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Global aluminum demand to rise in ’13 on China projects: Rusal

Keywords: Tags  Rusal, demand, aluminum, alumina, bauxite, China, premiums, production output

SINGAPORE — United Co. Rusal, the world’s largest aluminum producer, expects aluminum demand to rise 6 percent in 2013 on the back of Chinese infrastructure projects, the company said on Feb. 8.

"Rusal expects that the uncertainties seen in 2012, namely the current eurozone financial crisis and slowdown in Chinese growth, will lessen during 2013, thanks to the strong financial stimulus programs by central banks in key regions and growing data from China," it said.

Global primary aluminum demand is expected to total 50 million tonnes in 2013, an increase of 6 percent from 2012 levels, the Moscow-based company said.

China will remain the fastest growing primary aluminum market in 2013, registering 9.5-percent growth, followed by India at 6 percent, Asia—excluding China—at 5.8 percent, North America at 5 percent, and Russia and the CIS at 4 percent, Rusal forecast.

Europe, meanwhile, is likely to see a 2-percent year-on-year drop in primary aluminum consumption in 2013.

"According to (a) WardsAuto forecast, Chinese car production is expected to exceed European production in 2013," Rusal said, adding that China is forecast to manufacture 19.6 million cars and light vehicles in 2013, an increase of 10 percent from last year.

"The emerging economies like China and India should be the ultimate beneficiaries of aluminum demand from the car sector given that the aluminum penetration in those countries remains well below the level in North America and Europe," Rusal said.

"While aluminum demand in Europe remained subdued, this was offset by strong consumption growth in China and the U.S. in the fourth quarter of 2012, which has continued into the first quarter of 2013 and ensures positive sentiment for the year ahead," it added.

In 2012, China’s aluminum consumption grew by 9.3 percent to 21.8 million tonnes, while U.S. consumption rose by 5.4 percent to 5.9 million tonnes. Japanese aluminum consumption grew by 3.1 percent to 2 million tonnes in 2012, while consumption in South Korea grew by 3 percent to 1.3 million tonnes.

Global aluminum consumption in 2012 rose by 6 percent to 47.4 million tonnes, the company said.

"Chinese infrastructure investments were boosted by 20.6 percent in 2012," Rusal said, adding that "the continued urbanization process will require significant investment in infrastructure, including housing, transportation and social services in 2013."

China’s stimulus program for home appliance purchases in rural areas boosted sales of products containing aluminum, such as televisions, air conditioners, washing machines and refrigerators, it said.

The producer also said it expects some global aluminum capacity to go offline.

"About 1 (million to) 1.5 million tonnes of the global aluminum production (will) be idled in 2013 under the current circumstances as significant amount of the global production will be at the break-even point," Rusal said.

Aluminum premiums will therefore continue to grow in 2013, the company said.

"The increase in demand and the tight metal availability continued to push regional premiums to historical highs in all major regional markets in 2012 and this trend will possibly continue in 2013," Rusal said.

At the end of December, the Japanese premium stood $254 per tonne, the United States’ Midwest premium was $248 per tonne, and the Rotterdam, Netherlands, in-warehouse premium was reported to be at $285 per tonne, it added.

"The current warehouse incentives in Europe and the U.S. will continue to attract surplus metal, which will be supported by strong contangos resulting from ongoing low costs of finance and renewed interest from the hedge funds," the company said.

Financial deals continue to be a dominant factor for LME aluminum pricing.

"As more than 65 percent of LME stocks are locked in financial deals, ongoing low costs of finance and renewed interest from the hedge funds increase financial trading of aluminum contracts, which is significantly exceeding a physical demand," the company said.

Rusal’s total aluminum output in 2012 was 4.173 million tonnes, up 1 percent from 2011 due to increased production across the lower-cost aluminum smelters located in Russia’s Siberia region, as well as at Kubal in Sweden and at Alscon in Nigeria.

Output at its Sayanogorsk aluminum smelter rose by 8 percent in 2012 due to reduced output in the second half of 2011 following a railway bridge collapse.

Rual’s total aluminum output in the fourth quarter of 2012 fell by 2 percent year on year to 1.038 million tonnes.

Alumina production fell 8 percent in 2012 to 7.477 million tonnes, primarily due to the shutdown of the Friguia alumina refinery in Guinea in April 2012 after workers went on strike. In January this year, a company spokesperson said Rusal was considering restarting the refinery in 2013.

Alumina output in the fourth quarter decreased by 13 percent year on year to 1.806 million tonnes.

Bauxite production also decreased by 8 percent to 12.365 million tonnes in 2012. The decrease was mainly due to the reduced mining operations at the Friguia bauxite mine, the company said.

Bauxite output in the fourth quarter fell 15 percent year on year to 2.788 million tonnes.

In December 2012, Rusal said it had committed itself to the production of 3 million tonnes per year of bauxite at the Dian-Dian deposit in Guinea within three years, as part of a long-term development agreement struck with the Guinean ministry of mines.

The development of the world’s largest bauxite deposit at Dian-Dian will be divided into four phases, expected to be realized by the end of 2019. It will include the development of a bauxite mine and construction of an alumina refinery.

A version of this article was first published by AMM sister publication Metal Bulletin.

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