World Aluminium Consumption¨C Australian DIIS

Australia’s Department of Industry, Innovation and Science’s Resources and Energy Quarterly December 2019 said “Global aluminium consumption fell by 6.2 per cent year-on-year in the September quarter of 2019, to nearly 16 million tonnes. Both trade tensions between the US and China, and slowing global economic growth have resulted in softer demand for aluminium. China consumed 9 million tonnes of aluminium in the September quarter, a fall of 6.8 per cent year-on-year. Over the September quarter, sales in the Chinese automotive sector (one of the country's largest aluminium consumers) fell by 5.5 per cent year-on-year to 5.3 million units. The fall in car sales in China was due to the withdrawal of government subsidies for cheap and low quality new energy vehicles, hybrids and electric cars. Global industrial production, a leading indicator for aluminium demand is forecast to increase at a slower pace, averaging annual growth of 1.0 per cent in 2019. As a result global aluminium consumption is estimated to fall by 3.8 per cent in 2019 to 63 million tonnes. World alumina usage declined by 3.0 per cent year-on-year in the September quarter 2019 to over 29 million tonnes, driven by lower global aluminium production (down by 2.2 per cent year-on-year). Aluminium output in China fell by 3.6 per cent year-on-year in the September quarter of 2019 as concerns about the trade tensions with the US discouraged Chinese aluminium smelters from raising output.

The return to full production of the Albras and Becancour aluminium smelters and new aluminium capacity additions from China, are expected to lift the demand for alumina in the December quarter of 2019. However, this expected growth in alumina usage is likely to be outweighed by the negative impact of the US-China trade tensions. As a result, world alumina demand is estimated to fall by 0.8 per cent in 2019 to 120 million tonnes. World bauxite usage rose by 4.4 per cent year-on-year in the September quarter to 84 million tonnes, propelled by increased global alumina production (up 4.3 per cent year-on-year). The growth was driven by the resumption of full production at the Alunorte alumina refinery in Brazil and the production ramp-up at the 4 million tonnes per year Al Taweelah alumina refinery in the UAE. New aluminium capacity fuels increased demand for alumina and bauxite World primary aluminium demand is forecast to fall at an average annual rate of 1.2 per cent in 2020 and 2021 to 82 million tonnes by 2021. New energy vehicle sales in China are expected to fall over the outlook period following the Chinese government's decision to sc3le-back electric vehicle subsidies in March 2019. Outside of China, economic uncertainties are expected to discourage consumers from purchasing vehicles. In the US, higher vehicle prices (driven by higher import tariffs) and weaker consumer confidence are expected to negatively impact consumer demand for vehicles. World alumina consumption is forecast to increase at an average annual rate of 0.9 per cent in 2020 and 2021 to reach 121 million tonnes by 2021. Alumina demand is driven by primary aluminium production, which is forecast to increase at an average annual rate of 3.8 per cent between 2020 and 2021. Despite slowing economic growth, China is expected to remain the world's largest (and growing) source of aluminum demand, accounting for 58 per cent (or 69 million tonnes) of world alumina demand in 2021. US demand is expected to rise gradually over the outlook period. Russia. India and the UAE are also expected to remain large sources of demand. World bauxite consumption is forecast to rise at an average annual rate of 5.7 per cent in 2020 and 2021 to nearly 340 million tonnes by 2021 driven by new alumina capacity in China and Indonesia.

WORLD PRODUCTION

World production of aluminium, alumina and bauxite to rise in 2019 World aluminium production decreased by 2.2 per cent year-on-year in the September quarter of 2019 to nearly 16 million tonnes, due to lower output in China. Production in China decreased by 3.6 per cent year-on-year over the same period to nearly 9 million tonnes. There were unexpected outages in the sector, due to flooding at Hongqiao's aluminium smelter in Shandong Province, and an explosion at Xinfa's aluminium smelter in Xinjiang region. Trade tensions with the US and the Chinese government's stricter environmental regulations have put a brake on production growth in China.

