The aluminum market's relative strength continues to help the profits of producers like Canada's Alcan (NYSE:AL). Although the stock has been blitzed so far this year, operating results aren't quite as bad as Wall Street might indicate.

While first-quarter revenue was down 14% as reported, the year-ago results include the contribution of the since-spun-off Novelis (NYSE:NVL) rolled-aluminum business. Stripping out Novelis, comparable revenue grew nicely at about 23%. Looking further at income from continuing operations, Alcan saw 56% growth in the first quarter.

Alcan's engines of growth are no secret to loyal Motley Fool readers -- higher volumes shipped and higher prices realized. Excluding Novelis, Alcan increased its volume shipped by 22% on an annual basis (that's compared with the year-ago period) and 19% on a sequential basis (compared with the fourth quarter). On the pricing side, Alcan saw 20% annual improvement and 10% sequential improvement as tight supply buoyed pricing.

I found Alcan's comments on the worldwide aluminum market particularly interesting. Management expects global demand to increase by about 4.3% for 2005, a slowdown from 2004's 9.7% demand increase. On the supply side, production in 2005 should increase about 6%, also down from last year's 6.6%. On a net-net basis, the market deficit for aluminum in 2005 should shrink to about 200 kilotons (kt) vs. 685 kt in 2004.

If that's true, it suggests that pricing should stay firm into 2006. At that point, things start to get interesting. Will Chinese producers like Aluminum Corporation of China (NYSE:ACH) be able to expand production enough to sop up demand growth? Will aerospace companies like Boeing (NYSE:BA) and Airbus build enough new planes to make a dent in global demand? Will new production facilities from the likes of Alcoa (NYSE:AA) or Rio Tinto (NYSE:RTP) add too much supply?

Quite frankly, I don't know the answer to any of those questions, and nobody else does either, because there are just too many independent variables to manage. My hunch is that the aluminum market will stabilize at a new, higher, equilibrium but that any drop-off in global economic health could send prices down hard if supply continues to grow much above 5% a year.

Alcan isn't my favorite metals company, but there's no doubt that the stock has gotten smacked around pretty hard -- probably too hard. Investors looking to pick up shares of a seemingly overpunished company could look at Alcan, but I'd also suggest a look at a more diversified company like Rio Tinto as well.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).