Rusal to keep production volumes low despite high aluminum prices

 Russian-UC Rusal- the world’s largest aluminum company has announced to keep its production below capacities during the rest of the year, despite rising aluminum prices. The company plans to restrict its cumulative aluminum output to 1.8 million mt during July-December period this year. The mills will run at less than 80% of their capacities, Rusal announced.

The company expects aluminum prices to remain positive in the second half of the year. The premiums are also likely to improve. However, Rusal notes that world aluminum producers are seen unwilling to boost production due to several cost factors including power tariff hikes, labour issues and raw material costs. The company plans to persist with the cost-effective production controls. It had implemented a series of production cuts at high cost smelters during the first half of 2014.

The company announced that it will stay away from restarting idled capacities or expanding current facilities. The launch of Boguchansky smelter too is delayed, the company stated.

According to data, primary aluminum ingot, billet, slab and foundry alloys production by Rusal during H1 2014 had totaled 1.7 million mt, down almost 11% when compared with the corresponding six-month period in 2013. The company estimates the full year production for 2014 to reach 3.5 million mt, down nearly 9% when compared with the annual production of 3.5 million mt in 2013.

Aluminum Warehousing Antitrust Suits Dismissed by Judge

Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM), Glencore Plc (GLEN)and other firms won dismissal of lawsuits accusing them of restricting aluminum supplies in a conspiracy to drive up prices.

U.S. District Judge Katherine B. Forrest today threw out the antitrust claims by buyers of aluminum and aluminum products, finding they hadn’t shown the defendants acted together to increase prices.

The complaints filed by the aluminum purchasers showed that “this was an unintended consequence of rational profit maximizing behavior rather than the product of conspiratorial design,” Forrest said in her written opinion.

Forrest also ruled that a group of commercial and consumer end-users of aluminum lacked the legal standing to make their antitrust claims, saying they can’t refile them. She gave the other plaintiffs in the case permission to try to file new complaints.

Today’s ruling doesn’t affect a group of antitrust claims targeting alleged price-fixing in the gold and silver markets. In those cases, plaintiffs claim banks manipulated a benchmark used to set prices throughout the gold and silver markets.

Dozens of makers of porch screens, flashlights and other products that contain aluminum sued beginning in August 2013 over claims the metal was being hoarded in Detroit-area warehouses, triggering delays of as long as 16 months in filling orders. Forrest said today that price increases were the unintended result of traders and warehouses trying to maximize their own profits.

Forrest dismissed claims this week against the London Metal Exchange on the ground that it functions as an arm of the U.K. government and is protected by sovereign immunity.

bloomberg.com

Aluminum Trades Near 18-Month High as U.S. Outlook Improves

Aluminum traded near an 18-month high on speculation demand is rising amid signs a recovery is gathering pace in the U.S. and before data forecast to show the country’s economy expanded for the second quarter.

The metal in London was little changed after rising 1 percent yesterday. The U.S. economy grew 3.9 percent in the three months through June, according to a Bloomberg survey of economists before government data tomorrow. Orders for goods meant to last at least three years climbed by a record 22.6 percent in July, the Commerce Department said yesterday. Consumer confidence unexpectedly rose in August to the highest level in almost seven years, a separate index showed.

Aluminum for delivery in three months on the London Metal Exchange was at $2,084 a metric ton, up 0.1 percent, at 8:38 a.m. in Hong Kong. It closed at $2,083 yesterday, the highest since February 2013. Also on the LME, nickel fell while copper was little changed. Lead, zinc and tin price unchanged .

Russia's Rusal back in black as aluminium market moves into deficit

* Q2 recurring net profit climbs to $129 mln

* Core earnings jump 26 pct but miss forecasts

* Rusal sees aluminium market moving into deficit

* Rusal shares up 73 pct this year (Adds CEO comments)

MELBOURNE, Aug 27 (Reuters) - Russia's United Company Rusal Plc returned to profit in the three months to June for the first time in five quarters due to higher aluminium prices, cost cuts and smelter closures, and forecast further gains.

