Aluminum

[winston]

In the base metals market, aluminium prices sank below the $1,600 a tonne level, reaching a four-and-a-half year low, amid mounting gloom about the outlook for prices and the future of the industry.

The benchmark London Metal Exchange three-month aluminium contract sank 2.2 per cent to $1,580 a tonne, the lowest level since May 2004. Aluminium has fallen 53.2 per cent since hitting a record $3,380 a tonne in early July.

Stocks of aluminium at LME warehouses increased by a hefty 19,500 tonnes and have risen to 1.86m tonnes, the highest level for fourteen years.

"The industry is struggling to cope with both an overhang of spare capacity and a huge level of unconsumed inventory," said Dan Smith, metals analyst at Standard Chartered.

About 65 per cent of aluminium smelters worldwide are estimated to be losing money at current price levels.

– Financial Times

[winston]

China buys aluminium to support producers-sources By Eadie Chen and Rujun Shen

BEIJING/SHANGHAI, Dec 25 (Reuters) - China's State Reserves Bureau (SRB) has agreed to buy about 300,000 tonnes of aluminium at around 12,300 yuan ($1,800) per tonne in January to support producers, trading and industry sources said on Thursday.

The price represents a premium of almost 10 percent over the key Shanghai aluminium futures contract SAFc3, which rose 60 yuan to 11,330 yuan on Thursday, a three-week high, but still only just over half the peak reached in March this year.

The SRB will buy around half from Chalco (601600.SS), the listed arm of state metals firm Chinalco, and 20,000 from each of seven other smelters, the sources said.

One industry source named the smelters as Shanxi Guanlu 000831.SZ, Yunnan Aluminium 000807.SZ, Henan Shenhuo, Qingtongxia, Huolinhe, Henan Wanji and Qinghai Qiaotou -- all state-controlled smelters based in different regions of China.

The SRB met the eight firms on Thursday, one industry source familiar with the situation said.

"The SRB said they're going to buy 300,000 tonnes in January. They did not say anything about further purchases," the same source said.

Two industry sources put the total volume of sales at 290,000 tonnes, with Chalco providing 150,000 tonnes, and the price at 12,350 yuan rather than 12,300.

A Chalco spokeswoman declined to comment.

Several sources said officials were still discussing further purchases and could target 1 million tonnes in total.

Chinese officials have said they plan to buy up resources and materials to support producers, who are smarting from prices that have fallen below the cost of production.

"Aluminium prices were encouraged on the reserve purchase news," said analyst Jia Zheng at Southwest Futures. "The decided purchase volume seems to be lower than expected but we are looking forward to more movement by the reserve bureau."

The SRB has already bought 30 tonnes of indium, a minor metal used in making LCD screens, from a large Chinese smelter, a trade source said last week. It also plans to buy 300,000 tonnes of zinc, a smelter official said last Friday. [ID:nHKG364654]

China's aluminium companies, like their competitors worldwide and their peers in other base metals, have been forced to shut in some production to cope with the impact of the global economic crisis, which has crippled demand.

"The government has approved a total reserve build of 1 million tonnes. The SRB has not re-stocked for a long time because prices were so high. And I estimate the state reserve has only about 200,000 inventory of aluminium," said one analyst who declined to be named.

Chalco's Shanghai-listed shares (601600.SS) slumped in early trading and failed to recover, trading in a narrow range and ending 3.3 percent down at 6.510 yuan.

[millionairemind]

Aluminum Declines as China Purchase Seen Short of Expectations
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By Li Xiaowei

Dec. 26 (Bloomberg) -- Aluminum declined from a three-week high in Shanghai as a state purchase plan by China, the world’s largest producer and consumer, was smaller than expected. The metal still posted the biggest weekly gain in ten weeks.

China’s State Reserve Bureau will purchase 290,000 metric tons of aluminum at 12,350 yuan ($1,808) per ton from domestic smelters to boost state reserves and stabilize prices by the end of January. The bureau may buy a total of 1 million tons of the metal over three months from January, analysts had said.

“We feel the buying is too small to ease the domestic surplus,” said Eric Zhang, an analyst at commodities researcher CBI China Co. Shanghai aluminum had been steadily pricing in speculation of a much bigger purchase, he said.

