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Market Reports - Nonferrous

RTGE Staff March 10, 2014

Aluminium markets may finally be starting to show some signs of life. Several sources feel this market is nearing a balance between supply and demand, something that hasn’t happened for a number of years. Over the past several years, while other nonferrous metals markets seemed to have addressed their oversupply issues, the continued oversupply of aluminium on the global market has kept prices toward the downside.

Now, with the first quarter of 2014 coming to an end, there appear to be signs that numerous smelter closures are beginning to have an impact on the supply/demand imbalance that has persisted. The cuts in production have not been limited to one area, but have been spread over a wider number of large and small aluminium producers in North America, Europe, Australia and even China.

Bringing a more positive outlook for the metal, the Japan-based trading house Sumitomo recently noted that following significant cuts there could be a deficit of aluminium on the global market by 2015.

While a deficit could improve prices later in the year, getting there is not without pain. Several of the largest aluminium producers, including Alcoa, United Rusal and Rio Tinto, have shuttered smelters and cut production.

Alcoa recently announced it is shuttering its 190,000-tonnes-per-year smelter in Australia, which followed the shutdown of potlines in the United States.
 


 

The closure continues the company’s capacity cuts throughout its production range. The company has taken around 551,000 tonnes of capacity off market.

The Russia-based aluminium firm United Rusal also has reported sizable cuts in its production. The company noted that for 2013 the company’s total output totaled 3.857 million tonnes, an 8% drop from the prior year. In commenting on its decision to reduce supply, Oleg Deripaska, CEO of Rusal, said, “2013 witnessed the supply side adopting a disciplined approach to production, with Rusal successfully completing its production cut program, which resulted in cuts of 316,000 tonnes (of aluminium).” Deripaska says reduced operational levels are expected to be sustained throughout 2014.

While China continues to lead the way with aluminium consumption, Europe has seen a modest return to growth, with consumption during the second half of 2013 increasing by 2% from the prior year.

The cuts have led to an overall decline in aluminium production. According to recently published statistics from the International Aluminum Institute and the consulting group CRU, global aluminium production, excluding China, reached 25.66 million tonnes in 2013, down by 48,000 tonnes from 2012.

Meanwhile, copper scrap metal markets continue to see downward pressure, driven primarily by problems in China. One notable related factor has been the slowing of China’s economy over the past several quarters.

Also plaguing copper processors is that the strategy by some Chinese buyers to use the metal as collateral against real estate is no longer en vogue, which also has reduced demand.

One news report from China notes that banks are looking to halt extending loans to property-related companies, which has dampened any enthusiasm for copper.

On a more positive note, the European firm Trafigura has taken a 30% stake in a large Chinese smelter that opened late last year. The smelter has a rated annual capacity of 400,000 tonnes of copper per year.

 

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