The aluminium giant, which last week completed a restructuring of $5.15 billion in debt and has no payments due until January 2016, said it expects its margins and profits to improve in the second half of the year.

"In the first half of 2014, we witnessed some important trends which signaled that the global aluminium industry has turned a corner," Chief Executive Oleg Deripaska said in a statement on Wednesday.

Aluminium prices have jumped 24 percent off a 4-1/2-year low hit in February. Global demand increased by 6 percent to 27 million tonnes in the first half of this year, while producers outside China have cut output, Deripaska said.

Premiums that aluminium buyers pay over London Metal Exchange prices have also increased to record levels this year, with Rusal seeking a premium of $460 per tonne for shipments to Japan in the December quarter, three sources told Reuters ahead of quarterly price talks.  

For the September quarter, Japanese buyers mostly agreed to pay a record premium of $400-408 a tonne PREM-ALUM-JP.

Rusal's recurring net profit, defined as adjusted net profit plus the company's share of Norilsk Nickel's earnings, jumped to $129 million for the June quarter, up from a loss of $203 million a year earlier.

Core earnings jumped 26 percent to $220 million, but that missed analysts' forecasts for earnings before interest, tax, depreciation and amortisation (EBITDA) of $255 million, according to a Reuters poll of six brokers.

Rusal, which has a primary listing in Hong Kong and secondary listings in Paris and Moscow, said it expected EBITDA to top $600 million in the second half of this year at current aluminium prices.

"Looking at the rest of the year, we expect the LME spot aluminium price to remain around its current level and view potential upside for physical premiums," Deripaska said.

Rusal said it expected a global supply deficit of 1.5 million tonnes in the global aluminium market this year.

Rusal's shares have surged 73 percent this year on the back of the rebound in aluminium prices and a sharp jump in nickel prices. Rusal owns a 28 percent stake in Russia's Norilsk Nickel.

Aluminum Falls From Six-Month High on China PMI Data

Aluminum in London retreated from a six-month high as industrial metals declined after worse-than-expected manufacturing data from China, the biggest consumer.

The contract for delivery in three months on the London Metal Exchange dropped as much as 0.5 percent to $2,066 a metric ton and was at $2,072 at 10:20 a.m. in Hong Kong. Prices closed at $2,076 yesterday, the highest since Feb. 20. Copper fell 0.2 percent to $6,995 a ton.

A gauge of Chinese manufacturing from HSBC Holdings Plc and Markit Economics showed a preliminary August reading of 50.3, trailing all 22 estimates in a Bloomberg News survey of economists. The measure dropped from 51.7 in July and was the lowest since May. The index followed data last week that showed a slump in credit growth and slowdown in industrial output.

Signs of a slowing economy in China “will dampen sentiment,” said Helen Lau, a Hong Kong-based analyst at UOB Kay Hian Ltd. “This will affect the demand for metals.”

Copper for December delivery fell 0.5 percent to $3.1825 a pound in New York, while the metal for delivery in October advanced 1.2 percent to 50,130 yuan ($8,155) a ton in Shanghai, rising for a fourth day.

On the LME, lead dropped for the first time in five days. Nickel, zinc and tin also fell.

Zinc and Aluminum Rise on Signs U.S. Demand Will Quicken

Aluminum and zinc rose in London as a jump in home building fueled speculation that demand will accelerate in the U.S., the world’s second-biggest consumer of industrial metals.

Housing starts surged in July to the highest in eight months, U.S. government data showed today. Yesterday, a private report showed confidence among home builders rose in August to the highest in seven months. Zinc goes into household products including brass plumbing fixtures, while aluminum is used in window frames and other building components.

“Two days in a row of decent housing and building numbers is pretty good, especially for a base metal like zinc, which is used in galvanized steel,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “That’s a big part of demand.”

Zinc for delivery in three months climbed 0.9 percent to $2,302 a metric ton at 5:50 p.m. on the London Metal Exchange. That’s the biggest increase since Aug. 12.

Aluminum for three-month delivery gained 1 percent to $2,039 a ton. The metal also advanced 1 percent yesterday.

