Alcoa sees aluminum demand growth; markets tightening

Mon Jul 8, 2013 9:28pm EDT
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By Euan Rocha

TORONTO (Reuters) - Alcoa Inc (AA.N: Quote), the largest U.S. aluminum producer, still sees global demand for aluminum products growing 7 percent this year, signaling a potential price rise for the metal as bulging Chinese aluminum inventories begin to dwindle.

The solid demand, driven by the aerospace and commercial transportation sectors, should combine with industry-wide production cuts already in place to reduce a supply glut that has driven down aluminum prices by 13 percent this year.

Alcoa on Monday affirmed its demand forecast, even as it posted a net loss in the second quarter, due to restructuring costs related to plant closures.

On an adjusted basis, it achieved a larger-than-expected profit thanks to productivity gains and a strong performance from its engineered products business, which makes high-margin goods like aerospace fasteners, turbine blades and truck wheels.

"It was a good, solid quarter. Alcoa continues to show they can cut costs and will be a survivor," said Tim Ghriskey, chief investment officer of Solaris Asset Management, which owns some Alcoa bonds. "This is a company that remains profitable and strong despite the tough environment."

Shares of Alcoa, which closed at $7.92 on the New York Stock Exchange shortly after the results, were little changed in trading after the closing bell.

The stock has fallen nearly 9 percent this year in the face of stubbornly low aluminum prices, caused by a global surplus, and concerns about lackluster demand.

Alcoa expects a 9 to 10 percent increase in aluminum demand this year from the aerospace sector, driven by a recent flurry of aircraft orders at the Paris Air Show and an already-large backlog of orders within the aerospace industry. It also sees increased demand from the automotive, commercial transportation and construction industries.   Continued...

A part of Alcoa Inc.'s aluminium plant in Sardinian is pictured in Portovesme, next to Cagliari September 1, 2012. REUTERS/Alessandro Bianchi