ALUMINIUM-Major market developments in December

 

 

In early January, Alcoa Inc announced it was cutting its global smelting capacity by 12 percent. [ID:ID:nL1E8C5CV0]

 

 

Although the figure included permanent closure of a substantial amount of already idled capacity, it helped sentiment, which was underpinned further by Norsk Hydro's announcement of plans to curb output at a struggling smelter in Australia.

 

 

"The production cutbacks are supportive, but demand is not strong enough to warrant higher prices. I see the market trading sideways near term," said Fastmarkets analyst Will Adams.

 

 

Barclays Capital said the estimated non-China production capacity cuts announced in the past month total 1.3 million tonnes per year (tpy) and have helped reinforce cost support for aluminium prices.

 

 

This figure includes 292,000 tpy of capacity that had not been producing since 2009, around 342,000 tpy of non-price related closures and 85,000 tpy of delayed production ramp-ups.

 

 

But many analysts are somewhat cautious as to how high prices can go.

 

 

"It's difficult to see a big run-up in prices. If they go up too far, everyone will turn (production)on again," one said.

 

 

The London Metal Exchange (LME) three-months aluminium price was last indicated at $2,164 a tonne.

 

 

Below are some of the more significant recent developments in production, stocks and prices that may influence the direction of the market in 2012.

 

 

PRODUCTION

 

 

Dec 20 - Daily average primary aluminium output in China rose to 48,900 tonnes in November from 48,100 tonnes in October, provisional figures from the International Aluminium Institute (IAI) showed.

 

 

Dec 20 - Daily average primary aluminium output in November dropped to 70,700 tonnes, compared with a revised 70,900 in October and 68,600 in November 2010, provisional figures from the IAI showed.

 

 

Dec 19 - Dutch primary aluminium producer ZALCO said it was looking for a buyer to restart its plant, which was shut on Dec. 16 due to lack of funds after the company filed for bankruptcy, an official receiver said.

 

 

Dec 15 - A power cut at Rio Tinto Alcan's Lynemouth aluminium smelter in northeastern England has knocked out one of the plant's production lines and partially curtailed the other, a company spokesman said. In November, Rio Tinto said it was set to close the smelter as rising energy costs put pressure on margins. A consultation process on the closure is in progress and due to continue to the end of February. The spokesman said the recent problems would not affect that schedule. He added that no decision had been taken whether or not efforts would be made to restart the affected pots.

 

 

Dec 12 - China produced 16,015,000 tonnes of primary aluminium in the first 11 months of 2011, up 9.9 percent from the same period in 2010, according to the National Bureau of Statistics. Meanwhile output of alumina rose by 15.8 percent over the same period to reach 31,562,000 tonnes.

 

 

PRICES

 

 

Aluminium prices finished December at $2,020 a tonne, down from $2,110 the previous month.

 

 

Concerns that Europe's debt crisis could spiral out of control knocked industrial metals around mid-month and three-months aluminium fell towards $1,950 its lowest since July 2010.

 

 

Prices regained some of their composure as worries about Europe ebbed and in early January the market made further headway as production cutback news gave sentiment a boost.

 

 

STOCKS

 

 

Total exchange stocks of aluminium were at 5.187 million tonnes at the end of December, equating to more than 42 days of demand.

 

 

Of the end-December total some 4.979 million tonnes were held in LME-registered warehouses, up sharply from 4.558 million a month earlier.

 

 

Heavy inflows into Detroit and Vlissingen were partly down to consumers deferring orders due to Europe's deteriorating outlook.

 

 

In early December LME aluminium stocks surpassed earlier record highs and by Jan. 3 they had reached a fresh peak of 4.983 million tonnes.

 

 

Since the, however, inventories have dipped, with more declines expected given the queue of metal earmarked for delivery out of Vlissingen.

 

 

Total visible stocks of aluminium, including latest IAI stocks, were around 6.643 million tonnes, up from 6.144 million a month earlier.

 

 

Aluminium stocks at key ports in Japan totalled 221,500 tonnes at the end of November, down 6 percent from the month before, trading house Marubeni Corp said. End-October inventories totalled 235,800 tonnes.