15.01.2020

Rusal marketing head says lower China aluminium production will maintain market deficit in Asia

Lower Chinese production is set to fuel supply deficits in Asian aluminium markets in 2020, according to UC Rusal marketing head Roman Andryushin.

During 2019, aluminium supply in Asia was not growing due to falling primary aluminium output in China, and this is set to continue this year, Andryushin told Fastmarkets in an interview.

“Several disruptions and continued reallocation of capacities still put the Chinese market in a deficit,” he said.

Andryushin’s comments come as the three-month aluminium price on the London Metal Exchange starts the year strongly, hitting a six-month high of $1,832 per tonne on January 6, but regional physical premiums - indicators of market balance - remain low.

The last time the three-month aluminium price traded above $1,832 per tonne was on July 19, 2019, when it was at $1,847 per tonne.

Meanwhile, main Japan ports (MJP) aluminium premiums assessed by Fastmarkets fell to an all-time low of $60-70 per tonne on December 3 last year.

The last assessment on Tuesday January 14 showed a recovery of sort with premiums at $75-85 per tonne.

Chinese supply lower than expected

The most recent statistics from the International Aluminium Institute show a 2.5% year-on-year decline in global aluminium supply to 5.19 million tonnes in November 2019.

Most of that decline came from a fall in Chinese production, which was at 2.9 million tonnes, compared with 3.042 million tonnes in November 2018.

Disruptions and delays to restarting smelting capacity caused a 3.2% year-on-year fall in China’s refined aluminium production during November, according to the latest figures from China’s National Bureau of Statistics.

China’s production totaled 32.13 million tonnes in the first 11 months of 2019, down by 0.6% on the year, although volumes should rebound in 2020 after the restored capacity enters production, the bureau said.

Andryushin also surmised that with all the additional capacities commissioned in Asia this year, the Asian market for aluminium is still likely to stay in a deficit in 2020.

“Major Asian primary aluminium producers are well positioned on a global scale and efficiently distributing their increased production volumes in other regions,” he noted.

News of falling demand in Japan due to slumping automotive sales did not concern him.

“Negativity coming out of Japan has a minor effect on a global metal balance,” he said.

Global supply ramp-up

Production outside China grew by 1.22% year on year in November 2019, according to the International Aluminium Institute.

Aluminium Bahrain (Alba) will start construction of its line 6 expansion project, which will increase total capacity to 1.5 million tonnes per year.

UC Rusal, the second largest producer of aluminium globally, is planning to add value-added products volume in 2020, on top of its P1020A ingot sales.

The company is also confident that the increased supply will be consumed by growth in developing economies.

“A growth in aluminium supply would be inevitable, but it would also be fueling growth in other economies which would be able to consume the additional supply,” Andryushin explained.

“Pressure from China is still sizable, but there is a structural change which should not be ignored. Notably Chinese investment activity is contributing into ex-China demand growths in Asia and globally as well,” he said.

As it was, he had observed that big Chinese export-oriented producers were setting up greenfield downstream facilities in other countries to walk away from the ‘Made in China’ label and avoid high bills related to various trade barriers.

“With all additional capacities commissioned in Asia, the global market ex-China remains in deficit this year and most likely will stay in deficit in 2020,” Andryushin concluded.

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