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Aluminum Forecast
Tuesday | 22 November, 2011 | 3:14 pm

Same markets, new growth

By Meghan Boyer

Innovations in existing markets are contributing to some expansion in the aluminum industry

November 2011- At first glance, the outlook for the aluminum market may appear bleak. Growth exists in transportation, but the container and packaging market is flat and the housing and construction market is unlikely to pick up in the near future, says Nick Adams, vice president for business information and member services at the Aluminum Association, Arlington, Va.

“That means for aluminum, we’re looking at a much slower recovery,” says Adams. “We are raw materials, and we have to rely on the economy to pick up and demand for downstream products to pick up.”

The aluminum market is tied to consumer confidence and spending, says Paul-Henri Chevalier, president of Jupiter Aluminum, Schiller Park, Ill. Aluminum is very present in cans, cars and trucks, airplanes and homes. “The housing market is facing difficulties because if you don’t know what your house will be worth in six months, why would you renovate it? Why would you move?” he asks.

A decline in U.S. consumer spending in August to $68 per day from July’s total of $74 is consistent with a decrease in consumer confidence and increased employment worries among workers, according to data analysis by Gallup Inc. Third-quarter U.S. economic growth likely will be as anemic as the first half of 2011, and consumer psychology likely is the key to increased spending, according to Gallup. Although lower, August 2011 remains more than the $63 average recorded during the same time period a year ago.

Despite the difficulties in some areas, the entire outlook for the aluminum industry isn’t gloomy: Markets for growth exist, Jean-Marc Germain, senior vice president and president of Novelis North America, stated at a press conference during Aluminum Week, Sept. 12-15 in Chicago. “The trends themselves have a lot to say about the growing use of aluminum,” he said.

But aluminum isn’t entering entirely new markets. Rather, new segments within existing markets are growing, says Chevalier. “I don’t see any new major markets, but you always have new products coming out,” he says. Additional uses for aluminum continue to grow because “it’s very easy to form. It’s a good look. You can paint it, you can anodize it, you can do lots of things with aluminum.”

Niche growth
Innovations in existing markets are helping grow aluminum use, says Stephen Gardner, vice president of communications for the Aluminum Association. A good example of this is the rise of craft breweries choosing aluminum cans for their beers, he says. Previously, when cans were made from other materials, there was a metallic taste associated with canned beverages. “But craft beers going into cans in increasing numbers has really changed that whole perception,” says Gardner. “It’s reminding people that every draft beer you’ve ever had came out of an aluminum can.”

Aluminum cans used to package beer have a lining that eliminates flavors leeching into the beverages, according to Craftcans.com, a website dedicated to news and information about craft beers in cans. The site lists 402 different craft beers from 137 breweries that are packaged in aluminum cans. Compared to glass bottles, aluminum cans keep beer tasting fresh for longer because no light can penetrate them and the seal is tighter than a bottle cap, according to Craftcans.com. Additionally, cans are less likely to break during shipping, which makes them easier for breweries to distribute.

The popularity of craft beers is growing overall, with 1,753 breweries operating for some or all of 2010, the highest total since the late 1800s, according to the Brewers Association, Boulder, Colo. Craft brewers sold an estimated 9.9 million barrels of beer in 2010, up from 8.9 million in 2009.

Aluminum also is being used in new ways in the construction and housing market. More architects are choosing aluminum, with a specific area of growth being metal roofing, says Chevalier. “More and more roofs are aluminum. They are lighter than steel, you can paint them and they last longer than steel since they don’t rust,” he says. Aluminum roofs can reflect up to 95 percent of sunlight and lower in-house temperatures and by extension air-conditioning expenses during warm months, according to the Aluminum Association.

In the re-roofing segment, overall metal roofing has a market share of 11 percent, according to the Metal Roofing Alliance, Belfair, Wash. It accounts for 5.5 percent of roofing in the new construction market. “We’re seeing a steady increase in the demand for metal roofing products and expect to see continued growth,” Bill Hippard, president of the alliance, said in a press release. Sixty-one percent of homeowners chose metal roofing for its longevity, while 16 percent selected it for its strength and protection, according to the Metal Roofing Alliance.

Each year, companies interested in producing environmentally friendly buildings explore new uses for aluminum not only because of its aesthetics but also because of its sustainability, says Chevalier.

Since 1991, primary energy demand associated with aluminum production has been reduced 17 percent and demand associated with secondary aluminum production has been reduced 58 percent, according to “Aluminum: The Element of Sustainability,” a study released in September by the Aluminum Association. In 2009, aluminum recycling offset roughly 88 percent of major resource use associated with primary aluminum production, according to the report.

Look to the future
In addition to expansion in some areas of existing marketplaces, the transportation industry is growing for aluminum. Auto companies are working to lightweight their offerings, which, in part, means using more aluminum instead of heavier metals. Aluminum already is used in engines and wheels and it also is gaining market share in hoods, trunks and doors, according to a survey of North American automakers by Ducker Worldwide, a Troy, Mich.-based research firm.

The survey estimates automakers will increase aluminum use from 327 pounds in 2009 to 550 pounds in 2025. Aluminum use in vehicles has increased every year for nearly 40 years, and the report predicts aluminum will double its share of the average automotive materials mix to 16 percent by 2025. “The transportation sector, because of the penetration of aluminum in that industry, is expected to increasingly demand aluminum across the board,” says Jesús Villegas, a senior analyst at Harbor Intelligence, a Laredo, Texas-based consultancy.

“In the transportation sector, aluminum is clearly gaining market share,” in part, because it has a 25 percent lower carbon footprint than steel life cycle and it is more efficient for fuel use, he says.

In 2010, transportation accounted for 26 percent of aluminum use, says Villegas. Construction accounted for 23 percent, durable goods 9 percent, packaging 13 percent and the electronics sector 15 percent.

Although the automotive sector is growing for aluminum, the housing and construction markets remain stalled in the developed world. Few people are purchasing new homes, and “if you don’t build housing, you don’t build shopping centers to go with them,” says Adams.

Globally, there are two very different housing trends, notes Villegas. In the developed world, the housing market for aluminum likely will remain depressed. However, “the construction sector in the emerging world is demanding a lot of aluminum and will continue to do so,” he says, noting the housing sectors in China, India, the rest of Asia and Brazil are buoyant.

Despite the current difficulties in the housing and construction markets, Chevalier is confident they will rebound. Old housing stock will need to be updated or replaced and the growing population will require more homes in which to live, he says.

“When it comes to aluminum consumption in the world, it’s supposed to be double in the next 10 to 15 years,” he says. “I’m optimistic about the future as aluminum is becoming more and more a product of choice.” MM

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