ALUMINIUM-Major market developments in June

LONDON, July 8 - Rising Chinese aluminium output and the start-up of new capacity will offset cuts made by western aluminium firms and could push prices lower again as London Metal Exchange warehouses reach new heights, analysts said. ADVERTISEMENT But others believed the market has some of the best prospects among LME-traded metals, helped by a demand pick-up later this year, further output cuts and near term supply worries. "I wouldn't be surprised to see LME stocks at 5.0 million tonnes by the end of the year," said independent consultant Angus MacMillan. On Wednesday, LME stocks were close to record highs of around 4.4 million tonnes. While they are no longer rising on a daily basis, MacMillan said the underlying uptrend remained in place. Between 1.5-2.0 million tonnes per year of mothballed and new capacity was being brought back on stream in China, he estimated. "It's difficult to see the market sustaining upward momentum and I would look for lower prices as the year wears on." But others saw potential for higher prices if the economic picture improved and translated quickly into a pick-up in aluminium demand from the transport and construction sectors. Also supportive was that nearby metal supplies are tighter, because companies with metal are using it as collateral to release cash tied up in stock. [ID:nLF699919] Analysts also predicted more production cuts. "We're deep into the cost curve and the dollar is likely to weaken. These are all factors which should help to boost aluminium," said Dan Smith, analyst at Standard Chartered. A weaker U.S. currency makes dollar-priced metals cheaper for non-U.S. investors. Nick Moore, head of commodity strategy at RBS Global Banking and Markets, estimated around three-quarters of aluminium smelters were losing money, making more cuts inevitable. "Either we get more cuts or the industry turns into a charity and you don't get much philanthropy these days," he said. Moore predicted that aluminium prices will average $1,550 a tonne in the third quarter, rising to $1,875 in the fourth. Standard Chartered's Smith was more bullish near term and expected three-months prices to average $1,800 a tonne in the third quarter, possibly getting up to $1,900 during that period. At 1345 GMT the LME three-months price was indicated at $1,630/40 a tonne. Below are some of the more significant recent developments in production, stocks and prices that may influence the direction of the market in 2009. PRODUCTION: June 24 - Germany's plan to give special state aid to the metals industry could give hope to Hydro Aluminium's Neuss plant. The local unit of Norsk Hydro said in April it may stop production at the loss-making smelter in June because of high German electricity costs and weak demand. [ID:nLO407667] June 22 - Daily average primary aluminium output fell to 63,600 tonnes in May from 64,000 tonnes in April, provisional figures from the International Aluminium Institute showed. Primary aluminium production in China was 984,000 tonnes in May against 892,000 tonnes in April and 1.167 million tonnes in May last year. [ID:nLM297462] June 17 - Bosnian aluminium smelter Aluminij Mostar could restore full production in the autumn if the metal's price recovery continues. Aluminij cut output by a quarter this year due to the economic crisis and high electricity prices. [ID:nLG844895] June 17 - A Trinidad and Tobago high court judge has quashed an environmental permit issued by a state agency for the construction of a 125,000 tonnes per year aluminium smelter by government-owned Alutrint. The ruling temporarily halts work on what would be the first aluminium smelter on the twin-island Caribbean state. [ID:nN17343826] June 17 - Rio Tinto said it was too early to say whether a proposed new biomass power plant could secure the future of its Anglesey primary aluminium smelter in Wales, which is expected to close in September. the 135,000 tpy plant is set to close when its current power contract expires, unless it is able to secure an extension of its power terms or an alternative supply at favourable rates. [ID:nLH871747] June 17 - Century Aluminum said it reached an agreement on a new, long-term power contract with E.ON U.S. and Big Rivers Electric Corp for its Hawesville, Kentucky, aluminium smelter. [ID:nN17229192] June 15 - The UAE's Dubai Aluminium Co said it had not cut output after a supplier and metal traders said the firm was purchasing less raw materials. [ID:nLF561101] June 