Reuters reported that while Alcoa Inc executives expect aluminum markets to remain sluggish for 2009, they do expect an 11% increase in demand growth for the H2 not including replenishment of very low inventory levels throughout the supply chains of its end users.
Company executives said that they see most of the aluminum giant's end markets remaining distressed through the end of 2009 but are seeing modest sales increases in global truck and trailer and automotive segments for the H2.
Mr Klaus Kleinfeld president & CEO of Alcoa said that the Pittsburgh based aluminum producer projects global demand growth to decline by 6% for the year and fall 10% without China. He said that our consumption outlook has slightly improved. A few weeks ago we modestly improved our forecasts for Chinese demand and now think it will be 4% for the year. For the H2, however, the company sees demand growing by 11% over the H1 with increases in every region, driven by emerging markets growth which has already started in places like China, stabilization in the western world and stock levels at low levels.
The executive said that "The demand that we're seeing here is not expected to be driven by replenishment of low stocks. But we believe that will kick in.”
Mr Kleinfeld said that he expects the aluminum market surplus to shrink by year end with smelter curtailments fully implemented and demand starting to pick up. Alcoa has idled more than 20% of its smelting capacity compared with an industry average of around 17%. Almost daily Alcoa reviews potline by potline on a regional basis whether to curtail or restart capacity.
He said that at current prices, we don't feel that this is conducive for any restarts in the western world. With producer and US distributor inventories at all time lows, once demand picks up in earnest a ripple effect should cause a very rapid pick up in the supply chain. The supply chain is currently very thin and we believe it is going to need to be filled.
Mr Chuck McLane CFO of Alcoa said that shipments in Alcoa's flat rolled products rose 6% in the Q3 giving evidence of a slight up tick in activity.
He said that "We're seeing an increase in destocking activity as the supply chain swelled to levels anticipating a higher build rate than those estimated in the current forecast. As a result, we expect revenues in this market will be at lower levels for the next 6 month s to 12 months."
