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Alcoa expects growth in all key aluminum markets in 2012: CEO

By Tina Allagh in Washington

January 17, 2012 - US-based aluminum major Alcoa expects global aluminum demand to grow 7% overall in 2012, with increases seen in all key markets, Chairman and CEO Klaus Kleinfeld said the week ended January 13.

During a conference call to discuss the company's fourth-quarter results, Kleinfeld said Alcoa projects global growth in aerospace (10-11%), automotive (3-8%), commercial transportation (2-5%), packaging (2-3%) and building and construction (4-5%) markets.

Alcoa said this 7% overall growth projection is above the 6.5% rate required to meet the company's forecast of a doubling in global aluminum demand between 2010 and 2020. Aluminum demand grew 10% in 2011 on top of 13% growth seen in 2010.

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This year, Alcoa forecasts a global deficit of 600,000 mt in primary aluminum supply versus a 150,000 mt surplus in 2011. (See related chart: Aluminum US Transaction Daily: Nov 15, 2011 - Jan 13, 2012).

Overall for this year, demand in China is expected to grow 12%, while consumption in North America is seen rising 3%, Kleinfeld said. India's growth is seen at 10%, Asia (excluding China), 9%; and Europe's growth should be flat.

By region and category, North America is expected to see 5-10% growth in automotive and 2-7% growth in heavy truck/trailer, but a 2-3% decline in beverage can packaging and a 3-5% decline in commercial building and construction.

The automotive market looked as if it were headed for a slowdown last year, but ended the year with a strong 13.4 million vehicles sold, said Kleinfeld. And that is expected to continue into 2012.

Europe's automotive sector this year is expected to be down 0-5%, heavy truck/trailer down 8-13% and commercial building and construction down 3-5%. But Europe's beverage can packaging sector should be up 4-5%, said Kleinfeld.

China is expected to see growth in all the sectors -- up 3-8% in automotive and heavy truck/trailer, up 15-20% in beverage can packaging and 8-9% in commercial building and construction.

In 2011, North America saw 6% demand growth; Europe, 1%; China, 15%; and Asia (excluding China), 10%.

By product, in the alumina segment, Alcoa has 33% of its third-party shipments on a spot or alumina price index basis, said Chuck McLane, executive vice president and CFO.

He noted that the move to alumina index pricing helped Alcoa see year-over-year improvement "in the face of difficult market conditions."

In primary aluminum -- where the segment saw a 12% decline in realized prices in Q4 from Q3 -- regional premiums fell, causing an expected impact in Q1 of $20 million at current levels.

In global rolled products, the sector was hit with a 12% seasonal decline in beverage can volumes in North America and 23% in Russia in the fourth quarter. The European market declined by 16%.

Looking at Q1, aerospace and automotive demand is expected to remain strong and can stock demand should recover from a seasonal low. Also, the European outlook continues to be weak.

In engineered products and solutions, the aerospace market remains strong, but building and construction continues to decline, Alcoa officials said.

The commercial transportation market remains soft in Europe.

Kleinfeld added that aluminum continues to be an attractive asset class, "with macroeconomic indicators showing positive signals."

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