Indian aluminum majors expecting LME prices to show uptrend

BL reported that Indian aluminum majors are hopeful that the price of the metal on the London Metal Exchange may rise in the coming weeks as Euro zone leaders gear up to align their positions on centralized control of the euro zone budgets to fire fight the debt crisis.

After being on a steady decline for around the previous 6 months, aluminum prices gained USD 120 per tonne in the last 3 days in the wake of some positive signals from the euro zone.

Mr BL Bagra CMD of NALCO said that “The price of the metal tumbled from USD 2,700 per tonne in mid April to below USD 2,000 in the October to November period. If there is no fresh crisis we see the metal price on the LME being on a recovery phase.”

Mr Bagra however said that globally margins of aluminum producers will remain under pressure, due to the persisting spiral in energy costs. Today, one third of the existing capacity worldwide is operating on losses. On this count, India is better placed as cost of alumina is comparatively lower.

Mr D Bhattacharya MD of Hindalco indicated that the price of the metal on the LME will look better in the coming weeks.

Mr Bhattacharya said that the 3 major Indian aluminum producers Hindalco, Nalco and the London listed Vedanta have lined up ambitious expansion plans, expecting India, together with China, to lead in aluminum production in the next decade. The aluminum growth rate in India is expected to be 11% up to 2016 higher than that of China at 10%.

While Hindalco is doubling its existing capacity with an investment of about USD 10 billion by 2016, Vedanta is executing INR 60,000 crore expansion plan to add about 1.6 million tonne of fresh capacity to its existing 775,000 tonnes. Nalco is setting up a Greenfield unit of 0.5 million tonne capacity at a cost of INR 16,000 crore apart from another INR 6,000 crore to add 1 million tonne of alumina capacity.

Mr SK Roongta MD of Vedanta said that “We have already spent 75% of the CAPEX of INR 60,000 crore. We expect our new smelters to start production next fiscal and reach full capacity in less than 2 years. All the three producers are heavily banking on the Government's nod to allocate coal blocks, which could make aluminum production profitable at the desired level. We will be looking at coal assets once the policy initiative is in place.”
 http://www.steelguru.com/metals_news/Indian_aluminum_majors_expecting_LME_prices_to_show_uptrend/239664.html

Chinese aluminum manufacturers challenge Australian dumping duties

The sensitive issue of Australian manufacturers being put under pressure from dumped Chinese imports is set to be heard in the Federal Court, as two Chinese aluminum manufacturers challenge the Australian government's decision to impose dumping duties.

The case stretches to government relations, given submissions by the Chinese government against the dumping conclusions reached by the Australian Customs and Border Protection Service. The Chinese government has argued that it considers state-owned enterprises to be commercial bodies and should not be defined as public bodies under the anti dumping laws.

Customs however has found that regardless of ownership, the level of control and regulation by the Chinese government in the aluminum industry in China is so significant that primary aluminum producers and suppliers are in fact responding to the Chinese government's industrial development policy.

PanAsia Aluminum (China) Limited and Tai Shan City Kam Kiu Aluminum Extrusion Company Limited have lodged documents in the Federal Court, seeking to quash a decision of Attorney General Robert McClelland, who recently reaffirmed the dumping finding. PanAsia has had a countervailing duty of up to 13.6% imposed on its imports into Australia and Tai Shan of up to 7.4%.

In court documents, PanAsia said that the dumping duty notice and the countervailing duties, adversely affect its commercial position in the Australian market. The decision involved errors of law, and was an improper exercise of power, it claims. In the Kam Kiu case, the government has been asked to provide all documents on which customs based its dumping determination.

The aluminum saga began in May 2009 when ASX listed company Capral which had about half the Australian market for aluminum extruded product such as bars, tubes, pipes, doors and window frames notified the Australian Customs and Border Protection Service of alleged dumping.

During its investigation customs identified more than 300 importers of Chinese aluminum products. PanAsia and Kam Kui were identified in a group of seven importers which accounted for more than half the goods imported. The Australian market involves about 195,000 tonnes of goods sold a year.

Customs found that the subsidization and dumping of the Chinese aluminum had caused 'material damage'' to the local industry. Customs had determined that a range of Chinese imported aluminum products were priced at below normal value, and had used as a guide prices on the London Metal Exchange.

It found the Chinese products had been dumped with margins ranging from 2.7% to 25.7% and subsidized with margins from 3.8% to 18.4%. Capral had suffered a notable fall in sales and had been forced to lower its price to try to match the Chinese prices.

