Steadier auto sales a bit of good news for aluminum

By Chris Kelly - Analysis

NEW YORK (Reuters) - Budding signs of stability in the ailing U.S. automotive sector will kick-start a quicker demand recovery for aluminum, even as the industrial metal's supply base in U.S. warehouses will continue to swell from the industry's severe downturn.

Further demand deterioration for the lightweight metal is expected during the seasonally slower summer months, as automotive companies change production lines and curtail output during the peak energy-consuming period.

Still, analysts suspect any turnaround in consumption will come sooner, rather than later.

"With a bottoming out in auto sales and production we could see aluminum demand start to pick up again as early as September or October," said Catherine Virga, senior base metals analyst with CPM Group in New York.

"When we are coming from such low levels of production and sales, any sign of recovery is going to have an effect on the market," she said.

Data on Wednesday continued to show vehicle sales by the big three U.S. automakers -- General Motors GM.N, Ford (F.N: Cotações), and Chrysler -- on the decline in June.

Ford, the only U.S. automaker not supported by emergency U.S. government funding, reported a 10.9 percent drop in sales in June, while GM posted a 33.6 percent decline and Chrysler came in with a 42 percent slide.

According to the Aluminum Association, the average U.S.-built automobile contains 326 pounds of aluminum, or about 8.7 percent of its weight.