Primary Aluminum Imports up in US, Secondary Alloy Imports up in Japan

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Apparently contrary reports put out by Reuters this week at least agree that a slight increase in aluminum consumption is largely due to higher automotive production. The first report focuses on US imports of primary aluminum in May. Data from the US ITC showed imports grew 26% to 215,876 tons. This builds on an increase for the first five months of the year up 51% from the same period in 2008 to 912,963 tons. A typical US vehicle uses 326 lbs of aluminum but percentage content is rising and so, finally, are numbers. Barclays Capital is reported as saying they expect production to be up 1 million more vehicles in the third quarter from the one just gone. Here the assertion that the rise in aluminum imports is due to car production begins to breakdown. Car production was flat in the first six months so automotive couldn’t have pulled in imports. Furthermore, even if production does pick up by a million units in the third quarter it will add only 150,000 tons to demand, significant but barely more than half May’s increase.

The report went on to state that stocks at LME warehouses should ease as a result of US imports and an uptick in car production. We don’t see that anytime soon. Some 1.5-2.0 m tons of primary capacity has been brought back on stream in recent months and though China has remained a net importer so far it has to do no more than become self sufficient for world stocks to rise again.

The conflict with the second article is that though the first points out that primary metal demand in Japan has been falling, the second article explores how Chinese aluminum alloy exports are up. And, chiefly to meet a rise in Japanese buying from the automotive sector. Aluminum alloys are principally used in die castings and the automotive sector is a big user so in the case of Japan it certainly does seem as if the automotive market is driving demand. The Japanese market like those of many European countries, and shortly the US, is being driven by a short term stimulus package to replace older cars with newer more fuel efficient vehicles. Demand may therefore be temporary, as we have seen elsewhere sales drop off significantly when these temporary stimulus packages come to an end.

Interestingly, copper imports have not picked up in the US. In fact, May’s imports were lower than the previous month. If telecommunications or house-building were the drivers for aluminum’s rise we would reasonably expect to see copper demand pick up in tandem. May be the aluminum mill closures in the US have finally put the market into sufficient deficit that only imports can meet demand, modest as it is.

–Stuart Burns

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