ALUMINIUM-Major market developments in February

LONDON, March 12 (Reuters) - Aluminium prices will continue to be underpinned near term by steadily improving demand and a tight physical market, analysts say.

But production is rising and some see prices succumbing to downward pressure further ahead as it becomes clear that the market is on course to record another big surplus this year.

"Prices in the month ahead should find some support at current levels, as the physical market remains tight," said Olivier Masson, a consultant at CRU Group.

The fact that a lot of inventory at present is tied up in LME warehouses under financing contracts is supporting physical tightness.

Standard Chartered analyst Dan Smith said he had a relatively upbeat view on demand in top consumer China.

"And the rest of the world is starting to pick up the baton a bit on growth," he added, citing a significant upturn in orders from North American aluminium fabricators in February.

Smith expected prices to weaken further ahead, but saw room for a bit more strength short term, helped by steadily improving demand.

But production is rising, even though companies outside China, which idled capacity in response to the global recession, appear cagey about restarting.

"World production is going to rise pretty strongly this year. We're heading for another bumper surplus and pressure on prices will be down," said independent consultant Angus MacMillan.

He said first support for the metal is at $2,000/1,950 a tonne, which could give way sometime in the second quarter, with next support at $1,800.

The London Metal Exchange (LME) three-months aluminium price  was last indicated at $2,240/50 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:

Feb 27 - Guinea's CBG, the world's top bauxite exporter company, said orders for 2010 have already exceeded last year's output by more than 10 percent in a sign of improved global demand for the ore used to make aluminium.

Feb 26 - BHP Billiton   wants to build a $3.5 billion 2,500 MW hydro power plant in Democratic Republic of Congo to support its proposed aluminium smelter, according to a company presentation obtained by Reuters. BHP's Inga X plan envisages a power plant on the Congo River to supply a proposed $5 billion aluminium smelter 150 km away that would process 2 million tonnes of Guinean alumina per year into 800,000 tonnes of finished aluminium, according to the presentation. A BHP official was not immediately available for comment.

Feb 26 - Alcoa Inc  has agreed to keep its Italian aluminium smelters working for six months, instead of idling them as planned after the EU ordered it to repay state aid. Italy's government said the agreement on the plants, which employ about 2,000 people, had been struck after talks with Alcoa and unions late on Feb. 25. In November, Alcoa said it would temporarily idle operations at its 194,000-tonne-per-year smelters at Portovesme in Sardinia and Fusina near Venice after the European Commission ordered it to pay back most of the state aid it had received in Italy since 2006.

Feb 22 - World daily average primary aluminium output rose to 64,400 tonnes in January from 64,000 tonnes in December 2009, provisional figures from the International Aluminium Institute (IAI) showed. Total production in January was 1.995 million tonnes compared with 1.984 million tonnes in December. Total production in January 2009 was 2.094 million tonnes. On Mar. 4, the IAI released provisional figures showing daily average primary aluminium output in China fell to 41,700 tonnes in January from 42,900 tonnes in December.

Feb 22 - United Company RUSAL , the world's largest aluminium producer, said it plans to increase aluminium and alumina output in 2010 as economic development in China and India is expected to boost demand for the metal. The company said it would increase aluminium production by 3 percent in 2010 as its Siberian plants, as well as facilities at Alscon in Nigeria, KUBAL in Sweden and potline 5 at the Irkutsk Aluminium Smelter (IrkAZ) in Russia reach full capacity. UC Rusal also aims to increase alumina output by 7 percent in 2010 by stabilising alumina production at Achinsk Alumina Refinery (AGK), Bogoslovsk (BAZ) and the Urals Aluminium Smelters (UAZ) as well as restoring production at the Boksitogorsk Alumina Refinery (BGZ) in Russia and Aughinish Alumina Refinery in Ireland.

Feb 19 - UC RUSAL said it had agreed to set up a joint body with the new government of Guinea in an apparent attempt to find a solution to a dispute with its predecessor. On Feb. 15, authorities named a caretaker government to lead the world's biggest exporter of raw material bauxite, to its first election since a 2008 military coup. RUSAL has been locked in a dispute with the previous government of Guinea over ownership of Friguia alumina refinery, which it said had been bought unlawfully by the company. Guinea's mines minister has since said in an interview that the new government is prepared to talk with UC RUSAL.

