Aluminum demand is slipping

With the financial reporting season in full swing, the Metals Insider newsletter says there is a common theme emerging from US fabricators of aluminum products—reduced buying and inventory destocking caused by a 5% year-on-year decline in shipments. Data from the Aluminum Association backs up analysts’ views that a three-year string of increased shipments will be snapped in 2007. Reason: Annualized demand is down almost 10%.

Aleris International in Beachwood, Ohio, says 12% year-on-year decrease in first quarter shipments of mill products “was driven by weakness in North America due to end-use customer inventory destocking and the steep decline in housing starts.”

Wise Metals Group in Baltimore notes that “the most significant driver holding back the first quarter's profitability was the direct result of reduced production levels…owing to customer-announced intentions to undergo significant de-stocking of year-end inventories.” The firm says it also had destocked in the fourth quarter of last year and is now in the process of rebuilding inventory levels only to meet contracted volume commitments.

The subscription-only Metals Insider report says Kaiser Aluminum represented an exception to the rule, largely because it is more focused on the aerospace sector, which is still booming. “But here again, there were two divergent trends at work as the company’s reports of robust demand for aerospace and defense applications was partially offset by soft demand in ground transportation and other industrial applications for fabricated products.”

Meanwhile, the net new aluminum order index fell 15.4% in April from the same month in 2006 and was down 7.1% from March, according to the Aluminum Association. The association's non-seasonally adjusted index is based on reports by 19 participants of new orders (less cancellations) received for the previous month. The association's new orders index for April stood at 102.23, down from 120.77 the previous year and down from 110.07 the previous month.

April orders of extruded products fell 25.7% from April 2006 and 7.9% from March. For the first four months of the year, orders were down 21.8% from last year. April orders of sheet and plate fell 18.6% from April 2006 and 6.2% from March. For the first four months of the year, orders were down 13.9% from last year. April orders of U.S. can stock, excluding orders from Canadian mills, fell 5.3% from April 2006 and 11.9% from March. For the first four months, orders were up 0.1% from last year. April orders of foil fell 1.8% from April 2006 but rose 7.7% from March. For the first four months, orders were down 9.6% from last year.