Aluminum smelting cutbacks continue globally

Aluminum industry analysts have asserted that the recent rash of smelting cutbacks would lift world ingot prices above the marginal cost of production, but it hasn’t happened yet. Aluminum spot prices on the London Metal Exchange (LME) softened as January ended, bringing the month’s average to 63?/lb, which analysts reported as being an unprofitable level. But, even with further cutbacks announced this month by Rusal of Russia, Norsk Hydro’s German unit and Century Aluminum of West Virginia, LME aluminum ingot prices are averaging 63?/lb this month Apparently, the falloff in purchasing is happening faster than the reduction in smelting. That’s why analysts tell Purchasing.com that global supply in 2009 will have to be cut deeply, from 40 million in 2008 to 30 million to 35 million metric tons, to meet a projected 10-15% drop in demand from 39 million in 2008. United Company Rusal is a privately held company controlled by Russian oligarch Oleg Deripaska and accounts for 12% of the global production of aluminum. In a statement earlier this month, Rusal noted that aluminum markets have suffered "a rapid deterioration" over the last six months. That’s why the firm will cut its aluminum output by 11%, or 500,000 tons annually, by April. The reduction includes a cut of 180,000 tons announced in December. Norsk Hydro might cut production further at its primary aluminum plant in Neuss, Germany, where power prices are high and metal demand is weak. The plant, with a annual production capacity of 230,000 metric tons, could be mothballed “if the competitive situation does not improve significantly,” the Norwegian company says. So far this year, “we do not see any signs of significant improvements within the timeframe required for continued, sustainable operations at Neuss," says Hilde Merete Aasheim, executive vice president of Hydro's aluminum metal business area, in a statement. The Associated Press reports that Century Aluminum of West Virginia's smelter in Ravenswood, W.Va., is closing by Feb. 20, the company's Monterey, Calif.-based corporate parent says, blaming the closure on slumping aluminum prices, which had prompted it to idle one production line at the smelter already. However, it's unclear what effect next week’s shutdown will have on the adjacent aluminum rolling mill operated by Rio Tinto Alcan of Montreal, which already announced plans to reduce operations there next month. SOURCE:www.purchasing.com