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Aluminum can weather low LME prices: execs

Keywords: Tags  Aluminum Association, Heidi Biggs Brock, Rio Tinto Alcan, Jean Simon, Noranda Aluminum Holding, Layle

ISLE OF PALMS, S.C. — Years of recession and the lessons gleaned from those tough times have helped aluminum producers cope with current low prices on the London Metal Exchange, according to industry executives.

The aluminum industry has grown resilient after soldiering through five to six years of economic challenges, Jean Simon, president of primary metals at Montreal-based Rio Tinto Alcan Inc., said during a press roundtable at the Aluminum Association’s spring meeting in Isle of Palms.

"We have learned to reorganize ourselves, look at our costs and work with our vendors ... to be sure that we are still in a good position to compete, because it is a global market. And especially in North America, there has been very good work on that side," he said.

Layle "Kip" Smith, president and chief executive officer of Franklin, Tenn.-based Noranda Aluminum Holding Corp., largely agreed. "It’s an axiom in any commodity industry that we compete globally on the basis of our productivity and the ability to provide a cost-competitive product," he said. "So I think fundamentally, we just practice good commodity management."

The LME’s cash aluminum contract ended the official session April 9 at $1,858.50 per tonne, down 0.2 percent from $1,862 per tonne April 2 and 12.5 percent below the 2013 high of $2,123 per tonne recorded Feb. 15. The price dip has caused concerns about the aluminum sector’s profitability, and worries about whether the industry could withstand a continued trend of sagging prices (, April 5).

Executives participating in the press roundtable could not discuss specific price trends or forecasts per association and antitrust policies, Aluminum Association president Heidi Biggs Brock said.

Some attendees on the sidelines of the conference expressed concerns about imports, particularly from China and Indonesia, and the impact they could have on commodity grades of aluminum in the North American market. But aluminum executives largely downplayed such concerns.

The industry has been able to compete against imports in part because it learned to reduce costs and grow closer to customers during the recession, Simon said. "This is a key element for the customer: being able to talk to us (and) receive their order, and it being what they were expecting. When you are far away, it might be a bit different. This is one of the competitive advantages that the U.S. industry and North America in general has."

Some customers may go wherever prices are lowest, but they are a minority, Simon said.

A spokesman for Pittsburgh-based Alcoa Inc. sounded a similar note. "The cost of material is only one element of your total cost structure. Sometimes you might not buy something because it’s the cheapest thing," he said.

Smith, like Simon, stressed the importance of open but fair trade. "It’s about having a level playing field and then doing what we do best, which is compete," he said. "And I think as a producer, you have to be thoughtful about competition from all quarters, not just imports."

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