The fee to borrow aluminum for a day in London reached $9 a ton, the highest since December 2012. The construction industry accounts for 20 percent of world usage, according to United Co. Rusal, the largest producer.

Aluminum for immediate delivery closed yesterday at a $1.25-a-ton discount to the three-month contract, the smallest gap since Dec. 17, 2012. Stockpiles monitored by the LME are at the lowest since September 2012.

Novelis the driving force behind Ford's aluminum trend

Novelis, a global aluminum supplier, is seeing a 45-year-old dream come true as the auto industry is on the cusp of making the lightweight material mainstream.

Novelis is supplying aluminum for the 2015 Ford F-150 that goes on sale later this year. The supplier is expanding its Oswego, N.Y. plant, for a third time and Ford can use everything it can make.

For 40 years prior to 2009, the amount of aluminum on vehicles increased by about seven pounds a year, said Tom Boney, a general manager for Novelis North America. 

First it was hoods, then doors and liftgates. A few luxury automakers were bold enough to offer aluminum frames and body panels on selected models. But when it came to the full body, steel remained the metal of choice.

“We just kept plugging away,” Boney said. “We were always the bridesmaid, never the bride.”

There were times when the executives thought a breakthrough was nigh. For example, Novelis worked with Ford on an aluminum Taurus in the 1990s.

“We thought it would be it,” Boney said. But it was not to be.

So when Ford and Novelis started talking in 2009 — facilitated by Novelis CEO Phil Martens, a former Ford executive, and Ford’s former CEO Alan Mulally’s knowledge of aluminum from his time at Boeing — the aluminum F-150 evolved from dream to reality.

Ford makes about 700,000 F-150s a year and starting with the next-generation light-duty truck they will all have aluminum bodies. With reports that General Motors’ next generation of pickups, Chrysler’s next Jeep Wrangler and maybe Ram pickup could all shift to aluminum, Novelis is positioned well for the industry’s next big trend.

Like most overnight successes, it was years in the making.

“It has been a 40-year journey for the aluminum industry,” Boney said.

By 2025, 18% of all vehicles will have all-aluminum bodies compared with less than 1% now, according to a recent report from Ducker Worldwide, which examines material trends.

Pickups are leading the charge, partly because they must achieve big improvements in fuel economy in the next decade. Ducker estimates by 2025, 70% of pickups will be aluminum intensive.

Drilling down into Ducker’s data, 46% of doors will be made of aluminum by the middle of next decade, up from 3-5% now; and 85% of hoods, more than double today’s 35%.

“It’s a pretty exciting time and with the alloys we have, we don’t think we’ve arrived yet” at the best alloys for future weight reductions, Boney said.

Novelis has taken a giant step with the development of a military grade alloy that can be produced in high volumes.

The unique alloy was developed specifically for the auto industry, said Todd Summe, Novelis director of automotive technology.

Novelis is already working on its next set of aluminum vehicles for 2019. Neither Boney nor Summe would confirm they are the GM trucks.

Summe said future vehicles will have an even greater mix of materials, including layers of different alloys, gauges and thicknesses in a single component.

To meet the growing demand, Novelis has quadrupled its potential production and hired almost 1,000 people at its Oswego plant. There are two lines now and construction began in June on a third line to be ready next year. It will bring North American capacity to 400,000 metric tons a year and represents an investment of about $500 million in recent years.

“All that capacity was installed on known purchase orders,” Boney said, “so we are all sold out.”

But if more customers commit to broader aluminum use, “we are able to step up to the challenge.”

Recycling is also key. Novelis will sell coils of aluminum to Ford. As much as 50% becomes waste in the stamping process. Ford will save the scrap, separate it by alloy and give it back to Novelis to use in producing new coils.

Novelis has a target of using 80% recycled aluminum by 2020 through relationships like the one with Ford, up from 43% last year, said Summe.

The Novelis executives are not worried that truck buyers will shy away from the F-150 and deflate the momentum aluminum is picking up.

“Ford has done its homework and the industry has done its work.” Boney said.

