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Global Aluminium Production Reached A New High in March
Posted: 2014-04-24 01:11:48 Hits: 1296
Although the biggest manufacturers cut the capacity, global aluminium production reached a new high in March. For depressed prices continuing to weigh on the industry, companies such as Alcoa, Rusal and Rio Tinto have shut smelters over the past two years in an effort to tackle oversupply. However, surging output in China has more than offset these cuts.
Citigroup reckons that worldwide aluminium production, which is one of the most widely consumed base metals and is used in the transportation, beverage can and construction industries, will increase by 4.9% in 2014, to 52.7m tonnes. Demand is expected to grow by an even greater amount, about 6%, helping to bring the market closer to balance. The World Bureau of Metal Statistics said on Wednesday that the market had slipped into deficit in January and February.
Production of the light metal increased to 4.329m tonnes last month, a 5% year-on-year increase, according to the International Aluminium Institute. The previous monthly high, of 4.255m tonnes, was achieved in October.
While output reduced over the past 12 months in Europe and the Americas, production increased by nearly a fifth in the Middle East, where smelter owners benefit from cheap energy. But the biggest increase occurred in China, where aluminium production increased from 1.734m tonnes in March 2013 to a record 1.984m tonnes last month. Compared with 21% a decade ago, China accounts for 46% of global aluminium output currently.
China has not rose superior to the pressures of low prices. Aluminium for three-month delivery on the London Metal Exchange traded on Wednesday at $1,877 a tonne, the same price achieved in 2005, approaching to the start of the commodities boom, and at times during the 1980s and 1990s. Due to part of the Chinese government's plan to reduce inefficiencies and tackle pollution, some high-cost smelters have been shut. Wood Mackenzie, the consultancy, reckons that 2m tonnes of capacity has been trimmed since 2012.
But at the same time, large smelters have been opened in northwest China, taking advantage of the cheap coal deposits nearby.
"So much new capacity has come online in China that the closures there don't mean much," said David Wilson, director of metals research at Citigroup.
Citigroup reckons that worldwide aluminium production, which is one of the most widely consumed base metals and is used in the transportation, beverage can and construction industries, will increase by 4.9% in 2014, to 52.7m tonnes. Demand is expected to grow by an even greater amount, about 6%, helping to bring the market closer to balance. The World Bureau of Metal Statistics said on Wednesday that the market had slipped into deficit in January and February.
Mr Wilson expects a small surplus this year, of about 162,000 tonnes. That is substantially lower than the annual surplus of between 1m and 2m tonnes from 2009 to 2012, after the financial crisis. Much of this excess production ended up locked away in warehouses as part of financing deals. Stocks held in registered warehouses and by producers are estimated at more than 7.2m tonnes, or 56 days' demand. A similar amount may be held at other locations, Mr Wilson said.
"We will need a 1m tonne-a-year deficit for at least a decade or more to get rid of the overhang of metal," he said.