Chinese Aluminum Surplus Will Make Up For Alcoa, Rusal Output Cutbacks

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Source: Novelis

Aluminum factories in China are rolling more metal into shapes for beer cans and cigarette packaging, maintaining an eighth year of surplus even as producers from Alcoa to UC Rusal curb output, Bloomberg News reported.

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China, which accounts for half of the world’s aluminum, will produce 2.5 million metric tons more than it uses in 2014, exceeding the 2 million tons of capacity cuts elsewhere since 2013, Morgan Stanley told Bloomberg. While most of China’s surplus is staying at home, its shipments of processed metal are growing. The net global surplus will be 160,000 tons, according to the median estimate of 10 analysts in a Bloomberg survey.

Chinese fabricators have an incentive to unload supply. With tariffs making exports unprofitable for typical 25-kilogram (55-pound) blocks, more metal is turned into sheets, foil and plates that fetch government rebates. Output of aluminum products in China surged 25 percent in April from a year earlier and exports in March were the highest since the record in 2011.

On Wednesday, May 14, the Indian aluminum cash price fell by 1.4 percent, landing at INR 104.75 ($1.76) per kilogram and making it the day’s biggest mover. On the LME, the aluminum 3-month price held steady around $1,782 per metric ton. The primary aluminum cash price showed little movement on Wednesday on the LME at $1,739 per metric ton.

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Chinese aluminum closed mixed yesterday. Following a couple days of improvement, the Chinese aluminum cash price weakened by 0.3 percent. Prices closed at CNY 13,040 ($2,094) per metric ton. The price of Chinese aluminum scrap remained essentially flat at CNY 12,250 ($1,967) per metric ton. The price of Chinese aluminum billet saw essentially no change for the fifth day in a row, remaining around CNY 13,590 ($2,182) per metric ton. The price of Chinese aluminum bar was unchanged at CNY 14,200 ($2,280) per metric ton.

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