Global Aluminium Production (Oct.) - Capital Economics
Metals

Global Aluminium Production (Oct.)

Metals Data Response
Written by Samuel Burman
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Ongoing strength in China’s aluminium production meant that global aluminium output continued to grow in October. And despite the winter environmental restrictions in China, supply there is set to remain elevated in the months ahead due to the recent upgrades to smelting facilities.

China aluminium production to hold up, despite winter curbs

  • Ongoing strength in China’s aluminium production meant that global aluminium output continued to grow in October. And despite the winter environmental restrictions in China, supply there is set to remain elevated in the months ahead due to the recent upgrades to smelting facilities.
  • According to the press release from the International Aluminium Institute (IAI), global aluminium production increased last month to just shy of 5.6m tonnes, from around 5.4m in September. And While average daily aluminium output was flat at around 180,000 tonnes, it was still 4.5% higher than this time last year. (See Chart 1.)
  • In a continuation of recent trends, production growth in China offset weakness elsewhere in the world. (See Table 1.) China’s production rose by 8.5% y/y in October as ongoing fiscal support boosted domestic demand and supported the Shanghai aluminium price, which still trades at a premium to the LME price. And even though winter environmental curbs are still being introduced, we expect production to hold up in the coming months. Many existing smelters have already upgraded their facilities to meet more stringent environmental regulations and the new capacity additions in Yunnan, which accounts for almost half of the new production capacity, is mostly run on hydropower.
  • Meanwhile, production in North America rose by almost 6% y/y, although this is primarily due to low base effects as Alcoa’s Bécancour smelter in Canada has only just recently reached nameplate capacity. Elsewhere, output also grew in Western Europe in m/m terms. That said, we think that it will fall in the coming months as regional demand remains weak and Alcoa’s San Ciprián smelter in Spain is scheduled to be taken offline soon.
  • All told, global aluminium production looks set to hold up relatively well in the coming months. This should add to the existing market surplus and global stocks, and weigh on prices.

Chart 1: Aluminium Production (Oct. 2020, % y/y)

Sources: International Aluminium Institute, Capital Economics

Table 1: Aluminium Production

China

Other Asia

GCC

N. America

W. Europe

E. & C. Europe

Others

World

Oct. (Th. Tonnes)

3,230

350

490

334

280

351

557

5,592

% y/y change

8.5

-5.4

-1.0

5.7

-2.1

-1.4

1.1

4.5

Jan.-Oct. (Th. Tonnes)

30,946

3,438

4,843

3,310

2,779

3,461

5,426

54,203

% y/y change

3.8

-6.3

3.8

4.3

-3.3

0.2

1.9

2.3

Sources: International Aluminium Institute, Capital Economics


Samuel Burman, Assistant Commodities Economist, samuel.burman@capitaleconomics.com