Wood Mackenzie Foresees New Aluminum Capacity and Boosted Scrap Use

SEATTLE (Scrap Monster): According to Wood Mackenzie analysts, Chinese companies are likely to build aluminium smelters in countries such as Malaysia, Indonesia and India, triggered by higher aluminium prices. The increased capacity will help in eventually taming the high prices for the commodity. The setting up of new capacities will have to be supplemented with higher scrap utilization, it noted.

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The marginal costs are estimated at around $1,900 per tonne in China and just above $1,950 per tonne in the rest of the world. In order to meet strict carbon emission targets, China has been boosting scrap consumption. The country imported around 1.5 million tonnes of scrap in the first seven months of the current year. It must be noted that China had imported over 2 million tonnes of scrap in 2020.

Meantime, Macquarie analysts noted that ongoing deficit market situation along with sky-high prices will lead to investment in new capacity outside of China. The market is likely to end in a deficit of around 700,000 tonnes in 2021. The deficit market is expected to persist through 2025.

At the same time, the aluminium demand is expected to surge higher by 10% by 2025, compared with today’s levels, thus resulting in a supply deficit of around two million tonnes, analysts said.