BY GORAN DJUKANOVIC for Aluminium Insider
Base metals prices tumbled to their lowest in several weeks at the start of August, after U.S. President Donald Trump said he would slap a 10% tariff on the remaining US$ 300 billion of Chinese imports from September 1, after no progress was achieved at the last round of talks. According to a report by The Aluminium Insider, it is clear that the trade war between the U.S. and China that has been clouding the global growth outlook has had a lasting negative effect on metals demand this year.
Aluminium prices hit their lowest in about a month last Friday (US$ 1749 /t cash LME) on fears of weak consumption after Chinese data showed shrinking factory activity. The grey metal has been this year’s second worst performer among base metals (after tin).
Global aluminium production fell by 0.5% in the first half of this year, to 31.6 million tonnes, according to the International Aluminium Institute (IAI). This is not an alarming development, but the fact is that global output hasn’t registered a year-on-year decline since the Global Financial Crisis in 2009. Chinese output fell by 3.1% in June vs. June last year, and by 0.4% over the first six months of the year, according to the IAI.
The global market remains amply supplied other than the official market deficit (“on paper”) of at least half million tonnes for the year. This is an insignificant number compared to the 3 million tonnes of Chinese exports registered in the first half of the year.
In the second half of the year ex-China aluminium production will increase due to the ramping up of production in Brazil’s Albras smelter. The plant has an annual capacity of 450,000 tonnes, but has been operating at 50% of that rate since April 2018 due to the reduction in output at the Alunorte alumina refinery.
China is forecast to add around 1 million tonnes/year of new aluminium capacity in 2019, on top of the current capacity of 40.8 million tonnes/year, thus adding fuel to the supply pressure, according to the state research firm Antaike.
In Canada, the 18-month long lock-out of unionised workers at the Becancour smelter has ended. Production at the plant slumped from 438,000 tonnes in 2017 to 136,000 tonnes last year, with Q2 2019 output running at an annualised rate of just 65,000 tonnes, according to Reuters.
The Alumimium Insider