Aluminium demand decelerates dramatically, but still growing

Chinese demand for primary aluminium is forecast to continue to increase next year, despite the global downturn, although at a very much reduced rate in comparison with demand last year. China is the world’s top consumer of primary aluminium and this prediction comes from Chinese State-owned research group Antaike, which says that the country’s consumption of the metal will rise by 3% in 2009. This, however, is in comparison with the research group’s forecast of an increase of 8,5% for this year and in dramatic contrast to an increase of more than 30% in 2007. Chinese aluminium consumption is expected to reach 13-million tons this year, rising to 13,4-million tons in 2009. “Consumption is slowing due to the global financial crisis and weak performance of the local property market,” said Antaike senior analyst Wang Feihong at a recent aluminium conference in the Chinese city of Sanya, on Hainan island. “The Chinese market will have a surplus and prices will fall.” China’s domestic primary aluminium production is expected, by Antaike, to have increased by 10,6% this year, as against a 33% rise in 2007. However, Chinese aluminium production capacity will have increased by almost 20%, to 18,2-million tons. The result is that, even with production cuts at Chinese smelters – according to Wang, these cuts could amount to some 1,5-million tons by the end of this year – there will still be a surplus in the Chinese market. Not surprising, then, Antaike expects that the commissioning of about 2,2-million tons of new production capacity will be postponed. There are also signs that China’s aluminium sector is being consolidated. Last week, it was reported that mining giant Rio Tinto was considering selling its 50% share in a joint venture (JV) with Chinese smelter Qingtongxia Aluminium, in order to raise cash to help it deal with its $40-billion debt burden. Rio has promised to raise $15-billion from asset sales but has so far realised only $3-billion. Qingtongxia is owned by the Ningxia provincial government, and the JV operates an aluminium smelter with a capacity of 150 000 t/y, which amounts to about 25% of the Qingtongxia’s total capacity. Rio inherited the JV as a result of its acquisition of Canadian aluminium group Alcan, last year. It is believed that Qingtongxia will be the likely buyer of Rio’s share of the JV, which will allow the Chinese company to consolidate its assets, prior to its reportedly planned sale by Ningxia province to the (national) State-owned China Power Investment Corporation, which will then become the country’s second-biggest aluminium producer, after Chalco. China Power is expected to follow up on the acquisition of Qingtongxia by buying coal mines and constructing power stations in Ningxia to ensure adequate energy supplies for the smelters. The decelaration in Chinese aluminium demand will, naturally, affect China’s alumina production. Antaike expects the country’s alumina production to have increased by 21% this year, to 24,6-million tons. Last year, alumina production rocketed 50%; in 2009, it is forecast to inch up 1,8%, to 25-million tons. Alumina production capacity last year increased by almost 40%, and it is believed that the rise for this year will be 24%, to 33-millon tons. However, no significant capacity increase is now expected next year. Meanwhile, the Chinese province of Yunnan has announced that it will buy one-million tons of metal concentrates, in a programme which could cost about $3-billion, to support local producers, who have been hit by the fall in demand and the concomitant fall in prices. The programme will involve the purchase of 300 000 t of aluminium, 300 000 t of zinc, 150 000 t of copper and 150 000 t of lead. The programme will also see the province buying 100 000 t of tin, which has raised some eyebrows among observers, as this amounts to about one-quarter of the total world production of the metal. --www.miningweekly.com