Summe agrees.

“Our confidence level is very high,” he said.

EU Aluminum Can industry shows stronger growth during 2013 as exports up

Over the past decade the total beverage can market in Europe further increased and is now well above 50 billion cans per year. The aluminium share rose steadily and today more than 70% of all beverage cans consumed in Europe are made of aluminium.

As per Beverage Can Makers Europe study, last year was a good year for aluminium cans, as some 60 billion were produced throughout Europe for growth of 3% compared to 2012. Nearly 20% of Europe's beer market relies on aluminium as a packaging material. This was only 14% at the start of the century.

"The strong growth in aluminium cans exports is believed to have been a main factor in the can production increase. This positive momentum is hailed as a clear sign that leading soft drinks producers and breweries have become aware of the advantages of aluminium cans. They are increasingly popular as they can be easily filled and may be recycled infinitely," said Carine Lemmens, Chairman of BCME Benelux.

"The continual improvement in recycling rates across Europe is further confirmation that consumers are responding well to industry programmes which promote a recycling culture such as Every Can Counts," said Welf Jung, marketing committee chairman of BCME.

Restricted supply to keep Aluminum prices elevated in Q3 2014

The Quarterly Analysis and Forecast report on Aluminum published by FastMarkets and Sucden Financial forecasts elevated prices and premiums during the third quarter of the current year primarily on account of restricted supply of the metal.

According to the report, the downward trend in Aluminum has ended in early-February this year when the prices touched the bottom of $1,671.25 per tonne. Since then, the prices have been moving in an upward trend. The trend is expected to sustain during Q3 2014. However, forward selling by marginal producers are likely to keep the prices capped in the range of $2,000 per tonne.

The effect of closure of existing facilities is likely to be offset by the new capacities in the Middle East region. Some local governments in China too are seen focused on restarting idled capacities. The production from China will remain surplus, but those from Western countries are likely to drop. The Indonesian export ban, if persists, may affect aluminum production as Chinese bauxite stockpiles are expected to get depleted by early-2015. However, the impact of this will be seen only in 2015, FastMarkets states.

The report also states that aluminum demand will remain robust during the quarter. The metal is expected to win more market share from copper and galvanized steel. It also rules out risk of aluminum shortage in the medium term. Also, the production is expected to remain price-elastic.

Novelis hikes aluminum sheet product prices in North America

Novelis has announced price hikes for automotive and specialty aluminum sheet products in North America. The revised prices will be applicable for all new orders effective immediately, Novelis added. However, all existing orders and firm agreements prior to August 7th will conform to old price.

Among automotive products, the 6000-series automotive alloys will see an increase on $0.06 per pound. The 5000-series automotive alloys prices will witness a similar jump of $0.06 per pound. Among specialty products, the prices of 1000-series and 3000-series of alloys will be hiked by $0.05 per pound. An increase of $0.03 per pound will be applied to 5000-series products. Also, 6061-O prices will be increased by $0.03 per pound. The price increase in automotive products is in addition to the pricing adjustments announced earlier in January this year.

The company also announced its commitment to the promised capacity additions and expansion in North American region. It has already commissioned two new auto finishing lines in Oswego, New York. The completion of the third line is expected soon. This is expected to lift the company’s capacity in the region to 360,000 tons per year. It also announced that the commissioning of the finishing lines in Changzhou, China and Nachterstedt, Germany would take the global capacity to 900,000 tons per year by end-2015.

Headquartered in Atlanta, Georgia, Novelis Inc. is the leading producer of rolled aluminum products. They are also the world’s largest recycler of aluminum.

MCX-aluminium (₹122.5): BUY

The aluminium futures contract traded on the Multi Commodity Exchange (MCX) has been going through a strong uptrend since May. The contract has risen some 21 per cent from its low of ₹101.25/kg recorded in May. A fall in global production coupled with an increase in demand for the metal has helped this commodity to vault higher.

On the global front, the spot price of aluminium on the London Metal Exchange has surged 15 per cent from its May low of $1,714 a tonne to $2,013. The outlook is bullish with strong support at $1,850.

