Major aluminum market developments in March

Reuters reported that aluminum prices made some headway in March from the previous month and some analysts anticipate further gains as demand outpaces supply, but others expect downward pressure to hold sway.

Ms Gayle Berry analyst of Barclays Capital said that "There's a bit more upside in prices. We're not going to seen an explosion but there's a very strong recovery in demand globally and production is growing at a slower pace relative to demand.”

Mr Will Adams analyst of Fastmarkets expected prices to move lower in the next month or so, pressured by concerns that financing deals which have tied up about 70% of LME aluminum warehouse stocks may start to unwind. It might start to unnerve the market. I'm looking for aluminum to drift lower, perhaps back to about USD 2,300.

Mr Harry Colvin of Longview Economics expressed surprise that aluminum had performed so well recently. He expected the market to take its overall direction from the rest of the industrial metal complex with a general downwards bias. It will continue to under perform, I wouldn't want any exposure to it.

Below are some of the more significant recent developments in production and prices that may continue to influence the direction of the market in 2011.

Production

March 30 - Rio Tinto RIOL plans to invest USD 3.5 billion to USD 4 billion in an aluminum plant in Paraguay modifying a previous estimate of USD 3.5 billion. The plant will be Rio Tinto's largest worldwide with the capacity to produce 674,000 tonnes a year. It is scheduled to start operating in 2016 although the project director said this timeline was demanding.

March 23 - A group of contracted workers at RUSAL's Friguia refinery in Guinea have suspended a strike after a provisional deal was found. The group of workers, who are employed by contracted firms at the 640,000 tonnes per year plant had downed their tools the previous day to demand the same pay as other subcontractors directly employed by RUSAL through a subsidiary.

March 21 - China's daily aluminum production rose more than 12% in February compared with the same month last year figures from the International Aluminum Institute showed, as producers ramped up production. China's daily average aluminum output in February was 46,600 tonnes up from a revised 41,400 in February last year which works out to an annualized 17 million tonnes.

March 21 - Provisional figures from the International Aluminum Institute showed that daily average primary aluminum output rose to 69,600 tonnes in February from a revised 68,900 tonnes in January. Total production in February was 1.949 million tonnes, compared with a revised 2.135 million tonnes in January.

March 17 - US aluminum producer Ormet Corporation has restored its aluminum smelter to full capacity and is close to deciding to restart its newly acquired Burnside alumina refinery. A company official said the plant will make about 80,000 tonnes of additional metal this year.

March 15 - Ghana's Valco aluminum smelter which restarted in January after a prolonged shutdown is running one potline but will add a second in 3 months to 4 months. The 200,000 tonne per year smelter with six potlines had been shut since March 2007, largely due to weak metal prices and power shortages caused by low water levels in the vast Volta hydropower dam.

March 15 - Aluminum Bahrain ALBH.BH which owns the world's fourth biggest smelter is in full operation despite weeks of protests and the government's declaration of martial law. Recently, the company said that it was not having problems getting raw materials from ports and its smelter is operating normally.

March 11 - According to the National Bureau of Statistics, China produced 2,603,000 tonnes of primary aluminum in the first 2 months of the year down 1.6% from the same period last year. Output of alumina rose by 8.8% over the same period to reach 5,269,000 tonnes.

March 7 - According to the Finance Ministry's economic studies and forecasting department, Guinea produced 16.427 million tonnes in 2010 up from 14.741 million tonnes in 2009 when the country was shaken by political upheaval. Output of alumina rose to 837,640 tonnes from 543,700 tonnes.

March 2 - An official of the China Nonferrous Metals Industry Association said that China, the world's top aluminum market will continue to see a surplus in the next 5 years as output exceeds consumption, cutting profits for smelters. Production is likely to rise 24% from last year to 20 million tonnes this year fuelled by new capacity and the restart of idle facilities. He said capacity would rise to 25 million tonnes this year, a rise of 14% from last year.

March 1 - Aluminum Corporation of China Limited expects Chinese aluminum output to reach 19 million tonnes this year, outstripping demand by 1 million tonnes. To cope with high costs and excess capacity in China, the company said it would be looking outside the country for growth.

Prices

Aluminum was one of the few LME traded base metals to finish March in the plus column. Three months prices ended the month at USD 2,648 per tonne up from USD 2,600 per month earlier. Unrest in the Middle East and North Africa took their toll on industrial metals in the early part of the month, as did the earthquake in Japan. But fears about disruptions to supply from the Middle East an increasingly important source of the metal helped to limit price declines.

The month's low of USD 2,452 per tonne was recorded mid-month, but aluminum rebounded quite quickly. It was not all one way traffic for the metal but by April 11, prices had risen to USD 2,720 per tonne their highest since August 2008, helped by expectations for rising demand.