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January 8, 2009 Dear Friend, Attached are reports detailing current aluminum industry demand-supply dynamics and Alcoa's January 6th retrenchments, which are broadly consistent with a $0.27 per pound reduction in Alcoa's ingot costs that we already had estimated in our prior December 2, 2008 report. We believe the aluminum market will require an intergovernmental world output cut accord in 2009 similar to the 1994 "Memorandum of Understanding" output cutback accords which, combined with 17% global demand growth in 1994-95, permitted prices to rebound to $0.88 in the March 1995 quarter from $0.49 per pound averages in the December 1993 quarter. Important differences as we look out to 2009 are that (a) demand growth appears very anemic compared to 1994-95 and (b) China, Russia and the Mideast now represent the majority of world smelter output. On December 23rd the American Metal Market and Metal Bulletin carried articles in which Rusal, Chinese and EU officials each call ed for governments to hash out a smelter cutback regime. We continue to plan our March 31, 2009 and next November 11, 2009 conferences similar to the two that we hosted in 2008. Please let us know if you would like to join us January 23rd at Mercator Minerals in Arizona via Las Vegas. Our enterprise has published 349 eports since inception July 2007 through year-end 2008, averaging 20.6 per month in 2008. We keep track of this as a measure of our own productivity and distribution of effort.
Literally one-fourth of our reports have been multi-metals overview reports, such as the weekend commentary on spot market developments of the prior week. Some of the steel, aluminum, copper and gold reports are commodity-specific and not company reports. Certainly performance is more important than quantity, but this is one measure. The reports on the large diversified mines require several times more work and effort than the reports on single-product companies Faithfully, John C. Tumazos | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Copyright © 2008 John Tumazos Very Independent Research,
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