February 2007- That can of pop (or soda, depending on where you're from) that you drank with your lunch today may cost you a little more in the future if aluminum costs keep going up.

Price is always in the news when it comes to aluminum. Mike Barden, CEO of CRU Strategies, London, said at the Aluminum Association's 73rd annual meeting, Oct. 22-24, 2006 in Napa, Calif., that the average price premium for aluminum was 40 percent higher in 2003-2006 than it was in 1993-2002. For the mid-term, CRU predicts that the metal markets will return to a supply and demand balance and prices will retreat from current highs.

Wachovia Economics Group agrees in its 2007 Q1 Metals Forecast Chartbook, saying that the moderation of growth continues to drive forecasts, and "most metals prices are likely to fall with growth in 2007." Inventories will remain low in 2007, said the report. "We believe that prices are likely to find support from supply fundamentals. Slower growth, however, coupled with the easing of natural gas prices, is expected to allow prices to fall." The group has left its 2007 price forecast unchanged at $1.14 per pound and predicts the same for 2008.

December aluminum product shipments totaled 86,800 tons, down 4.3 percent from December 2005, the Metals Service Center Institute noted in its December Metals Activity Report. Aluminum shipments for the full year were 1.2 million tons, a new annual record and 2.7 percent more than in 2005. Aluminum inventories ended the year at 376,800 tons at U.S. metals service centers, up 6.9 percent from the end of 2005, but 2.9 percent lower than in November. At the current shipping rate, this represents a 4.3-month supply, an increase of 11.6 percent from last year and 5.3 percent from last month.

Copper has an effect
The Aluminum Association's January Aluminum Highlights said that downward pressure came in January and aluminum was pulled lower on falling copper prices, which triggered liquidation. However, it also takes into account that there are concerns about weakness in the U.S. housing market and the impact it is having on physical metals demand, and a 31 percent year-on-year drop in U.S. housing permits suggests that the market hasn't bottomed out just yet.

The report also gives more good news, saying "forward-looking indicators suggest that an improvement in broader U.S. macroeconomic conditions may be in the pipeline for the second quarter."

Alcoa posts record year
Many analysts are taking a second look at their forecasts, however, after Alcoa, Pittsburgh, released the best full-year results in its 118-year history. Looking forward, the company said that market fundamentals remain strong.

"This year, top- and bottom-line performance has been the best in our company's history," said Alain Belda, Alcoa's chairman and CEO. "Revenues and income from continuing operations achieved record levels."

Belda noted that the company will generate "more than enough cash this year to fund our capital investment programs. We will continue to deliver strong results, invest in our future and keep a strong balance sheet."

With a stable market there aren't too many words of caution, however, Barden noted that the aluminum market has a number of longer-term challenges to face. He said that the metal has strong fundamentals with an upside potential from substitution, but companies need to understand Chinese supply-side dynamics, anticipate market growth and cyclical timing, manage capital and operating costs, and manage business risk.MM

CONNECTING WITH ALUMINUM
Although many assume copper to be the best choice as a connector material, aluminum is making headway in many electrical applications. In its new role, aluminum is proving to be more cost-effective, easier to use and longer lasting than its red metal counterpart. Aluminum is an alternative choice to copper for electrical connectors, including mechanical and compression terminals, splices and taps in industrial and commercial installations. Aluminum connectors are well-suited for these applications because of their lightweight composition, high conductivity and ease of installation.

There are advantages to both mechanical and compression types. Mechanical connectors are easy to install because they require no special tooling, unlike compression connectors. Aluminum mechanical connectors are also reusable, have the flexibility to accommodate a wide range of cable, run cooler than conductors being joined and have high mechanical strength.

Compression connectors are typically the chosen method with larger organizations responsible for bigger installations. Compression installations are made to last, are irreversible and offer a high holding strength. Aluminum compression connectors deliver high-quality connections at a low installed cost after the initial investment in special tooling has been made.

Whether opting for aluminum mechanical or compression connectors, companies should select a manufacturer that offers features such as: dual-rated products for use on both aluminum and copper conductors, connector cross-sections that are heavy enough to carry full electrical loads of conductors and withstand the forces applied during installation, contact surfaces that are finished and protected to prevent re-formation of non-conducting oxides, contact paths that are as short and direct as possible, connector designs that prevent moisture and corrosive media penetration into contact areas from causing potential corrosion, and electro-tin plated contact surfaces that provide for durable, long-lasting, corrosion-resistant connections, if required. Ensure that pressure applied from bolts, as well as compression tools, is well-distributed over the contact surface and does not weaken the conductor.

After choosing the right connector, certain steps need to be followed, including measuring and marking the recommended insulation strip length and carefully cutting and removing the insulation to avoid nicking strands, wire brushing the stripped length of wire and unplated aluminum contact pad thoroughly to remove surface oxides, applying an oxide-inhibiting compound to any exposed conductor surface before inserting the conductor into the connector, and selecting the appropriate installation tool and die (for compression conductors). Complete the process by using the required number of crimps and torquing all hardware (for mechanical connectors) to recommended values according to hardware material and size.
-Sidebar courtesy of FCI-Burndy, www.fciconnect.com.

By Lauren Duensing, from the February 2007 issue of Modern Metals.