[winston]

China hails success in making alumina from coal ash

BEIJING, Jan 11 (Reuters) - A Chinese power company has succeeded in producing alumina from coal ash, a step that could help ease China's chronic raw materials shortage, the Economic Daily said.

Datang International Power Generation Co (601991.SS) has completed construction of a plant capable of producing 3,000 tonnes of alumina a year from coal ash, and produced its first batch of alumina, the paper said, citing a company forum on the topic.

Ash remaining after coal is burned typically contains metals, including alumina, the raw material for aluminium, and recapturing and using them could reduce demand for natural resources. The challenge has been to develop the technology to the point where it is cost-effective.

China's aluminium smelters have expanded rapidly over the last few years, straining the country's ability to supply alumina as well as its raw material, bauxite.

Although the economic downturn has idled some aluminium smelting capacity, China's appetite for raw materials is still expected to be formidable in the long term.

The plant is expected to source its fly ash from power plants in Inner Mongolia, where alumina content in fly ash can near 50 percent, much higher than from other coal sources, the paper said.

[winston]

Aluminum crashes to 7-year low

Commodities like oil, copper, and aluminum go through huge "boom and bust" price cycles. Years of low prices and underinvestment tend to produce huge bull markets… which brings a ton of production online and creates economic alternatives… which eventually produces a price crash.

Aluminum is suffering from one of these "busts" right now. Automobile production, which accounts for a big chunk of aluminum demand, has collapsed. The spot price of aluminum is down more than 50% since last summer… and punched through to a new 7-year low this week.

[winston]

Aluminum Recovery Delayed by Stocks, Chinalco Says (Update1)

July 23 (Bloomberg) -- Aluminum Corp. of China, the nation’s largest producer of the metal, said a price recovery for the lightweight metal will lag behind other base metals because of high inventories.

A demand revival from the auto and building industries hasn’t had “an obvious” impact on aluminum yet, Chairman Xiong Weiping said today in an interview in Beijing while attending a conference.

“The aluminum recovery has not been as rapid as copper because aluminum inventories are still high,” Xiong said. “Demand from the building and auto industries would only have an effect later.”

Aluminum inventories monitored by the London Metal Exchange quadrupled in the past year to a record 4.6 million metric tons, forcing Chinalco and rivals including Aloca Inc. to cut output. Aluminum futures in Shanghai have gained 20 percent this year, lagging behind an 83 percent gain for copper.

Copper futures gained 1.6 percent in Shanghai to 43,670 yuan a metric ton at 11:24 a.m. Aluminum rose 1 percent to 13,965 yuan. Aluminum Corp. of China Ltd., the listed unit of Chinalco, rose 2 percent to HK$8.28 in Hong Kong trading.

Anglo American

Chinalco is “closely watching” how a proposed merger between Xstrata Plc and London-based Anglo American Plc unfolds, Xiong also said. The proposal is a “very important transaction” in the world of resources, he said.

Xiong, who was responding to reporters’ questions, didn’t say whether Chinalco would be interested in bidding for either of the companies.

Anglo American last month rejected a proposed “merger of equals” from Xstrata, which would have created a mining company with sales of more than $54 billion. Anglo American may start talks with Chinalco about investing in Anglo’s Brazilian iron ore business, the Sunday Telegraph reported June 28.

Separately, Xiong also said Chinalco is continuing to push for an agreement to buy power directly from utilities under a government proposal. He didn’t elaborate.

[winston]

China’s 2009 Aluminum Consumption May Rise 12%, Minmetals Says Share Business

Nov. 28 (Bloomberg) -- China’s aluminum consumption may rise 12 percent this year as the [b]booming real estate industry, power network construction and car sales boost demand for the metal, said Wang Feihong, analyst at a unit of China Minmetals Corp.

Aluminum inventory in China may gain by 1.2 million tons by year-end because supply is likely to exceed demand, Wang said today in Kunming, the capital of Yunnan province. The country’s so-called apparent demand may reach 17.43 million tons this year while actual demand may reach 16.23 million tons, he said.

http://www.bloomberg.com/apps/news?pid= ... qvEdYDy86A

[winston]

Aluminum, Worst Performing Metal, to Beat Nickel: Chart of Day By Brett Foley

Dec. 3 (Bloomberg) -- Aluminum, the worst performer on the London Metal Exchange in the past year, will outpace peers such as nickel next year, Royal Bank of Scotland Group Plc said.

