There comes a time when a breath of fresh air at metals conferences indeed, at any conference is desperately needed, and that moment came when Lloyd O’Carroll took the podium at the Harbor Aluminum Outlook conference to talk about aluminum cans, cars, and many other uses of the light metal.
O’Carroll, a metals equity analyst for Davenport & Co. (who also served as a corporate economist for Reynolds), began by invoking legendary Packers coach Vince Lombardi, and it was good for a chuckle. But his jocular manner and Southern charm were only as good as his numbers and analysis which was equally interesting, if only it called out the “Big Three, as he called them: Cans, Cars and Construction.
Cars Ëœn Trucks
Good news for the aluminum industry comes primarily in the North American car and truck industry, according to O’Carroll. “If it moves, it’s gotta have aluminum on it, he said
While we all know auto production and sales are up lately, a good indicator that relates to our previous series, “Car Wars, is how many pounds of aluminum are used per car. There has been a consistent upward curve since 1998, when it was about 242 pounds per car; in 2010, that number was 330, and by 2012, O’Carroll forecasts more than 340 pounds per car.
He also calls out heavy trucks and truck trailers as “the two markets propelling aluminum extruders in North America. He added, “Hopefully everybody gets to make a buck.
Beer and Soda
In a sector close to my heart and my palate beer consumption has unfortunately been dropping in the US, which proportionally affects aluminum can demand. Yet there’s growth in the Euro and Asian markets, and quite sizable growth in Latin American markets especially Brazil.
More and more beer producers (craft brewers especially) are making the move to cans, as they are not only lighter (helping shipping costs) and more recyclable than glass, but they’re better for the beer as well. Nearly 65 percent of beer volume goes into cans, according to O’Carroll’s analysis.
Another interesting metric: pounds of aluminum sheet per 1000 cans. It’s getting harder to make aluminum cans any thinner, according to O’Carroll. “Downgrading is reaching its metallurgical limit, he said. Back in 1994, roughly 40 pounds of sheet made 1000 cans; in 2009, it’s down to about 33 pounds.
Construction and Housing
Lastly, it appears that O’Carroll holds similarly bearish views to the Beaulieu brothers, in that the one sector he doesn’t expect coming back anytime soon is the US housing market.
Ultimately, O’Carroll is most bullish on the aerospace industry, as my colleague Stuart covers in a separate article. With Boeing doubling its number of planes in the next couple decades, it’s certainly one sector that will make aluminum producers and suppliers happy.
Fun fact: the current lead-time to get a 737 delivered is mid-2019.
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