.
"If you think the U.S. auto industry is making something like 14 million cars, and a couple hundred thousand were destroyed and two-thirds of that has to be replaced, more often than not, those cars will be replaced off of the used market, which is already in short supply. Thats not going to help the automakers," the distributor said.
And while sources agree the effects of Sandy could temporarily boost some major aluminum end-use sectors, the most important factor for the light metal is the overall economy.
A second extruder told AMM he wants to add more capacity to meet increased demand from the building and construction and automotive markets next year, but hes concerned that business could be stifled.
"We would love the opportunity (to add more capacity)," he said. "But it depends on what drives (the economy). I really dont know what direction the economy will go. And right now, its not an environment to take risk."
"The economy doesnt seem to be growing legs," the distributor agreed. "When Katrina hit New Orleans, the steel industry had a short surge in certain products for construction, but it went away."