Global Aluminium Production (Sep.) - Capital Economics
Metals

Global Aluminium Production (Sep.)

Metals Data Response
Written by Caroline Bain
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Growth in global aluminium production accelerated in September, led by robust output gains in China and Canada. Capacity additions in China should mean that global output continues to rise in the fourth quarter and into 2021, despite an already oversupplied market.

China’s aluminium output set to climb even higher

  • Growth in global aluminium production accelerated in September, led by robust output gains in China and Canada. Capacity additions in China should mean that global output continues to rise in the fourth quarter and into 2021, despite an already oversupplied market.
  • According to the International Aluminium Institute (IAI), global aluminium production slipped slightly to 5.4m tonnes last month, down from 5.5m in August. However, average daily output rose to 180,000 tonnes, which is 4% higher than this time last year. (See Chart 1.)
  • Growth in China’s production rose from (an upwardly revised) 7.1% y/y in August to 8% in September. The rapid rebound in China’s economic activity since the virus-related lockdown in the first quarter implies strong domestic demand for aluminium. Reflecting this, Shanghai aluminium prices have traded above LME prices since April this year, which has incentivised both production and – very unusually – imports. What’s more, there is new capacity set to come on stream. Antaike recently estimated that around 3m tonnes of new aluminium capacity will be added in 2021, with more than half to be located in the emerging hub in Yunnan province. (Yunnan smelters typically run on hydropower.)
  • It is a different story elsewhere. Although North American output continues to grow in y/y terms, that is largely owing to a low base for Canadian output in 2019, as operations at Alcoa’s Bécancour only resumed in the second half of last year. In fact, the smelter has only recently returned to near nameplate capacity. At the same time, Alcoa recently confirmed that it is curtailing output at the San Ciprián smelter in Spain, citing an uncompetitive energy framework in Spain, low prices and oversupply in the global market.
  • The upshot is that China looks likely to remain the main driver of growth in aluminium production over the next year. But increases in its production will only exacerbate the existing surplus in the market , which will ultimately act as a lid on prices.

Chart 1: Aluminium Production (Sep. 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

Sep. (Th. Tonnes)

3,150

348

465

317

270

338

536

5,424

% y/y change

8.0

-3.6

-2.7

2.3

-2.2

-1.7

1.1

4.0

Jan.-Sep. (Th. Tonnes)

27,716

3,088

4,353

2,976

2,499

3,110

4,869

48,611

% y/y change

3.3

-6.4

4.4

4.1

-3.4

0.4

2.0

2.1

Sources: International Aluminium Institute, Capital Economics


Caroline Bain, Chief Commodities Economist, caroline.bain@capitaleconomics.com