Aluminium demand decelerates dramatically, but still growing

Chinese demand for primary aluminium is forecast to continue to increase next year, despite the global downturn, although at a very much reduced rate in comparison with demand last year.

China is the world¡¯s top consumer of primary aluminium and this prediction comes from Chinese State-owned research group Antaike, which says that the country¡¯s consumption of the metal will rise by 3% in 2009.

This, however, is in comparison with the research group¡¯s forecast of an increase of 8,5% for this year and in dramatic contrast to an increase of more than 30% in 2007.

Chinese aluminium consumption is expected to reach 13-million tons this year, rising to 13,4-million tons in 2009.

However, Chinese aluminium production capacity will have increased by almost 20%, to 18,2-million tons. The result is that, even with production cuts at Chinese smelters ¨C according to Wang, these cuts could amount to some 1,5-million tons by the end of this year ¨C there will still be a surplus in the Chinese market.

There are also signs that China¡¯s aluminium sector is being consolidated. Last week, it was reported that mining giant Rio Tinto was considering selling its 50% share in a joint venture (JV) with Chinese smelter Qingtongxia Aluminium, in order to raise cash to help it deal with its $40-billion debt burden. Rio has promised to raise $15-billion from asset sales but has so far realised only $3-billion.

Qingtongxia is owned by the Ningxia provincial government, and the JV operates an aluminium smelter with a capacity of 150 000 t/y, which amounts to about 25% of the Qingtongxia¡¯s total capacity. Rio inherited the JV as a result of its acquisition of Canadian aluminium group Alcan, last year.

It is believed that Qingtongxia will be the likely buyer of Rio¡¯s share of the JV, which will allow the Chinese company to consolidate its assets, prior to its reportedly planned sale by Ningxia province to the (national) State-owned China Power Investment Corporation, which will then become the country¡¯s second-biggest aluminium producer, after Chalco.

The decelaration in Chinese aluminium demand will, naturally, affect China¡¯s alumina production. Antaike expects the country¡¯s alumina production to have increased by 21% this year, to 24,6-million tons. Last year, alumina production rocketed 50%; in 2009, it is forecast to inch up 1,8%, to 25-million tons.

Meanwhile, the Chinese province of Yunnan has announced that it will buy one-million tons of metal concentrates, in a programme which could cost about $3-billion, to support local producers, who have been hit by the fall in demand and the concomitant fall in prices.

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