Minor & Light Metals / The Economics of Aluminium, 9th edition 2009

China dominates the global aluminium industry accounting for one third of both world production and world consumption of primary aluminium. While China is self sufficient in aluminium metal and approaching self sufficiency in alumina, dependence on imported bauxite remains high despite rising output. However, power supply issues and high costs of production could result in declining production in the longer term and the possibility that China will become a net importer of primary aluminium.

Report highlights

• World aluminium output rose by between 0.15 and 12.2%py between 1994 and 2008, averaging 5%py. Growth averaged almost 8%py after 2002 mainly due to explosive expansion in production in China. Output began to contract in the second half of 2008 and this accelerated in 2009, meaning that world aluminium production is likely to decline for the first time in fifteen years and by as much as 15 - 20%, bringing the market back into balance in the third or fourth quarter.
• In 2009, almost fifty aluminium smelter projects, with a total capacity of 20Mtpy, were at various stages of development, but only 2, with a total capacity of 3.8Mtpy, were already under construction. For most of these projects, no decision with regard to timing had been finalised and the timetables of the others are under review. At the same time, most of the major producers are idling high cost and inefficient capacity in response to low demand and prices. Some 6Mt of capacity had been taken out of service by March 2009, and further cuts of 2-4 Mt were thought to be required.
• Consumption of primary aluminium accounts for 65 to 70% of total aluminium demand. Between 1998 and 2007, world primary aluminium consumption increased year-on-year at an average of 5.6%. After a drop of 5.3% in 2001, aluminium demand grew by almost 8%py to 2007, largely driven by growth in China, which averaged nearly 24%py over the same period.
• In common with most other aspects of the global economy, demand for aluminium slowed sharply in the third quarter of 2008 and was declining in most regions in early 2009. The Chinese market for aluminium is still expected to grow in 2009, albeit at only 3%, but in Europe, North America and Japan, demand for aluminium will almost certainly fall in 2009 and will either level out or show minimal growth in 2010. The market should start to recover in the second half of 2010 and global growth of 4 to 5% is forecast for 2011, led by China. Average growth in the global aluminium market to 2013 is likely to be around 2 to 3%py, resulting in total demand of about 58Mt.