Alcoa CEO sees positive long-term aluminum prospects

NEW YORK (Reuters) - The head of aluminum producer Alcoa Inc (AA.N) said on Tuesday that longer-term prospects for pricing and global demand are good despite measures to rein in capital expenses and review underperforming assets to combat softer demand and tighter margins.

"While we face volatile and uncertain markets today, longer- term trends will drive a rebound in global aluminum demand and the forward market reflects underlying optimism on medium-term aluminum pricing," said President and Chief Executive Officer Klaus Kleinfeld.

During a conference call with Wall Street analysts to discuss lower-than-expected third-quarter results, he said Alcoa sees Chinese aluminum demand growing by 15 percent this year, though that rate was down from its previous estimate of 22 percent.

"Brazil and Asia will continue to grow and we project 6 percent global growth, which is 2 percentage points below our previous estimate," he said.

Asked about the outlook for the global aluminum industry, Kleinfeld said: "The credit crunch has forced those seeking liquidity to sell metal."

Inventory levels were currently at around 29 days -- relatively low compared with the 49 days supply in 2003.

On the supply side, about one-third of capacity is "under water," he said, meaning that they were operating at a loss because of high raw material costs and low aluminum prices.

Alcoa, which has already curtailed production at its Rockdale, Texas aluminum smelter, would cut back on capital investments during the current volatile period of global financial turmoil, said Kleinfeld.

"Under the current environment we have curtailed production at Rockdale. Curtailing Rockdale was necessary," he said.

"In the longer term, expectations are positive. We share the view that the market prospects are good.

"We should continue to see quite a bit of demand. Our mid- to long-term prospects for alumina and aluminum are good," said Kleinfeld.

Aluminum is made from smelting alumina, which is refined from bauxite.

(Reporting by Steve James; Editing by Ben Tan)