LONDON United Co. Rusal has revealed a continuing focus on Asian markets at the expense of European business in its 2012 production report, which will help maintain the tightness in European markets that has led to record-high aluminum premiums.
Rusal has all but stopped offering duty-unpaid material in Europe other than the material it sells to Glencore International Plc in transactions that began in 2009, and its analysis of global markets shows that it does not see European sales as being any more viable in 2013.
"While the U.S., China and the rest of Asia are expected to drive aluminum demand in 2013, our view on the European consumption of aluminum remains negative," Rusal said. "Despite the efforts taken by the (European Central Bank) to solve the debt problem, European countries are still suffering from weak economic activity, large budget deficits and cuts in capital spending which are unlikely to stimulate economic growth and consumption activity."
In contrast, the company is forecasting that China will produce 10 percent more light vehicles this year than in 2012, with strong growth predicted in India as well. "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 levels in North America and Europe," Rusal said.
The company also sees growth in Japan, where recent stimulus measures are expected to aid imports later in the year.
European aluminum premiums dipped from record highs Feb. 6the first time duty-paid premiums have fallen since 2011but market participants expect further increases as warehouse financing deals remain attractive and will keep material away from the market, forcing buyers to pay higher numbers for any available metal.
The continuing focus away from Europe by its largest producer will exacerbate the tightness in the market, and place further pressure on premiums even if demand remains at depressed levels.
"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.
AMMs Midwest P1020 aluminum premiums are in a range of 11.3 to 12 cents per pound.
A version of this article was first published by AMM sister publication Metal Bulletin.