LONDON: Aluminium from the Middle East, where output capacity will double by 2015 powered by cheaper energy, will feed growing long-term demand as smelters elsewhere fall by the wayside, hit by high power costs and a weaker market.
Smelter capacity in top user China will continue to rise, but as time wears on, it will be less able to satisfy its domestic needs.
In the near term, capacity could be lost in other parts of the world, perhaps permanently in some cases, as high power costs and low prices erode profit for a large chunk of the energy-intensive industry.
Electricity accounts on average for 40 per cent of the cost of producing the metal used in transport and packaging.
"The Middle East will continue to be an important production hub for aluminium," an industry source said.
"It has a reliable source of energy to power the smelters. That's one of the reasons why they built projects, and the keen interest of governments to diversify the uses for the energy they have and to create employment as well."
Beyond the global economic woes, consumption of the metal is set to grow at a healthy clip. By the end of the decade it will reach over 70 million tonnes, compared with 41m tonnes last year.
But before then, aluminium prices have fallen almost 25 percent since May, and 37pc since a record high $3,380 per tonne in 2008 to about $2,130 per tonne now, below producers' break-even levels.
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