Aluminium market to soar after 2014, economist says

Aluminium companies should use a slow 2014 to upgrade, expand and hire new staff to gear up for boom times in the following years, an economist has said.

Next year will be “off” compared with 2013 as demand slackens from the middle of 2014 into the first quarter of 2015, Alan Beaulieu, president of the Institute for Trend Research consultancy, said at a recent Metal Service Center Institute (MSCI) aluminium products division conference in Florida, USA.

“If you project that your growth is going to be the same as it was 2013, you’re going to be wrong,” he added.

North America will not fall into a recession, but Brazil and Europe will, Beaulieu said. “The world will soften ... and it will affect [the aluminium] industry,” he said.

Beaulieu’s view contrasted with those of several aluminium industry executives who voiced optimism about 2014.

While the automobile industry is seeing solid growth in 2013 compared with 2012, it will not be immune to the slowdown, Beaulieu said, predicting that automotive production in 2014 will be 6.3% below this year’s levels.

Industries as diverse as metalworking machinery, consumer durables, truck-trailers and medical equipment are also expected to slow in 2014, Beaulieu said.

The only exception is aerospace, which is expected to grow by 7.8% in 2014, he said. “Orders are in. And the downturn doesn’t look like it will be significant enough to cause a large number of cancellations,” he said.

Once the 2014 slowdown subsides, the US economy will be poised for a bull run from 2015 into the first half of 2018, Beaulieu said.

That period will benefit from energy independence in the USA resulting from the shale oil and gas boom, the expansion of the Panama Canal, which will create jobs on the US East Coast, and the US Federal Reserve continuing its loose monetary policies aimed at bolstering growth, Beaulieu said.

In addition, US consumers have deleveraged and are spending, the country’s manufacturing is again globally competitive and “near-sourcing” jobs, and a free trade agreement between Canada and the European Union should also spur growth in the future, he said.

But bank lending is slowing, in part because of increased regulation resulting from policies such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, at the same time interest rates are expected to rise, Beaulieu said.

“You need to go out there and borrow money now, this year, and not wait until 2014,” he said.

Another problem will be a lack of skilled labour, Beaulieu said, predicting that “bidding wars” for qualified workers will lead to wage inflation.

“You need to be using 2014, an off year, to get ready for what’s coming on the other side,” Beaulieu said. That might mean expanding, acquiring key staff, de-bottlenecking or making acquisitions, he said.

“Whatever your constraint is, fix it in 2014 because you are not going to have time in ’15, ’16, ’17 because of all the right things going on in this country,” he said.

Still, Beaulieu cautioned that a “significant downturn” is coming in 2019 as current loose monetary policies return to haunt the economy in the long term.

“We’re going to have to pay a price for that. Massive amounts of currency is being created by central banks around the world, and it’s the fuel that is going to touch off inflation,” he said, predicting an inflationary business environment not seen since the 1970s.