12 - Ormet Corp , a U.S. aluminium producer, said it had cut production capacity at its Hannibal, Ohio smelter to five potlines from six as of May 20, after trimming output to 5-1/2 potlines on May 1. The plant's total production capacity is about 265,000 tonnes per year of aluminium. Citing a dispute with Glencore International [GLEN.UL] over a short of alumina supplies, Ormet said it was forced to curb aluminium output. The company said it may need to cut production further, possibly halting all operations, if Glencore fails to deliver alumina to the company under a tolling agreement that took effect in April 2008. [ID:nN12502684] June 12 - A decision by six Japanese companies to abandon Venezuela's Venalum aluminium smelter and sell their shares is unlikely to affect the country's near-term output of the metal, market analysts say. [ID:nN12205541] June 12 - China produced 4,622,500 tonnes of primary aluminium in the first five months of the year, down 13.0 percent from a year earlier, figures from the National Bureau of Statistics showed. Output of alumina fell by 6.1 percent over the same period to 8,562,900 tonnes. [ID:nAPI000632] June 12 - China's Chinalco has dropped plans to help Rio Tinto expand an Australian alumina refinery, following the sudden collapse of a wider tie-up of the two companies, a Rio spokeswoman said. Chinalco had until June 15 to confirm its participation in the funding of the Yarwun 2 expansion project, costing about $1.8 billion and lifting alumina production to 3.4 million tonnes from 2 million tonnes. [ID:nSYD363470] June 10 - The annual rate of primary U.S. aluminium production in May dropped 37.8 percent to 1,731,124 tonnes from 2,781,753 tonnes in May 2008, and was down 1.9 percent from April's annual rate of 1,764,641 tonnes, the Aluminum Association said. [ID:nN10560057] June 5 - Montenegro will boost its stake in indebted aluminium smelter Kombinat Aluminijuma Podgorica following agreement with Russian EN+ Group to swap a stake for a bailout package, saving the company from bankruptcy, a top government official said. [ID:nL51019821] June 2 - Century Aluminum said it has delayed repairing 31 damaged pots at its Hawesville, Kentucky smelter in order to manage production in the current economic downturn. [ID:nN0250654] PRICES LME aluminium prices finished June at $1,629 a tonne, up almost 14 percent from $1,444 at the end of May. On June 10, three-months reached $1,701, its highest in over six months. Sentiment was boosted by the weaker U.S. dollar, hopes for the global economy and rising cancelled warrants -- metal earmarked for delivery out of LME warehouses. Despite near-record high inventories, aluminium has also been helped by tighter short term supplies. Even so, resurfacing demand worries and a strong dollar, took their toll and aluminium prices pulled back under copper's influence to $1,572 on June 22. A recovery towards $1,700 later in the month was not sustained and prices have tended to soften in early July. In January, the twice-yearly Reuters base metals price poll [MET/POLL] put the 2009 median average for the LME cash aluminium price at $1,604 .70 a tonne. STOCKS Total exchange stocks were 4,574,282 tonnes, or more than 48 days of consumption at the end of June, up from 4,424,274 tonnes a month earlier. Despite high stocks, the market is concerned that supplies in the near term are tighter because a substantial amount of metal in LME warehouses is tied up as collateral for financing deals for banks. Total visible stocks, including latest International Aluminium Institute unwrought stocks were 5.983 million tonnes, up from 5.845 million a monthe earlier. Estimated aluminium stocks at the Japanese ports of Yokohama, Nagoya and Osaka fell for the third month in a row in May. Stocks totalled 243,300 tonnes, down 52,300 tonnes or 17.7 percent from a month earlier, trading house Marubeni Corp <8002.T>. The decline was attributed largely to a sharp decline in imports rather than to a rise in domestic demand. For a graphic on LME aluminium stocks and three months prices, click on: http://graphics.thomsonreuters.com/079/LME_ALI0709.jpg (3000 Xtra users can access Reuters Metal Production Database by clicking on http://mpd.session.rservices.com. MPD details historical and predicted output and capacity for bauxite, copper, lead, zinc and gold mines, alumina refineries, aluminium, copper, lead and nickel smelters and copper, zinc, lead and nickel refineries between 1997 and 2012.)