The peculiar economics of China's aluminium industry and its effect on the global cost curve were highlights of the morning session of the final day of Arab International Aluminium Conference ARABAL 2012. On the other hand, the discussions by the panelists indicate that aluminium majors are pinning hopes on the increased prevalence of aluminium in the auto industry.
Mr Paul Adkins director of AZ China Limited and Mr Eric Zhang analyst at SMM presented on the peculiarities of the Chinese industry which persists with enormous production despite heavily subsidised losses in certain provinces in particular.
Mr Adkins said that China Sits in the top quartile of the global cost curve and its industry consumes scarce energy resources, is forced to import raw materials, and jeopardizes environmental integrity, yet 10 MT of new capacity are still to come online. Why on earth do the Chinese persist with making aluminium?
He said that "As Westerners and as analysts and corporates, we focus on the markets, the industry, equities, P&L, capital flows, ROI, etc. But by doing so, we can miss the key point for the Chinese Communist Party, aluminium is an important conduit for the development, urbanization and modernization of China reminding the audience that China's aluminium industry has been privatized if such a term is accurate in such a Statist country only one generation.
Mr Eric Zhang forecast that domestic aluminium prices will face many uncertainties in 2013 and are subject to LME aluminium prices to a large extent. SMM expects domestic aluminium prices to fluctuate between CNY 15,000 per tonne to CNY 17,500 per tonne in 2013.
The role of China was a theme carried into the next session with a presentation by Mr Jorge Vazquez MD of Harbor Aluminium Intelligence who spoke to delegates on who is winning and losing in the global aluminium industry and supply chain.
He said that "Who is getting the value?. It is not the producer for sure. Today, consumers are getting great value ever with a graph of real LME aluminium prices at a cycle bottom below USD 2,000 MT compared to historical average of USD 2,650 and a high of about USD 4,700.
He finished by forecasting two main sources of growth in next five years: Emerging Asia including the Gulf and the Americas. We see the Middle East as the leading provider for growing world metal needs ahead and Americas/Europe/South East Asia as increasing import players.
Mr David Cutting director of JD Power Automotive forecasting, spoke about the Global Light Vehicle Market heavily dependent on aluminium saying it has come a Long Way. In, 2012, Global Light Vehicle Sales are holding in positive territory while in 2013, Global Light Vehicle Growth is forecast to be steady with moderate risk.
He said that the GLV Market is predicted to break through the 100 million barrier by mid decade, almost doubling in size since the end of the 1990s. Emerging markets, led by China, India, Brazil and Russia, have driven much of the recent growth and are expected to remain key drivers to future growth. Light vehicle production growth in Asia is expected to significantly outpace the other regions. Scale brings fragmentation and a new definition of platform.
Mr Shambhu Prasad senior Expert at Gulf Organization for Industrial Consulting said that aluminium usage has increased to 140 kilogram per car in 2011 predominantly in drivetrain, chassis and suspension and body. The automotive industry is the largest market for aluminium castings and these account for more than 50% of aluminium used in cars.
