ALUMINIUM-Major market developments in December

LONDON, Jan 14 (Reuters) - The global aluminium market is heading for a big surplus this year as demand continues to be outpaced by supply, analysts say. "Demand is expected to pick up, but it's hard to escape the conclusion that the market will be in a substantial surplus this year," said independent consultant Angus MacMillan. He expects most of that surplus to show up in London Metal Exchange (LME) warehouse stocks, which have been falling recently from record highs. On Thursday they stood at 4,593,400 tonnes. "Demand is recovering, albeit slower than the market wants, there's no lack of supply and inventories are very high," said Calyon metals analyst Robin Bhar. But he expected the market to stay tight in the next couple of months, helped by the fact that a large amount of LME stocks are tied up in financing deals. Others take a similar view. "The fundamentals remain weak but the market still believes in firm aluminium prices at these levels supported by inventory locked in financing contracts and rising smelter costs," said Massimo Rossi, a senior analyst at industry consultants CRU Group. "Over-supply remains an issue despite strong Chinese demand growth and a moderate recovery in the developed world," he added. Rossi saw prices well supported at around $2,200 a tonne, with spikes to $2,400/450 possible in the next month. But MacMillan thought technical support at $2,200 could give way, with further falls to $2,000 possible in a short space of time. At 1313 GMT the LME three-months price was indicated at $2,330/40 a tonne. Below are some of the more significant recent developments in production, stocks and prices that may continue to influence the direction of the market in 2010. PRODUCTION: Dec 23 - Chinese aluminium smelters have agreed to pay more for imported alumina in 2010, a move that will reduce margins as they scurry to secure feedstock for new capacity. Term prices for imported alumina will rise to 14.5 percent to 15 percent of the price of aluminium on the London Metal Exchange. Dec 22 - Venezuela will chop output at its leading steel mill and two aluminium smelters to reduce energy consumption due to falling water levels at the dam which supplies about 70 percent of the country's electricity, a government minister said. On Jan. 4, the country said it may be forced to close its aluminium, steel and bauxite operations in the south-east of Venezuela due to a drought and electricity shortfall. Dec 20 - State-run Saudi Arabian Mining Co (Maaden) and Alcoa agreed to build a $10.8 billion aluminium complex in Saudi Arabia, targeting the Middle East from 2013. Under the deal, the companies form a joint venture to set up a 1.8 million tonnes-per-year (tpy) refinery, a 740,000 tpy smelter, a bauxite mine with an annual capacity of 4 million tonnes and a rolling mill with a capacity of up to 460,000 tonnes. The firms have yet to raise the financing for the complex mainly planned to be built in Ras Azzour on the kingdom's Gulf Coast. Dec 18 - Vedanta Resources Plc's east India plant is importing alumina to keep its aluminium smelter running despite a local scarcity of the input, a senior company official said. The company said it has also approached the state-run National Aluminium Co (NALCO) to buy alumina. The company started its 250,000 tonnes-per-annum smelter in Jharsuguda in Orissa state June 2008, and used alumina sourced from its refinery in nearby Lanjigarh. Dec 15 - China's main power grid operator State Grid Corp of China (SGCC) plans to invest up to $8 billion to set up an aluminium plant and three hydro-electric dams in the Malaysian state of Sarawak on Borneo island, a newspaper reported. has signed a joint cooperation agreement with 1Malaysia Development Berhad (1MDB), the country's new wealth fund, to make the investment, the Star newspaper said, citing a source. The only other big investor in Sarawak is Rio Tinto but its joint venture with local construction group Cahya Mata Sarawak to build a 720,000 tonne capacity aluminium smelter has yet to take off. Dec 14 - Rio Tinto Alcan, a unit of Rio Tinto, said it could invest up to $2.5 billion in a potential aluminium smelter in Paraguay. The company said it had begun negotiations on a possible power purchase agreement for the potential smelter. The company signed a letter of intent with Paraguay's state-run National Electrical Administration (ANDE) to begin negotiations on an energy purchasing agreement in the future. The head of ANDE, said the plant could be operating by 2016. Dec 14 - Aluminum Corp of China Ltd (Chalco) has restarted all its idle alumina and aluminium capacity, company executives said on Monday, up from