Platts quoted Mr Klaus Kleinfeld CEO of US aluminum giant Alcoa as saying that further aluminum production cuts are needed in order to close the gap on an expected 1.4 million tonnes surplus in the Western World this year, as aluminum producers face dramatically declining demand from end markets.

He added that "The economy has been battered by the decline in residential construction, and the serious drop in commercial construction is just beginning to be felt. The decline in the end markets and the current high inventory levels will lead to 7% decline in 2009 in aluminum consumption or 35.4 million tonnes following a 3% decline in 2008."

Mr Klaus said that "Given the substantial decline in end markets, it is not surprising that the London Metal Exchange price dropped, but what is unusual is how fast it did. The aluminum price has fallen 50% since July. Given the speed of the LME price drop, we've been moving quickly to cut costs and our actions in the past quarter have now put us in a position to be cash flow neutral by the end of this year and cash flow positive by 2010."

Alcoa expects the global automotive industry will see an 18% decline in sales this year, with the drop even sharper in North America projected at 25% to 30%. While demand for beverage can packaging is expected to be flat in 2009, demand in the commercial building and construction sector is slated to drop by 35% to 40% within North America and 10% to 15% globally.

In aerospace, the company has forecast 900 fewer deliveries in 2009 over last year. Alcoa continues to work to match supply and demand, and the company projected within the second quarter it expects production to decline as refinery production is matched to smelter demand.

(Sourced from www.platts.com)