North American aluminum shipments to slow this year

North American aluminum shipments are set to slow considerably this year, with an expected increase of 1% over 2012 levels, according to researcher Lawrence Capital Management.

In a report released Thursday, the researcher said it is expecting shipments to hit 23.4 billion lb, following a rise of 6% last year to 23.2 billion lb.

The US market should be a tad stronger, it said, up 2% to 19.8 billion lb this year, with exports poised for their first decline since the global recession.

But looking longer term, the outlook is "better," the analyst said.

It said that both the near-term and longer-term outlooks are being driven primarily by the auto market.

"Ongoing substitution of aluminum for steel, with the next wave coming in the form of aluminum auto-body sheet, combined with the cyclical recovery in vehicle production, is generating arguably the strongest growth rates of any end-use market," it said.

The researcher is projecting aluminum shipments to the automotive sector will rise in the range of 6-13% annually from 2013 to 2017.

But autos is not the only transportation sector bolstering aluminum demand, it said.

"Trucks, trailer, aircraft and RVs all posted strong increases last year," it said. "Demand should be up again this year, though at a slower rate."

Aluminum shipments to the transportation market are expected to increase 6% to 7.53 billion lb this year after likely rising 17% in 2012. Beyond this year, autos and aircraft should continue to grow strongly and lift aluminum shipments by 9-10% annually in 2014 and 2015, it said.

Also, the recovery in building and construction should gain momentum after this year, the analyst noted.

Higher demand from building and construction is projected to lift aluminum shipments by 5-10% per year from 2012 to 2017, with the exception of this year, it said.

The packaging market is projected to erode by 1-2% from 2013 to 2017, taking shipments from 4.66 billion lb to 4.49 billion lb, it said. The culprits are declining soft drink consumption and loss of market share to other types of containers in the beverage market.

North American aluminum shipments to autos are expected to increase by 7% to 4.7 billion lb in 2013 after likely rising by a robust 21% to 4.4 billion pounds last year, it said.

The aluminum industry is in the early innings of what should be explosive growth to the automotive market, driven by a reasonably healthy outlook for auto production and increased aluminum content per vehicle, it said.

Meanwhile, researcher Davenport said in a recent report that the combination of slowly improving fundamentals and strongly negative market sentiment toward aluminum "is unlikely to ebb in the near term in our view," and this will keep prices trapped within the recent trading range of $1,700/mt to $1,950/mt.

Davenport has cut its London Metal Exchange cash aluminum price forecast for the remainder of this year and next "as we expect a more protracted recovery in aluminum prices than we expected three months ago." However, by 2015, Davenport expects "a rapidly tightening market driven by consistent increases in demand and constrained supply growth."