U.S. demand concerns cast shadow over aluminium

LONDON, Nov 27 (Reuters) - U.S. demand is a key area of concern for the aluminium market and its weakness is expected to continue into next year, industry consultants Brook Hunt said.

``The weakness is likely to carry on well into the new year with 2001 as a whole expected to witness a significant decline in (U.S.) consumption,'' Brook Hunt said in the November edition of its Aluminium Metal Service.

Brook Hunt revised its U.S. demand growth forecast for this year to two percent from three percent. A 4.1 percent decline was seen in 2001 to 6.15 million tonnes.

It said the outlook in Europe was much brighter.

Despite the patchiness of its recovery, Japanese demand was expected to grow by 4.6 percent in 2000.

A further 4.3 percent increase was predicted in 2001, but would depend on a more widespread recovery in the domestic economy.

Demand elsewhere in Asia was expected to remain strong.

Western world consumption was forecast to rise by 4.2 percent in 2000 and by 1.8 percent in 2001.


MORE SMELTER CUTBACKS MOOTED

Brook Hunt said Kaiser Aluminum Corp's (NYSE:KLU - news) November 20 announcement of a further power-related cutback had raised speculation other Pacific Northwest producers might follow suit.

``Although no other producer has made an announcement it is clear that developments in this part of the world will bear careful scrutiny in the months ahead.''

Kaiser said it would curb the operating rate at its Mead, Washington smelter to 90,000 tonnes per year (tpy) from 138,000.

Some 63,000 tpy had previously been idled at the plant in June, and its Tacoma plant was simultaneously closed completely.

Under a new five-year power contract with the Bonneville Power Authority (BPA), that would begin October 1, 2001, Kaiser said it would receive only enough power to operate its capacity in the region at about 40 percent.

Power rates in the new contract would be 35 percent higher than rates in its current contract.

The company realised it could make more money selling back the power it had contracted to buy rather than using it to produce aluminium, Brook Hunt said.

The consultant put idled capacity in the region at an estimated 585,000 tonnes per year.

Brook Hunt forecast that the market would record a 317,000 tonne deficit this year, followed by a slight 41,000 tonne deficit in 2001.

Cash aluminium prices were seen averaging 70 cents a lb in both years.

During Monday's pre-market session the cash London Metal Exchange price was indicated at around 68 cents a lb.