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Aluminium's allure to increase in next decade -CRU

Thursday, Nov 17, 2011

 Less volatile prices and supply certainty are just two factors that will make aluminium stand apart from other industrial metals including copper in the next decade, a senior analyst at consultancy CRU Group said on Wednesday.

"We are predicting at least a decade now of aluminium being the preferred and most attractive metal from a consumer stance," said Paul Robinson, group manager for non-ferrous metals at consultancy CRU Group.
"Aluminium looks like a metal which will have a relatively stable price path compared to alternatives. The level is important, but just as important for consumers is the lack of volatility - which again makes aluminium look attractive," Robinson told Reuters.
Aluminium prices were last at $2,136 a tonne at around 1636 GMT on Wednesday, compared with copper at just under $7,700 and tin around $21,600.
Both tin and copper have uncertain supply prospects, with miners having to develop new technologies to dig deeper to retrieve lower grade ores.
CRU expects these two metals to lose out to aluminium in the packaging and transport industries respectively.
Robinson said large stockpiles of metal made aluminium an attractive prospect near term, while the fact that there were no perceived constraints on the ability to build additional smelters and access bauxite enhanced its medium-term prospects.
Aluminium, contained in bauxite ore, is the most abundant metal in the Earths' crust.
Inventories of aluminium in London Metal Exchange-registered warehouses alone are at around 4.6 million tonnes, or more than 10 percent of global demand.
Robinson said top aluminium producer and consumer China had shown how quickly it was able to ramp up new smelting capacity.
"We don't see structurally any reason for a prolonged period of shortages in aluminium because they (China) can build a smelter in 18-24 months," he said.
"It's not the same process as suddenly finding out you've run out of copper concentrates or nickel concentrates and you've got to sink a shaft and start thinking about mining - it's just so much easier."
Energy was clearly a consideration for the aluminium industry, where power can account for 30 to 50 percent of production costs, Robinson said. But energy supply itself, bearing in mind political risk, was not an issue.
"Essentially the long term play on aluminium becomes an energy play, whereas the long term play on base metals is very much an exploration, technology, increasing costs play, based upon lower grades, deeper underground, and more difficult to find.
Aluminium was one of the few industries where costs could actually fall, Robinson said.
"The technical shift from Western smelting technology to Chinese means a step reduction from a capital costs perspective."
CRU, which has recently published its latest report on the long term outlook for the aluminium industry. estimates that China has the potential to add another 10 million tonnes per year(tpy) of smelter capacity in the inner regions.
After that, the consultant expected Chinese-owned smelters, using their own technology, to be built outside the country, probably in southeast Asia to serve Chinese demand.
China would not turn to smelters in Europe and the United States to feed its needs.
By 2020 CRU expected Chinese aluminium imports to rise to 1.4 million tonnes. Chinese aluminium trade on the whole in recent years has been more or less balanced.
CRU forecasts global primary aluminium demand to grow at an average annual rate of 6.4 percent to reach 57.7 million tonnes by 2015. By 2020 usage is expected to reach 72.3 million tonnes, with China accounting for about half that amount.
Nominal LME three-months aluminium prices were expected to rise to $2,700 a tonne by 2015 and to $2,850 by 2020. 

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