North American Aluminum Industry Trends Upward After Tough 2001

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Recent world events, such as the 9-11 terror attacks and the subsequent Iraq war certainly didn't help the U.S. economic situation or the aluminum market; however, U.S. aluminum market struggles began long before these events occurred. The good news is aluminum demand is increasing. Historically, aluminum consumption has grown an average of 3.5 percent per year, and it is forecast to grow 2-5 percent through 2005.

Figures recently released by the Aluminum Association (Washington, DC) point out that many aluminum markets were flat in 2002, such as the containers and packaging sector. However, net shipments of aluminum products were up 4.8 percent in 2002 when compared to 2001. In general, since 2001, there has been a continuing upward trend in most market sectors. Bright spots in 2002 included the transportation sector, which witnessed a 6.8 percent increase. This can be attributed to an increase in the percentage of aluminum used per vehicle by many auto manufacturers.

Click on the image at left to view the 2002 Aluminum Production Table

Aluminum is slowly taking a greater share of the automotive market over iron and steel. For example, Ford Motor Corporation (NYSE:F)(Detroit, Michigan) announced that by 2007 it would convert all North American-made engine blocks from cast iron to aluminum. Its "Cyclone" V-6 engine program has since been delayed, so that time frame is most likely pushed back to 2009. Other manufacturers are slowly converting to aluminum, and foreign transplant manufacturers such as BMW, Honda, Nissan, and Hyundai will all be producing a significant number of aluminum engines. This trend is one of the reasons for the 11.8 percent increase in aluminum casting ingots in 2002.

The building and construction market was also strong in 2002 showing a 4.5 percent increase in 2002. Of note was a 24.2 percent increase in the residential siding sector.

U.S. primary aluminum production took a major hit in 2001, as a large majority of northwestern smelters were shutdown or curtailed, mainly due to high energy prices exacerbated by the energy crisis of early that year. U.S. primary production has since stabilized, but to date has lost about 30 percent of its capacity since 2000.

Canada now produces more primary aluminum than the U.S. Canada's production of primary aluminum increased by 4.9 percent in 2002 up to 5,975 million pounds for the year, while the U.S. produced 5,964 million pounds.

Click on the image at right to view the 2002 U.S. Imports and Exports of Aluminum

China increased its primary aluminum production by 24.6 percent up to 8,400 million pounds in 2002. This increase can do nothing but adversely affect North American exports to the global market. In addition to China and Russia, South Africa is another market that may see future primary aluminum growth due to its cheap energy.

While U.S. primary aluminum production remained low, many downstream aluminum producers such as extruders, foundries, and fabricators are seeing improving conditions. This year, Ryobi Die Casting Corporation, a wholly owned subsidiary of Ryobi Limited (Hiroshima, Japan) announced a $20 million two-year renovation of its Shelbyville, Indiana die casting plant. Ryobi Die Casting is one of the companies recently selected by Ford Motor to supply a variety of aluminum components for two new transmissions in the Ford Five Hundred sedans and CrossTrainer sport wagons scheduled to enter the market in 2004.

This supports a growing trend that shows increasing investment by foreign owned automotive tier suppliers in the U.S. Some of this growth can be attributed to new foreign-owned automotive manufacturing plants recently built or under construction in the Southern U.S., such as Hyundai's $1 billion plant in Hope Hull, Alabama, Nissan's truck plant in Mississippi, Honda in Alabama, and BMW in South Carolina.

Secondary aluminum smelters are also benefiting from the increase in automotive production levels in 2002. After two years of downsizing and cost reductions in the secondary aluminum industry, several firms are forecasting increased production due to an increase in demand mainly from the automotive sector.

Industrialinfo.com maintains a dynamic Aluminum Plant Database, which features management contacts, addresses and phone numbers for over 680 primary & secondary aluminum producers as well as aluminum foundries, extruders, and processors. For database details contact Industrialinfo.com's Member Center for details.