Alcan sticks for now with forecast of 200,000t surplus in 2007

Alcan sticks for now with forecast of 200,000t surplus in 2007

Canadian producer Alcan said it is holding for now its estimate that the global primary aluminium market will record a 200,000t surplus this year.

Supply growth is expected to accelerate to 10% this year from 6.4% last year with estimated production at 37.3 million tonnes.

Demand growth is also expected to accelerate to 8.9% from 6.9% and to total 37.1 million tonnes.

Inventories are expected to remain at an average of around 5.3 weeks of global demand through 2007, which is consistent will 2006 but “still low and quite tight by historical standards,' Alcan said on its conference call to present its Q1 results.

However, as always, China remains the great deciding factor and although the country has just switched to net importer of primary aluminium for the first time since 2004 (see yesterday’s MI for our analysis of the March trade data), tax differentials have created a compensatory pick-up in exports of aluminium products. “This scenario, if it continues, will apply some upwards pressure to our current 200,000t surplus estimate,' Alcan conceded.

It noted, though, the wide expectations that the Chinese authorities would plug the gaps in its export tariff system this May or June by lowering export tax rebates on aluminium products.

Alcan also made the point that while Chinese production growth continues to surprise on the upside, apparent consumption in the country seems to running at equally break-neck speed—up by over 50% in the first quarter of this year relative to last year.

By way of comparison, Alcan’s US peer Alcoa has just reassessed its forecast for 2007 to a surplus of 300,000t from a balanced market, again reflecting developments in China.