As a result of this investigation, the Australian government published a dumping notice and imposed countervailing duties on the Chinese companies in October 2010. In April, the Attorney General asked customs to reinvestigate some of its findings. Those findings were delivered, and in August Mr McClelland reaffirmed the dumping notice and duties.

http://www.steelguru.com/metals_news/Chinese_aluminum_manufacturers_challenge_Australian_dumping_duties/234409.html

Outlook for aluminum production

Aluminum production increased year-on-year in the first quarter of 2011, both in China and in the rest of the world.

Chinese production rose as producers re-started capacity that had been curtailed in the second half of 2010 in an effort to meet energy efficiency targets, according to a report from CRU, an independent business analysis and consultancy group focused on the mining, metals, power, cables, fertilizer and chemical sectors.

Smelters started to bring this capacity back on-line after the Chinese Lunar New Year in February. Alcoa estimated that 1.1 million tons of capacity a year has been re-started. Outside China, production re-starts have continued, although at a more moderate pace.

Chinese production will not only be supported by re-starts of curtailed capacity, but also by the start-up of new capacity in China's northern and western regions, such as Qinghai province and Xinjiang Uygur autonomous region, where power prices are cheaper.

Given the government's aim of increasing energy efficiency, Alcoa has factored in the closure of low amperage capacity; its China unallocated closures for 2011 and 2012 therefore reflect the stoppage of smelting capacity operating at or below 180 kiloamperes.

However, the Chinese authorities have recently announced that they are seeking to suspend approval of new projects.

This is unlikely to affect capacity currently being built, but it could affect future capacity growth, should this policy be rigorously implemented, and also bring forward the point at which China becomes a net importer of primary aluminum.

Alcoa expects primary consumption for aluminum in China to grow by 11.2 percent in 2011 to 18.7 million tons, and China is expected to be roughly self sufficient for the next few years before becoming a net primary importer from 2014 onwards.

The rail sector will be a major beneficiary of China's 12th Five-Year Plan (2011-2015). The nation has committed to expand its rail infrastructure, both long distance and urban mass transit, in the next five years. It has set aside 3.5 trillion yuan ($536.2 billion) for rail infrastructure, a 55 percent increase compared with the 11th Five Year-Plan period (2006-2010).

This amount will go toward the construction of high-speed rail, express rail, subway and light rail in cities, as well as coal railways.

The Ministry of Transport has expressed a desire to achieve a total rail network of 120,000 kilometers by 2015, a significant increase from the current network of 91,000 kms. Of the total investment, 850 billion yuan has been set aside for rail infrastructure development in 2011.

Government officials have publicly stated that at least 70 percent of equipment for any given rail project must be from domestic companies on a number of occasions. Aluminum demand will be boosted by this development, especially in the construction of high-speed rail.

As part of the energy policy in the 12th Five-Year Plan, China plans to generate 300 gigawatts of coal energy, 40 gW of nuclear power, 120 gW of hydropower, 70 gW of wind power and 5 gW of solar power to meet the needs of the country. The key energy bases will be located in Shanxi and Inner Mongolia and Xinjiang Uygur autonomous regions to serve the energy needs of demand centers in eastern and coastal provinces.

Alcoa expects aluminum demand to soar as a result. It will also be boosted by substituting copper, a practice that is more prevalent in China due to cost sensitivity and the absence of legacy issues where copper is already installed in wiring and cables in the country. It is seeing substitution to copper clad aluminum (CCA) cable and aluminum magnet wire in China from conventional copper products.

The automotive sector recorded a stellar performance in 2010. China comfortably strode past expectations, with annual production and sales exceeding 18 million units in 2010, registering a year-on-year growth rate of 32.5 percent.

Alcoa expects growth rates to fall back to a more sustainable level in 2011 as stimulus measures rolled out by the government to boost auto purchases in 2009 are withdrawn.

The aluminum usage for automobiles in China currently stands at an average of 127.5 kg per vehicle, compared with 145 kg a vehicle in the United States. As such, there is good potential to increase aluminum usage in automobiles and Alcoa expects this to catalyze demand for aluminum further.

To quell speculation in the property sector, the government imposed measures earlier this year including introducing property taxes in Chongqing and Shanghai, raising minimum down payments and banning second home purchases.

While these measures may have the effect of cooling the property market, aluminum uptake from the building and construction sector remains strong. 

http://www.chinadaily.com.cn/cndy/2011-07/07/content_12850980.htm

MCX Aluminum tumbles on global cues

Commodity reported that today the contract traded at arrange of INR 117.15 to INR 117.70 per Kilogram in the early sessions. Volume traded of the contract is 1867 lots and open interest of the contract is 1709 lots as of now.

Aluminum moved lower today eyeing counterparts that were trading lower in Indian commodity futures. The prices of benchmark Aluminum is trading at INR 117.20 per kilogram down 0.64%. Today the contract traded at arrange of INR 117 15 to INR 117.70 per Kilogram in the early sessions. Volume traded of the contract is 1867 lots and open interest of the contract is 1709 lots as of now.

