* Aluminum prices in quarter down from year-ago
* Markets showing some signs of positive growth - CEO
* Shares flat in after-hours
(Adds background) By Steve James and Ernest Scheyder
Oct 9 (Reuters) - Stronger demand for aluminum products from airplane and automobile producers helped Alcoa Inc's third-quarter profit beat Wall Street's expectations, offsetting weak aluminum prices and worries about China's slumping economy.
Boeing Co , Navistar International Corp and other manufacturers have been using more engineered aluminum parts from Alcoa to lighten the weight of planes and trucks.
Making bolts, wheels and other components for these customers is more lucrative for Alcoa than just supplying basic aluminum of which the price has dropped to near two-year lows.
"It looks like the tone of the quarter was slightly better-than-expected, particularly in the downstream business," Kuni Chen, an analyst at CRT Capital Group, said of the company's units that sell to manufacturers.
The company posted a net loss of $143 million, or 13 cents per share, compared with a profit of $172 million, or 15 cents per share, in the same quarter last year, the Pittsburgh-based company said on Tuesday.
Excluding charges for settlements with the Environmental Protection Agency and a joint venture partner in Bahrain, the company reported a profit of 3 cents per share. On that basis, it exceeded analyst estimates for a break-even quarter, according to Thomson Reuters I/B/E/S.
Revenue fell 9 percent to $5.8 billion, as a result of a 17 percent drop in aluminum prices from the same quarter a year ago, said Alcoa, which is traditionally the first S&P500 company to report quarterly earnings.
Despite the beat, some on Wall Street remain cautious.
"It's nice that revenues are up and that Alcoa is suggesting aluminum demand could double in the next decade, but that's a decade out," said Bryant Evans, an investment adviser and portfolio manager at Cozad Asset Management.
Chairman and Chief Executive Officer Klaus Kleinfeld reaffirmed Alcoa's long-term outlook for aluminum, which is used for construction, auto and aviation manufacture, and beverage cans. He expects global demand to double between 2010 and 2020.
He acknowledged there is still a lot of uncertainty, but said markets are showing signs of some positive growth.
"Markets seem to be driven more by headlines than fundamentals right now, but Alcoa remains focused on the things within our control", Kleinfeld said.
"We're capitalizing on pockets of strong growth and achieving record profitability in our mid and downstream businesses." <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
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Aluminum prices ended the third quarter at $2,112 per tonne, about 14 percent lower than in the third quarter of 2011.
While its downstream businesses have performed well, Alcoa faces big challenges in its core businesses of mining bauxite and producing aluminum.
Demand is strong in aerospace and transport, but other sectors, such as construction, have not recovered from the recession and over-supply in the industry has kept prices low.
"It's nice to see global rolled products had a record quarter, but other segments were negative or flat," Jonathan Pavlik, portfolio manager at Stewart Capital, said, referencing the Alcoa business that supplies finished aluminum products. "To me it looks like it is one step forward, one step back."
Alcoa recently closed its aluminum smelter on the Italian island of Sardinia and put it up for sale, citing high power prices that made the operation uncompetitive.
Last week, Dahlman Rose & Co analyst Tony Rizzuto cut his rating on Alcoa shares to "hold" from "buy" because of weak aluminum prices. "We haven't seen signs of any fundamental changes that should provide support for a meaningful move higher," he wrote.
Early on Tuesday, the company announced it had settled a civil suit brought by Aluminum Bahrain . Without admitting any liability, Alcoa agreed to make a cash payment to Alba of $85 million payable in two installments. It will also supply Alba with raw materials under long-term contracts. Alcoa took a $40 million charge against its earnings for the settlement.
Alcoa's stock was unchanged from its $9.13 close in after-hours trading on the New York Stock Exchange.
(Reporting By Steve James and Ernest Scheyder; Editing by Bernard Orr and Patricia Kranz)
Keywords: ALCOA EARNINGS/