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Aluminum to beat expectations: Alcoa

Keywords: Tags  Alcoa, William Oplinger, Aluminum Association, aerospace, automotive, construction, China, aluminum aluminum-lithium alloys


ISLE OF PALMS, S.C. — Bolstered by automotive and aerospace demand, Alcoa Inc. expects aluminum demand to grow 6.5 percent over the next decade, outstripping global gross domestic product gains, according to executive vice president and chief financial officer William Oplinger.

In fact, Pittsburgh-based Alcoa thinks supply and demand will be tighter than the 535,000-tonne surplus the company estimated just three months ago, Oplinger said April 9 at the Aluminum Association’s spring meeting in Isle of Palms, S.C.

While Oplinger conceded that such a projection was "going against the tide," he insisted that it makes sense, assuming 7-percent demand growth in 2013; China taking capacity offline, which should benefit upstream aluminum producers elsewhere; and strong automotive and aerospace demand.

"This is a growth industry," Oplinger said. "When you hear a lot of the bad press about our industry not growing quickly enough and applications not being innovative enough, I think it’s fundamentally wrong."

Driving aluminum’s expected growth are macro-trends such as the world population approaching 9 billion, urbanization—which bolsters demand for cars, housing and packaging, all of which contain aluminum—and climate change, which should benefit the aluminum industry as automakers look to lightweight their vehicles to reduce emissions, Oplinger said.

He brushed off some conference attendees’ concerns about exports from China. "When you think about exporting metal out of China, you are essentially exporting energy, which they are short on; water, which they are short on; and carbon emissions, which they have too much of—so we don’t foresee them being large exporters anytime in the near future," Oplinger said.

The manufacturing of aluminum-intensive vehicles is set to ramp up significantly in coming years, Oplinger said ( amm.com, April 9), noting that Alcoa is planning to accommodate an expected 10-fold increase in aluminum sheet requirements in the auto sector.

Alcoa expects aluminum penetration in vehicles to increase by 200 pounds in coming years, driving 1.5 million tonnes of additional demand in North America. Oplinger noted that there are relatively few North American primary aluminum producers, estimating current North American primary aluminum capacity at slightly more than 1 million tonnes.

In addition, the aerospace sector has an eight-year backlog at current run rates, Oplinger said, and even demand from building and construction in North American is improving. "We are starting to see the green shoots come back," he said,

But there are some headwinds, Oplinger said, acknowledging that aluminum is facing challenges from carbon fiber in the aerospace sector, although Alcoa has been "very aggressive" in developing aluminum-lithium alloys, which he said compete well against carbon fiber.

Alcoa expects aluminum-lithium demand to grow fourfold "over the next few years," Oplinger said. The company currently makes all of its aluminum-lithium alloys at its technical center near Pittsburgh, but it is investing in a casthouse in Lafayette, Ind., that is expected to come online at the beginning of 2014 ( amm.com, May 17).

Oplinger said the aluminum industry isn’t doing enough to get its positive message out to Main Street, Wall Street or Capitol Hill. Issuing a "call to arms," he said Alcoa would like to see more congressional visits from the industry, the creation of an aluminum caucus and a bigger push to improve communications about aluminum’s advantages, especially when it comes to sustainability. "We are significantly outperformed by things like steel, paper, plastic and glass," he said.

One other big challenge is price volatility on the London Metal Exchange, which comes often in reaction to even limited news, Oplinger said. "We’re working to get better transparency around the LME so people can see who the big players in the LME are."


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