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Aleris' Demetriou upbeat on auto, aero demand

Keywords: Tags  Aleris, Steven Demetriou, outlook, automotive, aerospace, building, construction, aluminum aluminum rolled products

CHICAGO — Aleris International Inc.’s top executive remains optimistic about aluminum demand in the building and construction, aerospace and automotive sectors despite drawing red ink in the third quarter.

Aluminum rolled products demand is expected to grow 6 percent every year through 2017, Aleris chairman and chief executive officer Steven J. Demetriou said during a conference call following the release of the company’s earnings results.

"We continue to remain encouraged by the long-term growth opportunities for our businesses and the industries they serve," he said.

Aluminum’s high strength-to-weight characteristics should benefit Aleris as end-users in diverse industries look to boost sustainability with lighter-weight products, Demetriou said. In addition, the fundamentals of the automotive and aircraft industries remain strong despite a temporary inventory overhang in the aerospace sector.

That aerospace inventory overhang results from production delays for certain aircraft models, Demetriou said. But Boeing Co., Chicago, and Toulouse, France-based Airbus SAS, had "near level" backlogs of nearly 10,000 planes in June, a figure that continues to grow, he said.

Approximately 85 percent of those planes are "metallic" in content rather than composites, which means long backlogs should translate into higher aluminum demand in the future even if aerospace volumes are likely to remain flat to down in the third and fourth quarters, he said.

On the automotive front, Aleris has been "very encouraged" by growing demand for auto body sheet, especially with North American light vehicle build rates expected to jump 5 percent in 2013, Demetriou said. Also bolstering results in the sector are gains in trailer builds, he added.

Building and construction volumes in North America should be stable in the third quarter, Demetriou said. The normal seasonal ramp up in building activity over the summer months was hampered by bad weather and customer destocking, but assuming the construction cycle has been delayed, Aleris expects demand from the sector to begin to increase soon, he said.

Another tailwind is Aleris’ wide-coating facility in Ashville, Ohio, according to Demetriou. The Ashville operation experienced "production bottlenecks" in the second quarter but should be running at planned levels in the third quarter, he added.

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