A rally to $2,100 in the short-term and $2,200 or may be even higher levels in the medium-term looks likely now. The MCX-aluminium which moves in tandem with the global price is also expected to rise. This offers a good buying opportunity in MCX-aluminium for traders.

Short-term view: The short-term trend in the MCX-aluminium futures contract is up. The price action between July 22 and July 30 suggests a formation of a bull flag pattern within the overall uptrend.

The sharp rise on Monday signals the beginning of a new leg of up move in the contract. Immediate supports for the contract are at ₹122 and ₹120.5. While the contract trades above these support levels, there is no immediate downside threat.

Traders with a short-term perspective can initiate fresh long position at current levels. Stop-loss can be kept at ₹120 for the target of ₹128.

The 21-day moving average at ₹119 is a key short-term support for the contract. The outlook will turn bearish only if the contract records a strong close below this level. The ensuing target in such a scenario will be ₹117.

Medium-term view: The medium-term outlook is bullish for the MCX-aluminium futures contract.

The strong down-trend that was in place since August 2013 has got reversed decisively.

Additionally the contract has breached an important trend-line resistance at ₹122 this week. A strong weekly close above this level this week could reinforce the bullish momentum.

Key medium-term support for the contract is at ₹114.

A rally to ₹132 looks likely in a medium-term time frame. The outlook will turn bearish if the contract declines below ₹114.

In such a scenario the contract can decline to test ₹102.

hindubusinessline

Novelis anticipates to double the production within 2018

Company states that, it is to increase its production in North America from about 50,000 tons of automotive aluminum in 2013 to 260,000 tons in 2014. By 2015 the production will be increased up to 365,000 tons. The reason behind the increase in production is because; Novelis is now the distributor of Ford automotive models including the Ford-150 pick up truck.

Tom Boney, the General Manager of North American branch of Novelis says that even though the demand is very much rugged, the company is increasing the production to its full capacity.

Novelis is now at last facet of expansion worth 500 million dollars at its aluminum plant in Oswego, New York. Novelis has announced their project to recycle the scrapped aluminum Ford Motor Co.’s stamping and scrapping plant as it will help to regain the 40% of aluminum being lost in the process of scrapping and other manufacturing processes. 

 Both Novelis and Alcoa; the leading rivals of Novelis, have made investments in their respective North American Branch in order to supply for the production of to be launched Ford-150 pickup truck.

As the automotive producers are about to cut down the weight of vehicles in order to reach their estimated CAFÉ targets, Novelis hopes that 70% of pickups will have aluminum bodies, and 80 % of hoods and 45% of doors will be made of aluminum. 

Aluminium to swing to deficit in 2015 after output cuts, ban

* Strong demand seen from U.S. auto industry

* Stock overhang expected to weigh on prices

* Premiums remain at record highs around $450/T duty-paid

LONDON, July 31 (Reuters) - The aluminium market outside China is set to record its first deficit in nine years in 2015 following production cuts and an Indonesian ore export ban, a turning point that could be the start of a prolonged shortfall as demand recovers.

After years of chronic oversupply, the market is beginning to tighten as producers cut production to battle rising costs, Indonesia bans bauxite ore exports and demand for aluminium rises, particularly from U.S. auto makers.

Analysts say the market could remain in deficit beyond 2015 but that historically high global aluminium inventories are likely to prevent much of a rise in prices.

The consensus forecast in a July Reuters poll was for a 444,000 tonne deficit in 2015, which would be the first market deficit since 2006, according to Thomson Reuters GFMS. 

"This is a market in massive structural surplus, though the physical market has moved into deficit," said Stephen Briggs, senior metals strategist at BNP Paribas.

"The deficit could be quite prolonged, but it needs to be. There's an awful lot of hidden inventory, not just in China but in the West, in financing deals and in warehouses."

Estimates of aluminium inventory outside China are at around 12 million tonnes. In LME-registered warehouses alone, stocks amount to nearly 5 million tonnes, although they have fallen by around 9 percent since the beginning of the year.

