Purchasing of aluminum mill products dropped by 7% in the U.S. last year and probably will slide again this year because of "what is now clearly a recession in the U.S.," says analyst Stephen Briggs at Societe Générale in London. However, he and other analysts see global demand expanding by 10% again this year, so prices will continue to bedevil domestic buyers. "The fact that aluminum prices have rallied in the face of a possible U.S. recession shows that the U.S. economy is less important to global aluminum demand than it was in recent years," writes analyst Lloyd O'Carroll at Davenport & Co. in Richmond, Va. in a recent report.

In its review of 2007 business, the Aluminum Association reports that demand from domestic buyers for key products sheet and plate dropped by 5.8% from 2006 while extruded products shipments fell 15.7% and electrical wire and cable dipped 8.1%. Only 15% of the buyers polled by Purchasing in March expect to increase aluminum buying in the near future, bringing the five-quarter average to 26%. In fact, the aluminum buying index overall has dropped to 41.9 in March on an index where 50 indicates growth.

On the other hand, global aluminum demand has been growing strongly because of expanded purchasing by manufacturing and housing in the BRIC nations of Brazil, Indian, China and Russia. In fact, Chinese growth was 38% last year.

Aluminum smelting in North America expanded by 6% last year to 5.64 million metric tons, but most of that increase was triggered by 13% growth in exports of mostly primary ingot destined for fabrication elsewhere (since exports of mill products slipped by 1%). However, latest new-order data from the Aluminum Association suggests that purchasing will be depressed in the U.S. and Canada again this year.

Also, early 2008 exports of aluminum ingot to China may slow as the year progresses. The worst Chinese winter weather in decades damaged power networks in southern provinces in late January to early February, forcing electricity-intensive aluminum smelters to shut down or reduce production. Smelters have gradually resumed production since late February and most are expected to return to full operations in late April or early May.