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Aluminum extruders eye 2013 uptick

Keywords: Tags  aluminum, extrusion, billet, building and construction, automotive, extrusion demand, billet, Alcoa ABI


LONDON — Aluminum extrusion demand is expected to grow in the range of 6 to 10 percent in 2013, market participants and analysts said, although they cautioned that some end-markets—notably truck trailer—could experience a slowdown in growth.

"I’m expecting 2013 to be good, provided the fiscal cliff gets resolved. It won’t be great, but it will be good," an extruder said.

"We’re projecting 7- to 10-percent growth (for extrusions overall)," a second extruder told AMM.

Automotive is one sector that will experience an uptick, but not nearly at the same breakneck pace as this year, sources said.

"(Auto) sales have had a very strong recovery out of the recession. This is typical in the first few years of a recovery, when there is some snap back in big-ticket items like cars," Davenport & Co. LLC research analyst Tim Hayes said. "We expect that growth rate to slow next year."

Still, Richmond, Va.-based Davenport is forecasting an 11.3-percent gain in automotive extrusion shipments to 442 million pounds in 2013 from 397 million pounds this year.

Participants are also encouraged about heating, ventilation and air-conditioning components (HVAC) markets.

Copper is traditionally used in HVAC tubing applications, but given the high cost of the red metal—copper currently costs around four times what aluminum does on the London Metal Exchange—many HVAC manufacturers are shifting to aluminum to save money.

The second extruder, who sells into the HVAC market, expects growth of more than 10 percent from this sector next year.

Building and construction, which has been all but dormant since the 2008 recession, is another market that offers encouragement. It has recently shown signs of life and is expected to experience an uptick next spring due to destruction caused by Hurricane Sandy on the East Coast ( amm.com, Nov. 21).

"(Building and construction) is getting better. It’s still not where it was, but it’s at least getting better," one producer said.

"A big part of extruders’ business is (building and construction) and clearly, without a doubt, (that sector) is no longer shrinking. (Extruders) feel the ground has hardened beneath them," a second producer said.

Davenport is forecasting an uptick of 5.5 percent in construction shipments to 1.076 billion pounds in 2013, up from 1.02 billion pounds in 2012.

"Residential housing will be better. New starts are growing well, but the repair and remodeling market, which is larger, is still growing in the low-single digits. So it’s not quite hitting on all cylinders," Hayes said. "But housing will continue to rebound nicely. Perhaps with a better economy, and more jobs, people will start to feel comfortable doing repairs and remodeling on their homes."

Once residential construction picks up speed, "it will be very interesting," the second producer added.

While most markets are looking relatively positive, it isn’t all good news. Most expect the truck trailer sector to be significantly slower than in recent years, experiencing only a slight rise next year.

Davenport forecasts that aluminum shipments to the trailer market will rise just 2 percent to 359 million pounds in 2013 from 352 million pounds this year, while heavy and medium truck shipments will remain flat year-on-year at 105 million pounds.

"We’ve seen the trailer build rates slow down. They’re tapering off and I think orders are softening. Watching truck and trailers is a good barometer of the economy. They were deeply depressed in 2009, then there was a big snap back in 2010 and 2011, but now it’s sort of going back to equilibrium," Hayes said.

Meanwhile, the strength of the extrusion sector contributed to a tight billet market in 2012, and participants anticipate more of the same in 2013.

A combination of tight supply and decent demand pushed contract billet premiums up an average of 2 cents per pound for next year’s material, while spot billet premiums remained at record highs of between 12 and 13 cents per pound for much of 2012.

The North American extrusion market is paying close attention to developments at Pittsburgh-based Alcoa Inc.’s Aluminerie de Beacancour Inc. (ABI) smelter in Quebec as talks to renew contracts covering some 900 workers at the 400,000-tonne-per-year smelter continue.

ABI halted 6063 billet production due to high iron content ( amm.com, Dec. 13), and extruders continue to keep an eye out for off-grade material.

A strike or lockout could result in billet premiums shooting up, although the general mood in the industry was reasonably upbeat heading into Christmas week.

"The ABI situation remains a problem, but I believe it’s going to be resolved. At this point, if the two sides were not close to an agreement I’m sure one of them would have taken some action now. That tells me to expect a positive outcome. ... Of course, the plant will need some time again to stabilize, but that’s normal," a third extruder said.

"If ABI’s (production) goes away, it will be a very, very brisk environment for billet spot premiums next year," the second producer said, but added that if Alcoa and the United Steelworkers union do reach an agreement there could be "some upward pressure" on premiums in the summer, although the overall premium growth is expected "to take a break in 2013."


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