In China, the market is still in surplus, but that is expected to shrink due to the closure of some 2 million tonnes of aluminium capacity at high-cost smelters.

Outside China, producers have cut back as low prices and high costs erode margins. Daily average aluminium output fell to 67,000 tonnes in June from 67,500 tonnes in May, according to the latest data from the International Aluminium Institute.

Highlighting reduced output, Russia's United Company Rusal <0486.HK>, the world's largest producer, said in May its first-quarter primary aluminium production declined by 2.3 percent. 

Benchmark London Metal Exchange (LME) aluminium prices hit a 17-month high of $2,054.75 a tonne last week and have gained nearly 12 percent in the year to date. But the metal is still down around 30 percent from a May 2011 peak of almost $3,000.

"We think an all-in price of around $2,500/T will be needed to incentivise restarts of high-cost smelters in Europe and Brazil, and thus current curtailed capacity of around 1 million tonnes per annum there is unlikely to come back anytime soon," Macquarie analysts said in a note.

In contrast to cutbacks in the West, smelters in the Middle East and India are expected to ramp up production, in a move that could help ease some of the tightness in the market.

The United Arab Emirate's Emirates Aluminium is expected to add production of 449,000 tonnes this year and the Saudi Arabian Mining Co <1211.SE> 330,000 tonnes, according to Macquarie.

STRONG SHAPE

A major factor driving the deficit view is a bullish outlook for the demand, particularly from the automobile industry as it moves to produce lighter, more energy-efficient vehicles.

Ford Motor plans to launch a new aluminium-intensive truck this year, and aluminium firms have announced plans to build plants to fabricate sheet for automakers, whose names have mostly not been disclosed.

"In the automotive sector you see a clear advantage for light metal," said Svein Richard Brandtzaeg, chief executive of aluminium producer Norsk Hydro , adding that the aluminium market was in its strongest shape since 2008/09.

"There are new efficiency rules in the U.S market and EU regulation on carbon emissions. We see that U.S. (demand) is growing faster than Europe."

European aluminium traders said they are seeing a rise in enquiries for material at a time of year that is usually quiet as the western hemisphere traditionally winds down for summer.

The stronger demand, combined with restricted access to the metal, has helped keep European aluminium premiums, or costs to obtain physical metal, at record highs of around $450 a tonne for duty-paid material.

Financing deals and logjams in accessing metal from LME-registered warehouses have helped underpin premiums, with wait times to get metal backlogged by two years at warehouses in the Dutch port of Vlissingen, which holds more than 2 million tonnes.

"The rise in premiums has helped the all-in price improve from the first to second quarter. That's a big plus to the producers," an aluminium trader said.

"There's scope for premiums to rise. Material is still stuck in queues, and demand is pretty strong at the moment."

Robust copper price prompts switch to aluminum

In New York trade on Wednesday copper rallied after much stronger than anticipated US GDP figures, reaching a high of $3.2625.

Defying market expectations, the copper price dug itself out of a near four-year low struck mid-March of $2.92 a pound and has gained more than 7% since early June. The metal is now down only 4% in 2014.

The copper price is highly correlated with economic growth thanks to the widespread use of the metal in the construction, transport and power industries, and the robustness of the red metal is prompting industry to switch to much cheaper aluminum for some applications.

Primarily recovered from bauxite ore, aluminum was trading on par with copper in 2002, but while copper has quadrupled since then, the aluminum price has gone nowhere.

FT.com reports "demand for aluminium cable, especially in the power industry, is already rising at the expense of copper":

Even though aluminium cables require a thicker core of metal – and thus more insulation – the weak LME price means that the overall cost is still around 40 per cent lower than for copper cables, according to the French company Nexans, a leading cable producer.

It's a trend already established in China and Gulf states where only 25% of insulated and overhead cables use copper versus 60% in developed economies.

Aluminum Set for Longest Gain in a Decade as Demand Rises

Aluminum was poised for a sixth monthly advance, the longest rally in a decade, on speculation of growing demand from improving economies in China and the U.S., the two biggest consumers of industrial metals.

