ALUMINIUM-Major market developments in February

LONDON, March 12 - Aluminium prices will continue to be underpinned near term by steadily improving demand and a tight physical market, analysts say.

But production is rising and some see prices succumbing to downward pressure further ahead as it becomes clear that the market is on course to record another big surplus this year.

"Prices in the month ahead should find some support at current levels, as the physical market remains tight," said Olivier Masson, a consultant at CRU Group.

The fact that a lot of inventory at present is tied up in LME warehouses under financing contracts is supporting physical tightness.

Standard Chartered analyst Dan Smith said he had a relatively upbeat view on demand in top consumer China.

"And the rest of the world is starting to pick up the baton a bit on growth," he added, citing a significant upturn in orders from North American aluminium fabricators in February.

Smith expected prices to weaken further ahead, but saw room for a bit more strength short term, helped by steadily improving demand.

But production is rising, even though companies outside China, which idled capacity in response to the global recession, appear cagey about restarting.

"World production is going to rise pretty strongly this year. We're heading for another bumper surplus and pressure on prices will be down," said independent consultant Angus MacMillan.

He said first support for the metal is at $2,000/1,950 a tonne, which could give way sometime in the second quarter, with next support at $1,800.

The London Metal Exchange three-months aluminium price <MAL3> was last indicated at $2,240/50 a tonne. Below are some of the more significant recent developments in production, stocks and prices that may continue to influence the direction of the market in 2010.

PRODUCTION:

Feb 27 - Guinea's CBG, the world's top bauxite exporter company, said orders for 2010 have already exceeded last year's output by more than 10 percent in a sign of improved global demand for the ore used to make aluminium. [ID:nLDE61Q08Y]

Feb 26 - BHP Billiton <BLT.L> <BHP.AX> wants to build a $3.5 billion 2,500 MW hydro power plant in Democratic Republic of Congo to support its proposed aluminium smelter, according to a company presentation obtained by Reuters. BHP's Inga X plan envisages a power plant on the Congo River to supply a proposed $5 billion aluminium smelter 150 km away that would process 2 million tonnes of Guinean alumina per year into 800,000 tonnes of finished aluminium, according to the presentation. A BHP official was not immediately available for comment. [ID:nLDE61O2QK]

Feb 26 - Alcoa Inc <AA.N> has agreed to keep its Italian aluminium smelters working for six months, instead of idling them as planned after the EU ordered it to repay state aid. Italy's government said the agreement on the plants, which employ about 2,000 people, had been struck after talks with Alcoa and unions late on Feb. 25. In November, Alcoa said it would temporarily idle operations at its 194,000-tonne-per-year smelters at Portovesme in Sardinia and Fusina near Venice after the European Commission ordered it to pay back most of the state aid it had received in Italy since 2006. [ID:nLDE61P0I1]

Feb 22 - World daily average primary aluminium output rose to 64,400 tonnes in January from 64,000 tonnes in December 2009, provisional figures from the International Aluminium Institute showed. Total production in January was 1.995 million tonnes compared with 1.984 million tonnes in December. Total production in January 2009 was 2.094 million tonnes. [ID:nLDE61I1ZE] On Mar. 4, the IAI released provisional figures showing daily average primary aluminium output in China fell to 41,700 tonnes in January from 42,900 tonnes in December. [ID:nLDE62312I]

Feb 22 - United Company RUSAL <0486.HK>, the world's largest aluminium producer, said it plans to increase aluminium and alumina output in 2010 as economic development in China and India is expected to boost demand for the metal. The company said it would increase aluminium production by 3 percent in 2010 as its Siberian plants, as well as facilities at Alscon in Nigeria, KUBAL in Sweden and potline 5 at the Irkutsk Aluminium Smelter in Russia reach full capacity. UC Rusal also aims to increase alumina output by 7 percent in 2010 by stabilising alumina production at Achinsk Alumina Refinery as well as restoring production at the Boksitogorsk Alumina Refinery in Russia and Aughinish Alumina Refinery in Ireland. [ID:nTOE61L00Y]

Feb 19 - UC RUSAL said it had agreed to set up a joint body with the new government of Guinea in an apparent attempt to find a solution to a dispute with its predecessor. On Feb. 15, authorities named a caretaker government to lead the world's biggest exporter of raw material bauxite, to its first election since a 2008 military coup. [ID:nLDE61I14G] RUSAL has been locked in a dispute with the previous government of Guinea over ownership of Friguia alumina refinery, which it said had been bought unlawfully by the company. Guinea's mines minister has since said in an interview that the new government is prepared to talk with UC RUSAL. [ID:nLDE61R0KP]