“Aluminum is one of the most economically geared metals and will benefit from rising demand,” London-based trading analyst David Simmonds wrote yesterday in a report. “For nickel there is a huge overhang of potential production restarts.”

The CHART OF THE DAY shows aluminum prices, in orange, have jumped and nickel prices, in green, slipped after the two traded in tandem through 2009. RBS expects the trend may continue, with Simmonds forecasting aluminum to rise as high as $2,325 a metric ton next year and nickel falling to as low as $13,650 a ton.

Buying aluminum and selling nickel is one of RBS’s “top themes and trades” for commodities in 2010, he wrote. Aluminum will surge as demand for the lightweight metal recovers along with the global economy, while previous gains in the price of nickel, used to make stainless steel, will encourage producers to increase supply as profitability increases, Simmonds wrote.

Aluminum, used to make cars, planes and beverage cans, is the worst performing industrial metal on the LME in the past 12 months, gaining 26 percent, compared with copper’s 101 percent advance and a 73 percent jump in nickel.

http://www.bloomberg.com/apps/news?pid= ... FnGWJORoGk

[winston]

=DJ MONEY TALKS: Aluminum: All The Perils Of Commodity Investment By James Campbell

SINGAPORE (Dow Jones)--On the face of it aluminum, the most widely traded metal in the world apart from steel, is a solid bet on an economic recovery, but as so often is the case with commodities there is a caveat.

Demand for the metal is in a long term uptrend as China and India continue to industrialize and urbanize. In addition, producing aluminum is very energy intensive, so supply of the metal is very sensitive to energy prices. It ticks two key boxes for many investors: It's an emerging markets play and an energy play.

This is why shares of big aluminum players like U.S. giant Alcoa remain a core part of many commodities portfolios and why the metal attracts a lot of attention in the financial media.

However there is a catch. The aluminum market is not what it seems.

As analysts acknowledge, there are vast aluminum inventories built up due to the 2008/2009 economic slowdown, and some key consuming industries like aerospace are struggling to recover. So why did the price of the metal rise 46% last year and why do some analysts remain bullish?

Aluminum inventories are what is known as 'tightly held'.

Most of the inventory--around seven million tons or one-third of 2009's entire production--is locked in warehouses and not immediately available at any price. As with oil, trading houses and banks take advantage of the fact futures prices are higher than the cash price and make a steady profit by just storing the metal. This behaviour, known in the metals industry as 'warehouse financing,' is what's holding the price up by creating an artificial shortage for consumers, and it is only possible because interest rates are very low.

The situation should be a significant worry for the industry.

In early February, a senior executive at a U.S. aluminum extrusion company, which supplies aluminum for the construction sector, felt compelled to remind an audience of industry insiders that 'the warehouse is not our customer.'

At some point, these financing deals will have to unravel, perhaps when interest rates rise more around the globe. When this happens, significant amounts of physical stock are likely to be released into the market, which could cause a dramatic correction.

It's hard to predict when this will happen. Bullish analysts tend to see the storage deals as stable for this year at least, while bearish analysts think some of the deals will unravel by mid-2010. Either way, unless investors have at least a three year time horizon, dabbling with aluminum exposure could turn out to be a risky bet.


Source: Dow Jones Newswire

[winston]

China Aluminium

DJ China's Henan To Idle 180,000 Tons Of Aluminum Capacity In 4Q -Xinhua

SHANGHAI (Dow Jones)--China's Henan province plans to idle 180,000 metric tons of aluminum capacity and reduce power usage by 2.5 billion kilowatt-hours in the fourth quarter of this year, the state-run Xinhua news agency reported Monday.

The plan is the latest effort by the provincial government to respond to Beijing's call to conserve energy and reduce emissions in 2010, as the country's 11th five-year plan draws to an end, the agency said.

In June, thirteen aluminum producers in Henan agreed to idle capacity by a combined 700,000 tons in the second half of the year in response to rising power prices and slack demand.

Producers in Henan have a combined annual aluminum capacity of 4.65 million tons. Output reached 2.63 million tons during the January-August period, accounting for 24.3% of total production in China, Xinhua said.

Website: www.xinhuanet.com

Source: Dow Jones Newswires