China's aluminum deficit to be short lived: Alcoa CEO

A deficit of aluminum in China will be short lived as rumors that smelters are preparing to restart production circulate, Alcoa chief executive Klaus Kleinfeld said on Tuesday. “The deficit in China is short term. China is currently importing more scrap than ever. Its a rare and more expensive around the world,” he said during a web presentation and conference call with analysts. He said it was the primary metal coming into the country from around the world while noting that there are “rumors that smelters are preparing to be restarted” to increase production. A slide used in Kleinfeld's presentation indicated that China had a 2,100 kmt supply deficit in January and February of this year while the “Western World” had a surplus of 1,400 kmt in the same period. The global aluminum industry is in the midst of curtailing production as demand and prices for the metal have plummeted amid the worldwide economic slowdown. However a slide in Kleinfeld’s presentation suggested that smelter operations may have to be restarted to meet demand. A graphic showed that by August of 2008, all aluminum production cuts announced in China had already taken place. When asked to consider the effects of demand created by China’s subsidy of the aluminum industry and the government’s participation in the market through the State Reserve Bureau, Kleinfeld said he didn’t expect it to be a factor. “The deficit is not a longer term phenomenon, but on balance scrap, imports and [smelter] restarts are factors,” he said. “Longer term, 2 years from today, we see a restructuring. The strategic reserve had a very specific regional component. It was used to buffer out certain regional employment imbalances. We don't believe we will see that happening forward.”