Aluminium: China can solve the overproduction problem by exporting

The negative opinions about LME aluminium price are mainly from the prediction of the large scale low cost capacity expansion in west China and northwest China. Although we have predicted that Chinese aluminium consumption will grow 12% and supposed that 1.4 million capacities will be shutting down, the rapid capacity expansion will definitely bring overproduction of about 700,000 tonnes in 2013. Market player predicted that the overproduction will be exported as half -finished products, because China till has a cost advantage. Chinese National Reserve Bureau is not likely to buy the rest of aluminium supply, because NRB has bought 100,000 tonnes in the fourth quarter in 2012, which in total lead to a 477,000 tonnes of reserve. What’s more, there is unlikely to be any news that announces to shut down or postpone more than 1.4 million tonnes of capacity. If there is any risk of our fundamental assumption, it would be closed capacity less than predicted, or exported more than expected.

China may continue to head toward an aluminium net exporter in the coming few years. As there will be more aluminium supply coming from China in 2013, and the output from the Middle East, India and Canada, although the global market situation will be improved, we predict that LME aluminium price will still be weak. Thus we reaffirm that the predicted 3/6/12 month aluminium price will be $2000/$2000/$2100 per tonne.