Alcoa reaffirms aluminium demand forecast, lowers surplus forecast

Alcoa Inc., the largest U.S. aluminium producer, maintained its forecast for global consumption of the metal.

Demand is set to climb by 6.5 percent this year, New York-based Alcoa said in its third-quarter earnings statement. That matched the company’s prediction in July. Analysts at Morgan Stanley forecast 6.9 percent aluminium demand growth, attributing light-weighting of automobiles as a key driver.

While Morgan Stanley forecasts a 2016 surplus of 1.18 million metric tons, Alcoa sees the market shifting to a deficit. The company narrowed its 2015 surplus forecast to 551,000 tons from 762,000 tons in its second-quarter earnings presentation.

The company lowered its China consumption forecast to 9.3 percent in 2015, from 9.5 percent. It still expects global aluminium demand to double between 2010 and 2020.

Aluminium surplus forecast lowered on China supply

Alcoa lowered its forecast for the 2015 global aluminium surplus to 551,000 tonnes from its second-quarter estimate for a 762,000-tonne surplus. It said it expects an aluminium market deficit in 2016, though it did not specify how much.

The decline in the expected 2015 surplus came as Alcoa lowered the amount of new smelting capacity it expected to come online in the rest of the year in both China and the rest of the world, as weak aluminium prices force producers to delay maintenance and scale back planned capacity upgrades.

Chief Financial Officer Bill Oplinger told investors the lower surplus projection was "primarily due to the effect of the executed Chinese curtailments and the slower launch of greenfield smelter projects in China."

The company expected Chinese supply to total 31.1 million tonnes, down from 31.4 million tonnes the last quarter, and said supply in the rest of the world would be 26.819 million tonnes, down from its forecast for 26.844 million tonnes in the prior quarter.

Oplinger added that while China's exports of "fake semis", or metal exported as semi-fabricated to evade export taxes only to be re-melted later, continued to fill the primary aluminium deficit in the rest of the world.

However, Chinese semi-fabricated exports fell 21 percent between the second and third quarter, Oplinger said, as continued weakness in regional premiums paid on top of London Metal Exchange prices for physical delivery reduced the attractiveness of exporting fake semis.

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