Aluminium supply to tighten as prices rebound but ‘structural’ excess capacity remains in China

Global and Chinese demand for lightweight industrial metal aluminium will remain strong and supply outside China will continue to tighten this year, creating conditions for firmer prices from near seven-year lows, according to the chief of the world’s second largest producer Rusal.

Rising exports of Chinese processed aluminium products – which were hit with anti-dumping duties in the United States, Australia and the European Union – are also projected to slow down this year as the premium in overseas prices versus domestic prices narrows, chief executive Vladislav Soloviev of the Moscow and Hong Kong-listed firm told the South China Morning Post.

“Rusal estimates that [global] aluminium consumption will grow by 5.7 per cent to 59.5 million tonnes this year,” he said in exclusive written comments to the Post. “Chinese growth is expected to continue to be strong at 7 per cent year-on-year in 2016 to 31 million tonnes.”

Soloviev expects the transportation sector that covers automobile and aviation equipment to continue to lead demand growth, followed by the construction, electrical, consumer durables and packaging sectors.

On the supply side, the projected increase in net capacity addition in China could be more than offset by plant closures elsewhere, he said.

“We see no new significant capacity additions over the next five years outside China, with [the supply] deficit forecast to [rise] sharply in 2016 and expected to surpass 2.4 million tonnes this year,” Soloviev said.