Rio Tinto Alcan cautious on near-term aluminum market, bullish long term: CEO

Rio Tinto Alcan is cautious about the near-term fundamentals of the aluminum market, but is bullish over the longer term situation, according to CEO Jacynthe Cote.

"We are aware the downside risk persists," she said Tuesday at the American Metal Market Aluminum Summit in New York. "There is a high degree of volatility."

She said while the market is improving, she cited inflation concerns, unemployment rates and the lingering effects of the March 11 earthquake on Japan as contributing to the near-term uncertainty.

But over the longer term, low inventories would provide support to prices, Cote said, in addition to the metal that is tied up in London Metal Exchange financing deals. She said the current healthy contango on the LME is keeping financing deals attractive.

Cote is expecting 5.5% growth in global demand over the next five years and 4.5%-6% over the next 10 years. The major engines of growth will be China, India and the Middle East, and Cote said she expects capacity growth to continue.

But she said "some constraints are starting to build."

"New capacity is more complex and more expensive," she said, adding that Chinese "aluminum producers are facing significant challenges due to rising energy costs." Cote said China will be a net importer of aluminum, "but the question is when."

Meanwhile, Indian producers face challenges over access to bauxite, she said.

Cote added that Rio Tinto Alcan is "supportive" of index-based alumina prices "in a spot market with good liquidity." The Platts Australian alumina price was $393/mt FOB Wednesday.