Boston (Platts)--8Apr2008

US aluminum major Alcoa expects volume in North American end-use markets
to decline 5% in 2008, further than originally forecast to levels "not seen in
over a decade" although end-use markets are likely to grow on a global basis,
an Alcoa executive said.

"We anticipate global primary aluminum consumption to increase 8.5%, or
over 3 million mt, in 2008. This is about 400,000 mt, or 1% lower, than our
previous guidance," Charles McLane, Alcoa's executive vice president and
chief financial officer, told analysts in the company's first-quarter
conference call.

Alcoa reported a income of $303 million from continuing operations in the
first quarter compared with $691 million a year earlier due to a deteriorating
US dollar and high energy costs which produced "a significant drag on
margins," McLane said.

Weakness on the consumption side -- the projected 5% decrease in North
America in 2008 would follow a fall of 10% last year -- has been offset by
constraints on the supply side, McLane said.

"The net effects of the well publicized weather and power issues in China
and South Africa will dampen global production by approximately 700,000
tonnes. That lowers our projected aluminum surplus to less than 100,000
tonnes," he said.

Weakened markets in North America and Europe are not significantly
affecting the overall strong aluminum fundamentals, he said. Growth in China,
India, Vietnam, Thailand and Russia remain strong and should continue beyond
2008 given ongoing industrialization and infrastructure projects in these
countries.

Although March LME prices have provided a strong start to the second
quarter, the company anticipates continued pressure from energy, material
costs and cost pressures due to currency risk, McLane said.

Aluminum closed on the LME Monday at $2,998/mt, a gain of $45 from
Friday's close.

On inventories, absolute tonnage of worldwide aluminum inventories has
risen slightly from the end of 2007, but the global days of consumption still
remain at levels two days under the same period last year and low by historic
standards, McLane said.

By company segment, Alcoa primary production increased 4% in the quarter,
driven mainly by the startup of the Iceland smelter, McLane said. Although he
did not provide a percentage projection for second-quarter primary output,
Iceland should reach 100% capacity in the quarter with "improved production
levels and efficiencies," he said.

In the flat-rolled products segment, weak market conditions in commercial
transportation and distribution have persisted from the fourth quarter, McLane
said.

The North American automotive and general industrial markets are likely
to continue at their depressed levels, although there will be improved results
in Russia and Europe should see a seasonal improvement this quarter despite
declining building and construction markets across much of the region.

The engineered products and solutions segment showed "outstanding
results" in the first quarter with revenues of $1.8 billion.

A strengthened aerospace market, demand for industrial gas turbines and a
seasonal increase in building and construction are likely to offset softness
in the North American automotive and commercial transportation markets in the
second quarter, following a trend seen in the first quarter.

Although automotive and heavy truck markets in North America are in
decline, Alcoa expects to take advantage of strengthening auto demand in
Eastern Europe and Russia with wheels and power train applications.

European truck demand is expected to increase slightly compared with
2007, driven by the Central and Eastern European expansion, McLane said.

The aerospace market remains strong with commercial delivery rates
expected to be up 13% year over year and this upward cycle is expected to last
at least through next several years, McLane said.

On the longer term outlook, Klaus Keinfeld, president and chief operating
officer, said the company expects aluminum demand will grow about 6% annually
over next decade, which would match the growth rate of the last 10 years. That
growth will be led Asia and particularly China, whose GDP Alcoa forecasts
will expand 9% in the next decade.