The contract for delivery in three months on the London Metal Exchange slid 0.3 percent to $2,016 a metric ton at 11:10 a.m. in Tokyo. The metal rose 2 percent yesterday, the most since July 2. Prices are up 6.6 percent this month, the biggest gain since November 2012.

The U.S. economy rebounded more than analysts estimated in the second quarter, growing by an annualized 4 percent. An official gauge of China’s factory output due tomorrow is forecast to show the highest reading this year at 51.4, up from 51 in June. A separate measure from HSBC Holdings Plc and Markit Economics is expected to come in at 52. Numbers above 50 indicate expansion.

“There’s no doubt that sentiment in the metals space is improving,” said Gavin Wendt, founder and senior resource analyst at Sydney-based Mine Life Pty. “The only issue is ensuring that markets don’t get too carried away in the near-term, which means that we will see short-term corrections in price.”

Aluminum, used in everything from aircraft to beer cans, entered a bull market last week. Global demand will exceed supply by 579,000 tons this year, swinging into a deficit after sevens years of surplus, Goldman Sachs Group Inc. said in a report on July 23.

Copper in London fell 0.2 percent to $7,113.50 a ton. The metal is up 1.4 percent this month, a third monthly increase. In New York, futures for September dropped 0.3 percent to $3.2335 a pound, while copper for the same month on the Shanghai Futures Exchange climbed 0.5 percent to 50,560 yuan ($8,190) a ton.

On the LME, zinc fell, while lead, nickel and tin were little changed.

50 Years Old Point Henry Aluminium Smelter to Shutdown Tomorrow

The Point Henry Smelter will close its operation tomorrow after functioning for more than 50 years as an aluminium smelter. The smelter is located near Geelong, Victoria, in the suburb of Moolap.

It is a joint venture between Alcoa World Alumina and Chemicals Australia.

Alcoa has already announced the decision to close the smelter and two rolling mills at Geelong and Yennora due to the pressure caused by the increased Chinese aluminium production and the high value for Australian dollar. As they found it to be economically unviable, Alcoa decided to take the decision of plant closure.

The smelter closure will cause job loss to about 500 employees and 480 employees in the rolling mills. Geelong region is now facing some economies hard times. Ford’s car making center of Geelong will also close down its operations in 2016. The aluminium plant is powered by Anglesea coal mine and power station. 

Aluminium Production Shows Slight Decline, Still Close To All Time Highs: IAI

International Aluminium Institute (IAI) stated that world aluminium market has showed again a slight decline in production. But, rising demand for aluminium made some relief in the month of June and that was close to all time highs.

IAI data showed that the production of primary aluminium in the month of June 2014 was about 4.303 million tonnes and that of May was about 4.331 million tonnes. Even though, it reported a slight decline, when calculating on year-on-year basis production figures have some improvements. It says that the aluminium production increased 1.8 pct on YoY basis in the month of June.

In the month of March, the aluminium production figure was at record highs of about 4.406 million tonnes. June month production has gained by 1.8 pct of last year figure 4.224 million tonnes. China is the main contributor in world aluminium production by producing a total of 1.95 million tonnes in June. In China May month production was around 1.898 million tonnes.

This implies that the China shares 45.31 pct in the world aluminium production. On YoY, production in China has increased by 6 pct, when compared to 1.84 million tonnes produced in June 2013. The unreported Chinese aluminium production is estimated about 250000 tonnes.

In the month of June 2014, production in Asian countries including China was about 193000 tonnes, when compared to 203000 tonnes produced in May 2014. IAI also noted that the production in the GCC region has also reported an appreciation. The net aluminium production in GCC in June was about 412000 tonnes, increased by 26 pct from 327000 tonnes in June 2013. 

Will Aluminium continue its rising trend?

The aluminum market is now in the spot light, with both LME and SHFE aluminum surging recently. The question is will the rising trend continue?

On July 22, Shanghai Metals Market publishes an article analyzing the reason behind the gain. In recent two days, the light metal saw the rising momentum easing with profit-taking at highs, but positions remain, leaving further price increases possible.

