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Aluminum rebounding

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  • Economics

Abstract

August 12, 1983 Aluminum Rebounding After the dismal performance of the past few years, the U.S. aluminum industry is finally staging a solid recovery. The course the industry has followed since the 1970s is a classic illustration of the interaction of supply and demand, in which U.S. pro- ducers' hopes for higher aluminum prices were thwarted by a worldwide excess inven- tory of the metal. Not unti I the early part of this year when curtailed production and improved demand reduced the world over- supply of aluminum did selling prices begin to improve. Because most forecasters expect further growth in U.s. economic activity and hence in the demand for aluminum, the industry should benefit from still higher prices as 1983 unfolds. The recent recession Because the aluminum industry relies heavily on the construction and transporta- tion equipment markets-its second and third largest outlets, it has always been subject to wide cyclical swings in demand. The recent recessions were no exception. Between 1979 and 1982, the domestic in- dustry experienced a 17 percent decline in shipments of primary ingot and fabricated mill products including such semi-finished items as sheet and plate, foil, wire, and tube. Sh ipments to the key construction and trans- portation equipment industries registered the sharpest declines, falling by 27 and 41 percent respectively. Shipment to the con- sumer durable, electrical equipment, machinery and export markets also de- clined, although by smaller percentages. Only aluminum's largest outlet, the con- tainer and packaging market, moved against the recessionary tide. Shipments to that market rose by 12 percent over the 1979-82 period, thereby growing from 22 to 29 per- cent of the total end-market. In previous downturns, notably the 1973-75 recession, major U.s. producers had been quite successful in stabilizing market prices by cutting production at the primary (ingot) stage of production. They renewed these efforts late in 1980. Between 1980 and 1982, U.S. p

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