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Metal Recycling News March 26, 2012 08:19:28 AM

China aluminium production increase undermines industry cutbacks: RBS

Paul Ploumis
ScrapMonster Author
China's increase in aluminium production for February is threatening to undermine production cutbacks made elsewhere in the global industry, according to the data released by The Royal Bank of Scotland (RBS).

BEIJING (Scrap Monster): China's increase in aluminium production for February is threatening to undermine production cutbacks made elsewhere in the global industry, according to the data released by The Royal Bank of Scotland (RBS).

According to RBS, once again Chinese aluminium producers have in one fell swoop managed to eradicate all the work done by other producers in cutting smelting capacity.

Three-months aluminium on the London Metal Exchange traded below $2,000 per tonne in the fourth quarter 2011, a level at which 50% of global capacity is estimated to be cash negative. This cost pressure saw a number of producers announce cutbacks.

Alcoa announced it would close or curtail about 531,000 mt, or 12%, of its global aluminum smelting capacity. Norway-based Norsl intended to idle one potline at its Kurri Kurri primary aluminium smelter in Australia, trimming production at the plant by 60,000 mt from a total capacity of 180,000 mt.

Rio Tinto Alcan announced plans to divest or shutter significant amounts of uncompetitive capacity in Europe, North America, Australia and New Zealand. This included the closure of Rio Tinto Alcan's Lynemouth smelter in England. While Dutch aluminium producer Zalco closed its primary aluminium smelter in Vlissingen with a nameplate capacity of 275,000 tonnes per year.

China's primary aluminium production averaged 53,400 tonnes per day in February, up from 48,900 tonnes per day in January and from 46,600 tonnes per day in February 2011, as per International Aluminium Institute (IAI). RBS notes that this is a daily output increase of 9.1% and is equivalent to annualized production of 19.48 million tonnes per year.

World primary aluminium production including China (which accounts for around 41% of global supply) was up 3.7% to 122,276 tonnes per day registered the second highest on record.

China's February production totaled 1.548 million mt, up from 1.517 million mt in January and from 1.304 million mt in February 2011, as per the IAI. North American output has dropped 5.7% since end 2011, but all of this has been undone by the Chinese reactivation and new smelter additions.

The bauxite imports hit a record 4.665 million mt, up 45% month-on-month in February 2011. RBS is forecasting spot aluminium prices to average $2,315/mt in 2012, down 4% from 2011.

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