On July 24, SHFE three-month aluminum prices are expected to test support at 14,000 yuan per tonne, with prices moving between 14,030-14,130 yuan per tonne, SMM foresees. In China’s physical market, price declines will be limited as SHFE current-month aluminum prices stay firm, with spot discounts expected between 60-20 yuan per tonne.

The followings are aluminum price estimates by major market participants.

HSBC's view on Aluminum
HSBC expects 2014’s average aluminum price at $1,875 per tonne, and raises the 2015’s average to $2,065 per tonne.

Sucden's view on Aluminum
Sucden estimates aluminum price to hit $2,050 per tonne in 3Q.

Norsk Hydro's view on Aluminum
Aluminum prices are expected to rise, Norsk Hydro foresees, adding global aluminum demand will increase by 2-4% outside China.

CNIA's view on Aluminum
Production in Chinese aluminum smelting industry will remain low, while conditions in the aluminum fabrication sector are expected to outperform that in aluminum smelters during the rest of the year, China Non-ferrous Metals Industry Association (CNIA) predicts.

Aluminum Hits Bull Market Target While Alcoa Stock Keeps Flying

The three-month LME aluminum price finally traded above $2,000/ton on Monday, hitting our target point. The move doesn’t come as a surprise to us. In June, we pointed out that the stock of aluminum-related companies, such as Alcoa, was skyrocketing due to high expectations on the future use of aluminum in automobile and aerospace sectors. Watching aluminum-related stocks rising while aluminum prices remained low was an uncommon divergence that we expected to converge at some point.

Since we pointed this out in June, Alcoa’s stock price has surged 20% and today it is at a three-year high. Meanwhile, aluminum prices followed up, reaching a 17-month high. The move looks very bullish and it seems that aluminum has plenty of room to go higher.

The move is not only supported by aluminum-related stocks. Industrial Metals also had a good half. Indonesia’s export ban and the closure of major zinc mines pushed  nickel and zinc prices higher so far this year. Aluminum is finally catching up with them and copper remains the laggard, but even it is showing some signs of life. Since industrial metals have historically moved in tandem, this grouped trend favors the continuation of aluminum on its way up with aluminum-related companies such as Alcoa.

What This Means For Metal Buyers

It looks like the aluminum bear market that started in 2011 has come to an end. Aluminum reached our price target on  Monday. We would suggest aluminum buyers be hedged as we would expect aluminum prices to trend upwards throughout the rest of the year.

Why Chinese Aluminum prices up during this low-demand season?

Aluminum prices are now gathering up the rising momentum due mainly to falling inventories, as per Shanghai Metals Market.

It is now the low-demand season, but aluminum stock declines have not slowed from those recorded during the peak-demand period.

Last Thursday, total inventories in Shanghai, Wuxi, Hangzhou, and Nanhai were 798,000 tonnes, down 42,000 tonnes on a weekly basis, according to SMM data.

SMM attributes the decline mainly to the drop in market supply after production halts or suspension, in addition to growing consumption of aluminum liquid and the shipment to regions with new fabricating capacity, such as Shandong, Henan, Hebei, Hubei, etc.

Over 2 million-tonne aluminum capacity has been cut so far this year, with complete shutdowns reported in May and June. More than one third of idled capacity is scheduled to be brought back online, but full resumption at the 700,000-tonne capacities in idled lines is not expected until August at the earliest, SMM learns.

Part of this is due to the difficulty in securing sufficient funds to support large scale restarts, and many smelters continue to struggle in loss-making territory. Besides, tight liquidity is also slowing the commissioning of new capacity, SMM believes.

The SMM recent survey of 34 large aluminum smelters and traders in China reveals 71% of them are bullish towards the outlook, expecting spot aluminum prices in China to rise to 13,900-14,000 yuan ($2,254-2,270) per tonne this week. The growth both in trading volumes and positions in SHFE aluminum market and few arrivals in spot market explain their optimism, the survey shows.

Source: Shanghai Metals Market