SINGAPORE --Aluminum prices are expected to fall by more than 8% to an average of $2,350 a metric ton in 2007, as global supplies and stocks increase in response to recent high prices, a report by the Australian Bureau of Agricultural & Resource Economics, or Abare, said Tuesday.
Aluminum output this year will likely rise 8% to 36.5 million tons.
New capacity is being commissioned in the Russian Federation, Iceland and the Middle East, and idle capacity in China will restart due to better availability of alumina, Abare said.
It added that while an expected easing of prices in 2007 may lead to some high-cost smelters shutting globally, such closures may not be sufficient to offset the newly commissioned capacities.
On the demand side, China will continue to drive aluminum consumption as more of the metal is being absorbed by the fast-growing automobile, housing and infrastructure sectors.
Chinese demand will likely push global aluminum consumption to grow 7% to 36.1 million tons this year.
The report noted that despite being the world's largest consumer of aluminum, China's per capita use of aluminum is still well below that of developed economies. This indicates there is still significant potential for further increases in aluminum consumption.
It added that aluminum consumption in China will continue to rise 12% annually until it reached 16 million tons in 2012.
On the other hand, aluminum consumption is on the decline in another major consumer, the U.S., where demand may drop 6% to 5.8 million tons in 2007 due to a slowdown in the residential housing market and automobile production.
Turning to Australia, Abare said the country's alumina production is forecast to increase by 6% to around 19 million tons in the fiscal year ending June 30, 2007, driven largely by the expected completion of the Gove alumina refinery expansion in Northern Territory.
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