US aluminum major Alcoa is expecting weakness in its North American end-use markets -- automotive, heavy truck, trailer and commercial building and construction -- although that will be more than offset by growth in China and Europe. On a worldwide basis, Alcoa is expecting demand growth in all of these sectors, said Alcoa Chairman and CEO Alain Belda.
Speaking during a conference call Wednesday evening, Belda said despite the fact that fuel, raw material and freight costs soared as the US dollar weakened, the outlook for 2008 was good. He said with an 18% higher LME aluminum price now versus a year ago, it confirms the market's belief in strong demand.
According to Charles McLane, Alcoa's executive vice president and chief financial officer, the market fundamentals are "sound" today, and despite volatility in metal prices, "the marketplace has assigned confidence in future projects of aluminum as witnessed by the forward curve."
In alumina, Alcoa expects a slight increase in production in the first quarter, although with continued pressure from higher fuel oil and natural gas prices. In aluminum, Alcoa anticipates a 5% production increase sequentially due to output in Iceland, but energy costs are expected to remain high.
The flat-rolled products division should see improved market conditions and improved performance in Russia but with high input costs. In engineered solutions, strong aerospace market conditions are to continue, but destocking still could have some impact.
According to Belda, increased build rates in aerospace have been tempered by delays in the A-380 and 787 aircrafts. During the first quarter, destocking should continue at a slower pace, with healthy build rates in the second quarter. Also, the downturn in the North American heavy truck market is expected to extend into 2008.
The North American automotive market is expected to be down in 2008 as the OEMs rationalize inventory levels with declining sales. In Europe, automotive market demand is up moderately and accelerating in China and other developing markets.