Global primary aluminum output totaled 2.099 million tons

Data from the International Aluminum Institute(IAI) showed that, in July, the global( excluding China) daily average primary aluminum output declined to 67,700 tons, and in June, the daily average is 68,100 tons.

In July, the primary aluminum output totaled 2.099 million tons, and in June, the output totaled 2.044 million tons.

In July, China average daily primary aluminum output declined to 59,300 tons, and in June, the output totaled 61,400 tons. In July, China primary aluminum output totaled 1.839 million tons, and in June, the output totaled 1.843 million tons.Aluminum prices have extended to the downside and in doing so the trend has turned from a sideways rangebound market to a downward one, the Aluminum Analysis and Forecast Q2 2013 report said.

Given the market has been in a supply surplus since 2007 and stocks have built up accordingly, the report noted that prices to be under pressure is not a surprise. In recent years, banks, producers and traders have done their utmost to hold the surplus aluminum off market as they tried to out-run the global economic slowdown, but it now looks as though the recovery has not come about as fast as expected.

In the first five months of 2013, primary aluminum production recorded by the International Aluminum Institute (IAI) showed global production of 10.313 million tons, which was down 0.1 percent on the 10.409 million tons produced in the same period in 2012. The daily average rate of production in the January to May period was 68,300 tons, which was higher than the 67,900tpd seen over 2012 as a whole, so the picture is somewhat mixed as to how much more production there will be this year, compared with last year.

Low prices are, however, likely to see more production cuts. Alcoa said in May that it would permanently close two potlines at its Baie-Comeau smelter in Quebec, with total capacity of 105,000 tons. This cutback will be part of the 460,000 tons under review – it is also closing its 44,000tpy Fusina plant in Italy. Bosnian aluminum producer Aluminij Mostar has announced the curtailment of production at its 130,000 ton smelter and UC Rusal will cut 300,000 tons of capacity this year.

China is also cutting output – at a recent China’s Non-Ferrous Industry Association (CNIA) meeting, smelters agreed to suspend one million tons of capacity, including 380,000 tons at Chalco, 150,000 tons at Yunan Aluminum and 120,000 tons at the Xinheng Group. Qujing Aluminum smelter has already stopped 150,000 tons in the first quarter, 2013. In total, at the end of April some 850,000 tons of capacity had been cut.

More importantly, changing dynamics in the markets with regards to liquidity and LME load-out rates, as well as the eventuality that the US will rein in quantitative easing (QE), may start to threaten the economic viability of financing deals. As such, the outlook for aluminum prices has deteriorated in our opinion, but that might be what is needed to rebalance supply and demand.

Despite being in a supply surplus, aluminum prices had, up until recently, managed to trade in a sideways range as the surplus had been kept off market. The prospects for stronger recoveries in the US and China also meant sentiment was bullish enough to underpin prices, even if it was not strong enough for a bull market. This situation has now changed.

The market is now faced with a slower economic outlook in China, fluctuating US PMI manufacturing readings, the prospect for less liquidity from QE is likely to dampen global growth. All of which has turned sentiment more bearish.

A slower China and less liquidity in emerging markets is likely to lower demand growth and with projected supply increases expected to outpace demand growth as well, excess production is likely to weigh on prices until they fall to levels that prompt more production cuts. 189 out of 281 large aluminum producers in China were incurring losses as the price is below costs of production.

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