The Aluminium Sector Is Expected to Witness an Upturn in Prices Sooner Than Later

Gulf Times reported that the aluminium sector which has seen price laggardness due to over production and stock building is expected to witness an upturn in prices sooner than later.

Mr Svein Richard Brandtz president & CEO of Hydro said that “Aluminium demand has been on high growth but it is laggard on price. But we have every reason to be optimistic despite the current environment.”

Weak demand and rising inventories at the London Metal Exchange has put pricing pressure on aluminium which has wide usage in packaging, aerospace, automobiles, construction and power. The sector has been confronted with bridging the short-term challenges and the long term opportunities highlighting that the global aluminium consumption is expected to increase by 76% between 2010 and 2020.

Mr Brandtz highlighted that the consumption had grown 18% between 1980 and 1990, by 39% during 1990 to 2000 and 54% in the 2000 to 2010 period. Highlighting overproduction and high inventories as prime reasons for price laggardness, the global inventory would amount to 12 million tonnes of aluminium outside China. Chinese manufacturing has been on contraction.

According to the Economist Intelligence Unit, Chinese aluminium production is estimated to slow down at an average of 5.3% during 2012 to 2014 due to the government’s efforts to reduce pollution and curb expansion of energy intensive industries.

Mr Oleg Mukhamedshin deputy CEO and director for strategy and business development Rusal said that “China has been cutting production throughout 2011 and 2012 year to date. At the same time however, 2 million tonnes and 0.8 million tonnes of new capacities were commissioned in the Western region of China and Shandong respectively.”

Dr Mohamed bin Saleh al Sada HE the Minister of Energy and Industry whose speech was read out at the conference by Qatalum chairman and Qatar Petroleum director of finance Mr Abdulrahman Ahmed alShaibi said that globally aluminium industry is in a state of restructuring and the Asian sub continent as well as the Far and Middle East are enjoying a marked growth and development of aluminium production.

Mr Al Sada said that “The focus of the aluminium sector is steadily shifting, often away from those who were considered the traditional. Middle Eastern manufacturers are now increasingly emerging as serious contenders in the global aluminium market. On the price front the current low price scenario was expected to change.”

He said that we do not expect low prices to last. Unlike many other metals, growth in aluminium demand is positive and we expect it to continue. Low global aluminium prices have become highly unprofitable for a large number of aluminium producers and there have been production cuts or postponement of fresh capital expenditure plans by small, medium and large producers over the past couple of months.

Mr Tom Petter Johansen CEO of Qatalum expressed concern on the stability of aluminium prices. “We need to increase profitability to attract more investment.