Aluminum firms forecast higher demand growth
"Aluminum industry fundamentals continue to exhibit sustainable signs of recovering, as evidenced by declining inventories and rising prices," suggests analyst Tom McNamara at CIBC World Markets in New York. The U.S. market has been, by far, the strongest worldwide. Indeed a 1.5% consumption growth forecast (16.5 billion lb) has been eclipsed by annualized year-to-date market demand totaling 17.9 billion lb.
By Staff -- Purchasing, 9/2/1999
Alcan Aluminum has revised upward its 1999 forecast for growth in Western aluminum demand to 2%-2.5% from 1.5% projected earlier. "Our view of aluminum industry fundamentals is somewhat more optimistic than it was earlier," says Suresh Thadhani, CFO of the Canadian-based producer. "The revised forecast reflects continued strong demand in the U.S. and expected improvement in Europe in the second half of the year." Thadhani notes that "Asian demand growth is looking better, although we have yet to see a turnaround in Japan."Comalco, another producer, now places year-2000 growth at 3%. Terry Palmer, Comalco's CEO, says the Australian-based firm "continues to expect a soft market over the next six to 12 months," acknowledging that a 3% demand-growth forecast might be slightly bullish. "We do believe there will be a fundamental improvement in the Asian economy, particularly in Japan, in 2000, which will support a return to more normal growth patterns.
"Beyond continuing uncertainty in the near term of 1999, the general outlook for aluminum demand growth remains promising," notes the Comalco exec.
On the supply side, Alcan expects some increase in second half 1999, reflecting greater production in Dubai. U.S. imports from the Commonwealth of Independent States are expected to be on par with 1998, with an increase in Russian production being absorbed by China. "Overall, we now expect year-end inventories to be about the same level as at the end of 1998," Thadhani says, adding that Alcan earlier had expected world inventories to increase during the year.
Both primary ingot producers expect prices to rebound next year. The price of aluminum on the London Metal Exchange averaged 69¢/lb in first half 1999, compared to 78¢ in the first six months of 1998.
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