Alcoa sees much scope for aluminum to replace copper

Tue Jun 7, 2011 9:31pm EDT

* Copper price rose 300 pct since '03 vs aluminum's 75 pct

* Aluminum has potential to replace 20 pct of copper uses

* Lighter-weight aluminum often conducts as well as copper

By Carole Vaporean

NEW YORK, June 7 (Reuters) - Alcoa Inc. (AA.N) Chief Executive Klaus Kleinfeld said on Tuesday that no one is happier to see copper prices climbing than he is, because that meant substitutions into aluminum would increase.

Speaking at The Aluminum Summit hosted by AMM, the head of the largest U.S. aluminum producer said: "I'm happy that the copper price has gone up. Every time it rises, those people who use copper are calling us, because they want to replace copper with aluminum."

He pointed out that the price of copper has risen about 300 percent since the end of 2003, compared with an increase of roughly 75 percent in aluminum over the same period.

At Tuesday's close, copper was last quoted at $9,140 per tonne, whereas aluminum stood at $2,690 per tonne.

Current technology would allow for about 20 percent of copper applications to be replaced with aluminum, amounting to about 3.8 million tonnes per year, Kleinfeld told conferees.

"That's why I like it," he said.

Medium to low voltage electrical wire and cable applications in cities, industrial or commercial buildings is one segment where aluminum can be used as a substitute, he said.

In China, for example, overhead power lines are now mostly made out of aluminum instead of copper.

"That is because, on a per pound basis, aluminum is twice as conductive as copper and it's one-third the weight. You have to increase the diameter a little bit and you have a lighter cable. And, it's as conductive as copper," he said.

In this case, he said, using lighter cables means the supporting poles can be set further apart, so fewer are needed.

He predicted that the same practice will eventually take hold in the United States.

Other replacement applications the CEO cited included building facades, wire harnesses in transportation, high voltage cables, and heat sinks for electronics.

"The price in copper goes up and what does that spell to you?" the executive asked. "Aluminum, I hope."

Overall, Kleinfeld repeated Alcoa's forecast for a 12 percent global demand growth rate for 2011 over 2010. Excluding China, the aluminum giant looks for an 11 percent increase in demand growth for the year. (Reporting by Carole Vaporean; Editing by Gary Hill)