Feb 12 - China said its aluminium industry faces severe overcapacity, with the total smelting capacity at about 20 million tonnes, exceeding demand by 7 million tonnes.    The nonferrous metals industry will have to curb the excessive expansion in smelting capacity and phase out outdated capacity, the Ministry of Industry and Information Technology said on its website (www.miit.gov.cn).

Feb 10 - State-owned Emirate's Aluminium (Emal) has signed a contract to ship aluminium to South Korea's Daewoo International Corporation , the UAE's official news agency WAM reported. This would be the company's first international shipment of the metal. By the end of 2010, Emal plans to ramp up production of its $5.7 billion project located at Al Taweelha in Abu Dhabi to 700,000 tonnes of aluminium per year (tpy).

Feb 9 - Argentina's biggest aluminium producer, Aluar , will hike aluminium output to 465,000 tonnes in 2010 from 412,000 tonnes last year as it continues implementing an expansion plan, the company's chief executive said. Aluar has nearly completed a $1.5 billion expansion, but is waiting for the global economic recovery to boost demand for base metals before investing the last $200 million of the plan to raise output to 515,000 tonnes a year.

Feb 9 - Around 1,200 Alcoa alumina and bauxite workers in west Australia plan to stage industrial actions on Thursday over stalled wages talks, but Alcoa said it was not expecting production losses.   The Australian Workers Union have not revealed what type of actions its members would take but a union source said they would cause "minimal" disruption at Alcoa's Wagerup alumina refinery, Willowdale and Huntley mines and the Port of Kwinana.

Feb 3 - Ormet Corp  laid off 20 workers on Feb. 1 at its Hannibal, Ohio smelter, but would not say why, a spokeswoman said. They were not related to the  Worker Adjustment and Retraining Notification (WARN) notice sent out last summer, a company spokeswoman said. Ormet's aluminium smelter has capacity of 266,000 tonnes per year with six potlines total. No reason was given for the latest round of layoffs and the company would not say whether production would be affected by the latest dismissals.

PRICES

Along with other LME-traded metals, aluminium prices continued to weaken in early February. By Feb. 5 three-months prices had fallen to $1,967.50 a tonne.

The market rebounded in line with the rest of the complex on a brighter economic outlook only to ease again later in the month as growth fears returned.

The month's high of $2,179 a tonne was reached on Feb. 23 and prices ended the month at $2,134 from $2,091 the previous month.

On Mar. 10 aluminium reached $2,270 helped by strong Chinese import data for bellwether copper, but worries over global economic health returned. Sentiment was dented further by investor concerns of further monetary tightening in the world's top metals consumer.

In January, the twice-yearly Reuters base metals price poll put the median average for the LME cash aluminium price  at $2,094 a tonne in 2010.

STOCKS

Total exchange stocks were 4,940,753 tonnes at the end of February, equating to around 47-1/2 days of demand. At the end of January they totalled 4,945,228 tonnes.

Most of this is acounted for by LME stocks, which stood at 4,570,075 tonnes at the end of last month, down slightly from 4,611,350 tonnes a month earlier.

Total visible stocks, including latest International Aluminium Institute (IAI) unwrought stocks were 6.144 million tonnes, down slightly from 4,611,350 tonnes a month earlier.

Estimated aluminium stocks at the Japanese ports of Yokohama, Nagoya and Osaka rose 3.05 percent from a month earlier, and were seen staying around the same levels for a while, trading house Marubeni Corp  said.

Aluminium stocks at the end of January stood at 199,200 tonnes, compared to 193,300 tonnes at the end of December, and were down 45.2 percent from a year earlier.

Marubeni's latest estimates this week put port stocks at the end of February at 200,700 tonnes, up 0.8 percent from a month earlier.

For a graphic on LME aluminium stocks and three months prices click on:

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(3000 Xtra users can access Reuters Metal Production Database (MPD) 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 2013.)

(Compiled by Karen Norton; edited by James Jukwey)