operating at just 88-90 percent of capacity at end-October. Chalco, with an annual capacity of 4 million tonnes of primary aluminium and 11 million tonnes of alumina, had shut 4.11 million tonnes of annual alumina capacity and 960,000 tonnes of primary aluminium capacity due to low prices. Dec 11 - China produced 11,732,000 tonnes of primary aluminium in the first 11 months of 2009, down 1.7 percent from the same period a year earlier, figures from the National Bureau of Statistics showed. Production of alumina rose by 1.6 percent over the same period to reach 21,387,200 tonnes. Dec 8 - Germany's biggest aluminium smelter plant, owned by Norway's Norsk Hydro , is facing immediate shutdown due to high environmental costs, a German daily said. The Rheinwerk plant in Neuss will have to close immediately if the metal industries do not receive aid in the coming days, Die Welt newspaper cited Martin Kneer, managing director of the German Metal Federation WVM, as saying in an e-mail to the German Chancellor's Office. A spokesman for WVM told the newspaper other aluminium and zinc smelters are facing the same risk of being shut down. Dec 7 - Some mineworkers have left Guinea in response to growing tension in the West African country, but production at major minerals operations has not been affected, resources companies said. A failed attempt to assassinate military ruler Captain Moussa Dadis Camara last week ignited fears of more turmoil in the world's top exporter of aluminium raw material bauxite, where firms including RUSAL, Alcoa , Rio Tinto and AngloGold Ashanti operate. Dec 4 - Brazil's Votorantim Group has signed a deal to join Trinidad and Tobago's government-owned Alutrint in a project to build a 125,000 tonnes-per-year aluminium smelter in the Caribbean nation, a Votorantim official said. The Brazilian industrial conglomerate replaces Venezuela-based aluminium producer Sural, which had a 40 percent stake in the Trinidad project but withdrew due to financing problems earlier this year. Trinidad and Tobago's government has a 60 percent stake in the smelter project. Dec 2 - Two-thirds of Europe's primary aluminium smelters might shut in the near future, because they are struggling with high costs, the European Aluminium Association said. Next week's climate change talks in Copenhagen could be a first step towards a long term solution, but they will not address the present critical situation of most of the region's aluminium industry, the secretary-general of the European Aluminium Association (EAA). PRICES Aluminium prices ended December at $2,245 a tonne, up from $2,065 a month earlier and $1,540 at the end of 2008. Three months trended higher in the first half of last month, reaching the month's high of $2,305 a tonne on Dec. 14. Prices eased off after that and held to a narrower range in the remainder of the month. But the market surged in early January on worries that power shortages in top producer China would affect smelter output and three-months reached. On Jan. 6, aluminium reached $2,394 a tonne, its highest since early October 2008. STOCKS Total exchange stocks were 4,921,934 tonnes at the end of December, equating to around 45 days of demand. At the end of November they totalled 4,870,116 tonnes. Most of this is accounted for by LME inventories, which stood at 4,624,425 tonnes at the end of December, compared with 4,599,700 tonnes a month earlier. Total visible stocks, including latest International Aluminium Institute (IAI) unwrought stocks were 6.060 million tonnes, up from 6.007 million tonnes. Estimated aluminium stocks at the Japanese ports of Yokohama, Nagoya and Osaka totalled 180,500 tonnes at the end of November, up 5.4 percent from October, trading house Marubeni Corp said. Stocks had fallen to 169,600 tonnes at the end of September, the lowest since Marubeni began taking records about 14 years ago. Japan's demand for aluminium, widely used in packaging and transportation, plunged after the economic crisis, as large manufacturers cut production. Demand has returned to about 80 percent of the previous year's level but industry officials are worried that the pace of the recovery will slow down next year after the impact from initial government stimulus measures have had their affect. Moreover, demand from the construction sector, a major consumer, remains in a slump. For a graphic on LME aluminium stocks and three months prices click on: http://graphics.thomsonreuters.com/0110/LME_ALI0110.gif (3000 Xtra users can access Reuters Metal Production Database (MPD) by clicking on http://bond.views.session.rservices.com/Metals/ 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 2013.) (Compiled by Karen Norton; edited by Sue Thomas)