Q4 aluminum demand tops output for 1st time in 5 years
MOSCOW. Nov 22 (Interfax) - In the fourth quarter of this year, worldwide demand for aluminum will exceed actual production for the first time in five years, Russian Aluminum chief Oleg Deripaska said during a Russia 24 television interview.
"The market is now achieving a balance. We think that the fourth quarter will be the first quarter in the last five years when production will be less than actual demand outside of China," Deripaska said. The shortfall is due to Rusal and Alcoa implementing production-optimization programs.
With China factored in, world aluminum production this year will weigh in at 51.2 million tonnes and consumption will top that by from 150,000 to 200,000 tonnes, Deripaska said.
He predicted that the pace of aluminum consumption will be growing 6%-6.5%, or around three million tonnes, annually and as a result consumption and production will reach 75 million tonnes by 2023.
With the shuttering of loss-making production facilities and further growth of demand will, in a year and a half to two years' time "we will see normal supplies of aluminum on the exchange and [in] exchange warehouses," he said.
The main problem in the aluminum sector now is speculation on the part of exchange players, Deripaska said. There positions are bolstered by significant amounts of metal stockpiled, but unneeded, in 2008-2009.
A situation has arisen where even though demand is up, aluminum prices will be depressed by massive speculation, he said. Rusal is in a dialog with the LME on the possibility of revealing sales statistics and the factors influencing pricing, he said. The amount of financial derivative instruments outstrips the amount of physical ones (warehouse receipts, warrants) by 40-fold.
"The metal itself is not even being traded today in London, rather the possibility of refinancing it, contango, and it is far removed from reality. The exchange price is one thing, but consumers are prepared to pay $250 to $300 more. This has never happened, where consumers are prepared 17%-18% more than the exchange price. This says that physical demand is higher than the expectations of market players, speculators, hedge funds, that are driving prices down," Deripaska said.
Thanks to Rusal measures to reduce production at inefficient plants, the company had "not bad results" this quarter compared with Q2 and Q3, but the company is not likely to be able to cut losses to a minimum, he said.
Asked about the aluminum giant's development strategy, Deripaska said that will be a reduction in costs and the development of the production of product with high added value. "Today the country needs about 850,000 tonnes of primary aluminum, of which 350,000 tonnes is exported in the form of semi-finished goods. On the other hand, almost 700,000 tonnes (powder, sections, and other goods) is imported. We can do all that," he said.
The Russian market is key, and in seven or eight years may provide around 0.5-1 million tonnes worth of demand, he said. "In addition, this is important to us in deciding on the final completion of the Boguchany aluminum smelter and Taishet," Deripaska said.