Demand for aluminum in China expected to more than double over next decade, eliminating domestic surplus, reducing global glut currently estimated at 1.4 million tons and pushing prices higher

Alison Gallant

Alison Gallant

Aug 17, 2011 – Industry Intelligence

LOS ANGELES , August 17, 2011 () – Demand for aluminum in China is forecast to double over the next decade and as a result will eliminate a domestic surplus, help reduce a global glut reportedly at 1.4 million tons, and support higher prices, Bloomberg reported Aug. 14, citing market insiders.

Chinese demand will slow over the next ten years to 15% per year growth from growth of 17% to 20% over the past decade, according to Liang Hongdo, executive director of Singapore-based XinRen Aluminum Holdings Ltd.

In April, the Chinese government mandated a slowdown in production to mitigate surpluses, Bloomberg reported. Effective immediately, new projects will be put on hold, according to an April 20 statement from the Ministry of Industry and Information Technology. The Chinese government also intends to take 619,000 tons of outdated capacity offline by the end of 2011.

Despite the mandated slowdown, demand from domestic construction and transportation industries is going to stay robust, helping to push prices back up to levels not seen since before the economic downturn, according to Liang. China’s high-speed rail network is forecast to hit 120,000 kilometers by 2015, Bloomberg reported. Vehicle sales may increase 5% in 2011, according to a July 8 statement from the China Association of Automobile Manufacturers. Liang also reported increased demand for aluminum from the packaging industry. Liang projected aluminum prices to reach more than US$3,000 per ton, approaching the record of $3,380.15 set in July 2008.

Due to the current glut, aluminum has traded down 2.4% in 2011 to $2,410/ton on the London Metal Exchange.

In the five years up to 2010, primary-aluminum output in China grew 78%, according to Laredo, Texas-based industry researcher HARBOR Intelligence. HARBOR went on to say that his year, production could increase 15% to approximately 19 million tons, a figure in line with estimates from Surrey, England-based researcher Brook Hunt. In June, production hit a record level of 1.59 million tons, Bloomberg reported.

Chinese output comprises nearly 40% of global production, according to Brook Hunt.

The primary source of this article is Bloomberg, New York, New York, Aug. 14, 2011.

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