Alcoa sees aluminum use climbing on China recovery

Alcoa Inc., the largest U.S. aluminum producer, sees global demand growth for the commodity recovering to 7% in 2013 as China’s economic rebound drives demand for cans, transport and office buildings.

Aerospace demand will increase by as much as 10% as planemakers face record backlogs, the company said yesterday in its fourth-quarter earnings presentation. It also predicted aluminum consumption may climb 19% in China’s heavy-truck and trailer industry, while U.S. commercial building and construction expands for the first time in four years.

“The fundamentals are pretty positive,” Chief Executive Officer Klaus Kleinfeld said on a conference call. “We will absolutely see the rebound” in aluminum prices.

Demand in China, the world’s largest aluminum user, will grow 11% this year to 23 million metric tons as stimulus spending announced by the country’s new leadership begins to show its effect, Kleinfeld said. He also forecast an acceleration of consumption in Brazil, India and Russia. Global demand advanced 6% last year, according to Alcoa.

China’s economic growth probably quickened to 7.8% in the fourth quarter from a year earlier, up from a three-year low in the previous period, according to a Bloomberg News survey last month. The government will release quarterly gross domestic product data as well as December industrial production, retail sales and fixed-asset investment on Jan. 18.

Rising Prices

Aluminum for immediate delivery on the London Metal Exchange averaged $2,021 a ton in 2012. The metal will average $2,125 this year, according to the median of 19 analyst estimates, and keep rising for at least three years. The price is seen advancing to $2,292 in 2014 and to $2,400 in 2015, the estimates show.

“Every commodity six months from now will be higher than today because China’s on an upturn,” said Lloyd O’Carroll, a Richmond, Virginia-based analyst at Davenport & Co. who recommends buying Alcoa shares. “LME prices have rebounded and that should continue.”

Alcoa said yesterday that fourth-quarter sales fell to $5.9 billion from $5.99 billion, beating the $5.6 billion average of 11 analyst estimates compiled by Bloomberg.

Net income was $242 million, or 21 cents a share, compared with a loss of $191 million, or 18 cents, a year earlier. Profit excluding a gain on the sale of a power plant and other one-time items was 6 cents a share, matching the average of 20 estimates compiled by Bloomberg.

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