Alcoa CEO Says Aluminum Inventories At Low Level

CHICAGO -(Dow Jones)- Aluminum distributors' inventories have fallen so low that any significant uptick in demand would likely trigger an increase in aluminum production, Klaus Kleinfield, CEO of Alcoa Inc. (AA) said Friday. Kleinfield said the aggressive destocking in recent months has taken distributors' inventories to levels not seen previously in the industry. "We have never seen the stock level being so low as it is today," Kleinfield said during a presentation at a Sanford C. Bernstein & Co. investor conference in New York that was broadcast over the Internet. "Most distributors have thrown out the window their normal safety inventory requirements." As a result, Kleinfield said he expects Alcoa and other producers will be flooded with orders as soon as demand increases. "Once there is demand coming back on, the distribution chain will generate this sucking sound throughout" the aluminum industry, he said. "We are seeing distributors calling us nervously asking for quotations" on how long it would take to restock them. While Kleinfield described seeing some "green shoots" for improved demand, he said Alcoa has no plans for ramping up production. "I don't think we need any restarts at this time," he said. Alcoa has curtailed 20% of its production capacity since demand and prices deteriorated in the second half of 2008. He said the reductions are helping the company reduce its overhead costs by $400 million. Alcoa's first-quarter revenue plunged 41% from a year ago to $4.15 billion. The company reported a net loss of $497 million, or 61 cents a share. Kleinfield said most government-sponsored stimulus programs are providing an uplift for the aluminum market, particularly in China where the stimulus spending is heavily weighted toward infrastructure construction. "The Chinese stimulus program is working. There is no doubt about it," he said. Alcoa was recently up 1.45% at $9.23.