LMEWEEK-Aluminium demand slowdown not dramatic-Rio Tinto Alcan

Demand for aluminium is slowing but not dramatically, with Asia holding up well, North America flat and Europe faring worst, a Rio Tinto Alcan executive said on Tuesday.

"The wheels are not falling off yet in terms of demand. We are certainly seeing a slowdown, but it is somewhat regional," Gordon Hamilton, vice president, metal management sales and marketing, said at a London Metal Exchange Week event.

"Business in Asia is good, North America has paused in some sectors...(and there is) a high degree of softness in Europe."

The auto industry was the star performer, he said, while construction remained weak.

Although the aluminium market was in a surplus this year, "through the rest of the decade demand growth means there will be a net shortfall", he said.

The average of 22 forecasts in a Reuters poll in July showed the aluminium market would have a surplus 575,000 tonnes this year and 237,000 tonnes in 2012. In a January survey the forecasts were 383,000 and 202,250 tonnes respectively.

Hamilton said longer term the outlook for aluminium was good, and forecast compound annual growth rate (CAGR) for the metal of 4.25 percent over 35 years.

"This is the sort of growth rate we would expect to see," he said, citing industrialisation in China and other emerging economies.

Aluminium consumption is around 20 kg per capita in developed markets, against 1 kg in India, 5 kg in Brazil and 12 kg in China.

Substitution would also boost demand for aluminium, as industries seek cheaper and lighter alternatives to copper, zinc and certain steel products.

Prices for three-month aluminium on the London Metal Exchange recently hit one-year lows below $2,150 per tonne, down from peaks of over $2,800 in May, and it traded around $2,170 on Tuesday.

By comparison, copper was around $6,780 per tonne on Tuesday.

On the supply side, Hamilton said there were relentless pressures on costs, with capital costs, alumina/bauxite and energy and carbon rising.

"We are constantly striving to be at the bottom end of cost curve," he said.

"We have to grind it out and reduce costs as much as we can," he added. "There is no question in my mind that (fundamentals) matter, though there are moments like this when it is tough.