Rising demand and prices for aluminum around the world fueled a profit rebound for Alcoa Inc., with momentum expected to continue this year.
Business has been booming for the Pittsburgh-based aluminum maker, which unofficially kicked off the fourth-quarter earnings season Monday. Prices for aluminum have skyrocketed 38% since July as global markets ramp up manufacturing, particularly in transportation, and China idles some of its production of the metal in an effort to reduce energy consumption and pollution. Aluminum smelters are huge users of electricity, one of the highest costs of operating a smelter.
Industrial demand in the Middle East and Latin America are fueling world-wide demand for manufactured goods and that growth could inch up the rate of inflation, said Chief Executive Klaus Kleinfeld in an interview Monday.
For the fourth quarter, Alcoa reported a profit of $258 million or 24 cents a share, compared with a year earlier loss of $277 million, or 28 cents a share. Sales grew 4% to $5.65 billion, largely as a result of higher prices.
Aluminum prices—currently hovering around $2,400 to $2,500 a metric ton—are expected to rise to $2,700 a metric ton in 2011.
Alcoa said that it expects all of its end markets to grow in 2011, including aerospace, cars and trucks, building and construction and industrial gas turbines. “When the market is turning into more demand than supply,” Mr. Kleinfeld said, “there is a chance to see inflation coming back in.”
Inflation has been low, but that could change if the gap widens between the limited supply of goods available and the growing demand for those goods.
Orders for aerospace, such as airplanes, more than tripled in 2010 from 2009. Demand for heavy trucks and trailers is up 25%. Even commercial building, said Mr. Kleinfeld, is “looking like things have bottomed out and not going down.”
The company—a key indicator of world-wide demand for industrial production because aluminum is used in everything from airplanes to appliances—projects global demand for aluminum will double by 2020.
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