Alcoa (NYSE:AA): Aluminum Supply and Demand

There have been a number of interesting things happening in the aluminum industry, but unfortunately for Alcoa (NYSE:AA) and other producers, when added together it pretty much brings things back to where they were, with growing demand, but an increasing supply to balance it.

This is even with the news the Chinese are cutting back on aluminum production, as high electrical costs are slashing the margins in the industry.

Alcoa's CEO and Chairman Klaus Kleinfeld said he expects aluminum consumption to increase from 10 percent to 12 percent for 2010, a 2 percent increase over his previous estimates (on the high side).

Possibly in the second half some of that aluminum supply may dwindle based on lower prices, and the self-fulfilling prophecy may result in higher prices in the second half.

Some new aluminum ETFs could be a factor going forward as well, but it remains to be seen if they can raise the needed capital to fund the acquisition of aluminum.

The bottom line with aluminum prices seems to be it's as unpredictable as it has been, even with the estimated increase in demand.

Prices will determine the supply as always, and there isn't a lot to generate confidence this will change anytime soon.