A Mitsui official said that while the company last month forecast one per cent year-on-year growth, in this year's demand for aluminium in the United States - a key area of concern for the market due to its weakening economy - the projection may be too optimistic.

But he said that even if US demand this year produces flat growth or a decline of one per cent from last year's 6.4 million tonne, production cuts in the US Pacific Northwest could help offset a possible drop in US demand.Production cutbacks in the US Pacific Northwest, prompted by rising power costs are now estimated at about 900,000 tonne a year, after Alcoa Inc said last week it will reduce output at Wenatchee and Ferndale smelters in Washington, he said.

Mitsui's forecasts are based on the assumption that the US economy is on course for a soft-landing, in which the economy will achieve 2.5 to 3.0 per cent growth in 2001.

Mitsui said the upward trend in spot US aluminium premiums will likely become clear this spring, due to output cutbacks in the US Pacific Northwest and a round of de-stocking in the country, which could be completed by the middle of the second quarter of 2001.

It expects US physical premiums for Midwest delivery, to range from 3.5 cents/lb to 5.5 cents over the London Metal Exchange (LME) cash price this year, against 3.5 cents currently quoted.

Mitsui said current midwest premiums were too low, to attract suppliers to sell the metal to the United States, which needs at least 1.5 million tonne of aluminium imports a year, from producing countries excluding Canada."Once a recovery in US domestic demand (for aluminium) is confirmed, a rush of new orders will be placed and thus it is inevitable to see the uptrend in the premiums," it said.

Mitsui also expects western duty-unpaid aluminium for Europe to range between $40 to $65 in 2001 and the premiums for Japan to move between $60 to $85.

Spot premiums for western duty-unpaid aluminium in Europe are currently quoted at about $45-50 per tonne, over the LME cash price in warehouse Rotterdam, while the premiums for Japan are talked at around $60-$65 in quiet physical trading, traders said.

Mitsui estimates Japanese demand for aluminium in 2001 to grow about two per cent from a year earlier, to 2.229 million tonne since it expects a recovery in demand, in the latter half of this year after slowing in the first half.It also sees Chinese demand rising by 6.1 per cent to 3.5 million tonne.China will likely become the focus in the latter half of this year on tightening global supply, because the country will remain a major aluminium importer, it said.

Chinese imports of aluminium are expected to stay at around 450,000 to 500,000 tonne in 2001, little changed from imports estimated for last year, Mitsui said.