Oversupply of aluminum will keep prices low, Alcan says

An oversupply of aluminum has put the damper on prices even as demand for the commodity grows, Rio Tinto Alcan's CEO said Wednesday.

Sales of the lightweight metal in 2010 have exceeded Alcan's forecasts, with global demand up 17 per cent over 2009.

While prices have stabilized - crossing the $2,100 per tonne threshold this summer - they are below pre-recession levels.

A fair value would require inventories, which are still at elevated levels, to return to normal and that will take time.

This week, the research group Harbor Intelligence said that aluminum imports by China could increase more than 25 times by 2015 as its domestic demand surges.

Rio Tinto Alcan in now in the process of determining if it is going to ramp up investments in key Canadian projects including a prototype smelter in Quebec's Saguenay region.

At the end of 2008, amid plummeting commodity prices, parent Rio Tinto slashed capital commitments across its mining empire and slowed the pace of Rio Tinto Alcan projects in Kitimat B.C., and Quebec's Saguenay region.

Montreal-based Alcan was acquired by global giant Rio Tinto in a $38.1-billion cash acquision in 2007.

In December 2006, the former Alcan had promised to invest about $1.8 billion U.S. in the Saguenay region in a controversial deal that was linked to its access to low-cost hydroelectric power from Hydro-Québec.

The centrepiece of that investment was the AP50 plant.