Global aluminium supply is estimated to increase by 0.4 per cent in 2019, to reach 65 million tonnes. The rise is expected to be driven by increases in Chinese aluminium capacity, originating from the ramp-up of new aluminium smelters. These include the 500.000 tonnes per year East Hope Guyang aluminium smelter, and the 300.000 tonnes per year Guangxi Baikuang Bose-Wenshan aluminium smelter. To offset slowing economic growth, the Chinese government has softened production cut enforcements with no official production cut targets for the 2019-20 winter season, 360.000 and 600.000 tonnes per annum of smelting capacity were cut in the 2017-18 and 2018-19 winter periods. The softening stance on environmental protection is likely to increase China's aluminium output, which is forecast to grow by 5.0 per cent year-on-year in the December quarter of 2019. World alumina supply rose by 4.3 per cent year-on-year in the September quarter, to nearly 31 million tonnes. The Alunorte alumina refinery in Brazil operated at half of its 6.3 million tonne per annum capacity between March 2013 and June 2019. due to restrictions imposed by Brazilian environmental authorities amid concerns of water contamination. The refinery's return to full production is expected to bring three million tonnes per year of alumina capacity back online. The two million tonnes per year Al Taweelah alumina refinery in the UAE has produced 600.000 tonnes of alumina since commencing production in April 2019. It is expected that Al Taweelah will produce another 400.000 tonnes by the end of the year, bringing its production for 2019 to around one million tonnes. As a result, world alumina supply is estimated to rise by 4.5 per cent in 2019 to 120 million tonnes. World bauxite production increased by 4.4 per cent year-on-year in the September quarter to nearly 84 million tonnes, propelled by an 8.0 per cent rise in bauxite production in Australia. the world's largest bauxite producer. The addition of new capacity at Rio Tinto's Amrun bauxite project and Metro Mining's Bauxite Hills project in Queensland contributed to higher output in Australia.

World bauxite production is estimated to increase by 5.5 per cent in 2019 to 346 million tonnes, driven by the production ramp-up at the Amrun bauxite project in Western Australia. Aluminium Corporation of China's 12 million tonnes a year Boffa bauxite mine in Guinea is expected to start production in December 2019. World production of aluminium, alumina and bauxite to continue to rise World aluminium production is forecast to rise by 3.6 per cent in 2020 and by a further 4.0 per cent in 2021. to reach 70 million tonnes in 2021. The gains will be driven by new additional capacity from China, Iran and Indonesia. In China, Baoshan Iron and Steel is expected to test production at its 300.000 tonnes per year aluminium project by mid-2020. Inner Mongolia Mengtai Group commenced construction of its 200.000 tonnes a year aluminium alloy project in June 2019. Phase one capacity of 100.000 tonnes is expected to come online in 2020. Iran is implementing its plan to increase its annual aluminium production to 1.5 million tonnes by 2025 with the 300.000 tonnes per year SALCO aluminium smelter due to commence production in 2020. In July 2019, PT Indonesia Asahan Aluminium (Inalum) announced plans to increase production at the Asahan aluminium smelter in Indonesia from 250.000 to 2.0 million tonnes per year by 2035. World alumina production is forecast to increase by 0.3 per cent in 2020 to 121 million tonnes and by a further 1.8 per cent in 2021 to reach 123 million tonnes. The growth is expected to be driven by China, India and Indonesia. In India, with improved bauxite sourcing, Vedanta is planning to increase production capacity at its Lanjigarh refinery to 2.7 million tonnes in the short term and to 6.0 million tonnes in the medium term. In China, the Qiya Aluminium Group's 2.4 million tonnes per year Qiya Linfen alumina refinery is expected to commence production in 2020. In Indonesia, the 1.2 million tonnes per year joint-venture Mempawah alumina refinery project (Chaleo from China and two local Indonesian companies) is expected to come online in 2020. World bauxite production is forecast to increase by 8.5 and 2.1 per cent in 2020 and 2021. to 376 and 384 million tonnes, respectively.

The gains are expected to be driven by newly added capacity in Australia, the world's largest bauxite producer, and Guinea. With a growing investment pipeline, Guinea is likely to overtake China as the world's second largest bauxite producer by the end of the outlook period. The Malaysian government is expected to issue bauxite mining licences to local mining companies in January 2020. The decision m3rics a full resumption of bauxite mining activity in Malaysia, after a mining ban was put in place in early 2016 over unregulated mining and water contamination. Before the ban, Malaysia produced over 24 million tonnes of bauxite in 2015. and accounted for 8.4 per cent of global bauxite output.

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