UC Rusal aluminum production capacity loss

 

 

More than 4% of 2012 ex China aluminum capacity is likely to be lost owing to a combination of market related and non market related events over the past 3 to 4 months. As a result of these known curtailments and disruptions, 2% to 3% of global aluminum supply is set to be lost in 2012. Several global aluminum peers have already announced aluminum production cuts of 1 million tonnes in 2012 due to low aluminum prices.

 

 

Expected curtailments of primary aluminum and alloys production in Europe may exceed 0.8 million tonnes in 2012 which is 16% of European production forecast for 2012. This level of reduced production mostly relates to rolling slabs and extrusion billets output with decreases of 29% and 39% related to total regional curtailment respectively.

 

 

According to UC RUSAL's estimates about 31% of Chinese aluminum production capacity may be unprofitable now. Particularly in the case of China, costs of production are expected to carry on rising in 2012 as the central government continues its efforts to reign in growth in energy intensive industries together with further RMB appreciation.

 

 

At the same time, low cost aluminum production in the western parts of China may partly replace high cost production loss. In UC RUSAL's opinion, the Chinese market will be in a small deficit of 0.2 million tonnes to 0.5 million tonnes in 2012.

 

 

As a result, UC RUSAL's estimation is that primary aluminum production loss ex China may achieve 2.7 million tonnes in 2012 and expected China closures will cut 1.2 million tonnes. Consequently total production loss is expected at a level of around 3.9 million tonnes or about 8% of global production in 2012. This fact should support LME aluminum prices as well as regional premium.