Aluminum inventories on London metal exchange showed a considerable jump of 3150 tonnes to 4606100 tonnes. From the beginning of this year the inventories have appreciated from 4274975 tonnes. However the rise in inventories has been countered by improvement in economy of US and improving demand for vehicles in India and China in which Aluminum is a major component.
http://www.steelguru.com/metals_news/MCX_Aluminum_tumbles_on_global_cues/198299.html

Aluminum Producers in China ‘Losing Money,’ May Reduce Output

May 21 (Bloomberg) -- Aluminum producers in China are operating at less than the cost of production after domestic prices fell and the government raised power rates for smelters, said Liu Xu, an analyst at China International Futures Co.

All “producers in China are definitely weighing output cuts now,” Liu said today. “It’s based on how far prices have fallen, without even taking into account that the cost for some producers will increase after the new power rules.”

China, the world’s largest maker of the metal, said last week it will raise power surcharges for some aluminum companies by as much as 100 percent from June, to curb overcapacity. Aluminum in Shanghai has fallen 13 percent this year and London Metal Exchange prices have dropped 11 percent on concern that Europe’s debt crisis may derail the global economic recovery.

Producers in China are probably unprofitable, with an average production cost of 15,300 yuan a ton, said Wan Ling, a Beijing-based analyst at CRU International Ltd. That compares with today’s price on the Shanghai Futures Exchange of 15,105 yuan ($2,212), taking this month’s fall to 6.8 percent.

“At these prices all aluminum producers in China are losing money,” said Jia Zheng, a trader at Soochow Futures Co. “So far we haven’t heard of any output cuts yet. Producers will try to maintain output for a long as they can because it is costly and time-consuming to restart idled capacity.”

The metal used in cars and airplanes gained 0.4 percent in London to $2,000 a metric ton at 2:26 p.m. in Singapore.

China’s measures to raise power charges may affect 6 percent, or 1 million tons of smelting capacity in China, according to estimates by Aluminum Corp. of China, or Chalco, the country’s largest producer.

Stockpiles Surge

China is cutting overcapacity as stockpiles of the metal in warehouses monitored by the Shanghai Futures Exchange have jumped 61 percent this year after smelters ramped up output on expectations demand will improve as the global economy recovers.

Higher production costs and weak aluminum prices may force smaller smelters to cut production in the second half, Eric Zhang, an analyst at Shanghai Metals Market, a unit of CBI China Co., said in a report last week.

“Zinc and lead producers will be next,” said Jiang Donglin, research department manager at Shenzhen Zhongjin Lingnan Nonfemet Co., the country’s third-largest zinc maker.

“The bigger ones that have their own mines are still in the black,” Jiang said. “Some of the smaller ones, which have to import concentrate, have already started to operate at a loss and it’s only a matter of time before they cut output.”

--Editors: Richard Dobson, Jake Lloyd-Smith
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
http://www.businessweek.com/news/2010-05-21/aluminum-producers-in-china-losing-money-may-reduce-output.html

India: Aluminum fall on higher stocks

AHMEDABAD (Commodity Online): Aluminum May contract has moved down by 0.60% during trading session in MCX due to Dollar strength and higher stocks.

Aluminum opened at Rs 92.85 per Kg and made low of 90.85 while it made high of 93.6. Total volume is around 3588 lots and open interest is around 2280. Today LME stocks is +39075

“Technically, resistance level is at 95” said Hardik Shah, Sr. Commodity Analyst with Commodity Online.

14 days RSI for Aluminum is at 35 and is decreasing continuously on selling pressure.

“Fundamentally, Aluminum is weak. One can make short position at 97 levels for long term.” said Shah.

To get in touch with the Analyst on this report, please mail to tips@commodityonline.com
http://www.commodityonline.com/marketmovers/India-Aluminum-fall-on-higher-stocks-2010-05-20-1125-3-1.html

Vale stays in aluminum with Norsk Hydro deal

Reuters reported that Brazilian miner Vale's purchase of 22% stake in Norsk Hydro will give Vale long term access to aluminum markets even after it exits the aluminum industry as an operator.

Mr Ricardo Carvalho director of Vale Aluminum said that the company would sell its aluminum assets to Norwegian aluminum maker Norsk Hydro in a surprise USD 4.9 billion deal that lets Vale keep exposure to the aluminum value chain from bauxite to aluminum products.

He said that this is a strategic repositioning in which Vale stops being an operator and becomes a major partner of a global aluminum company and makes that company much more competitive in the future.

Mr Carvalho denied the company was reducing aluminum exposure to boost iron ore investments, saying the deal was structured such that the principal compensation to Vale came in the form of Norsk Hydro shares rather than cash. In addition to shares, Vale will receive USD 1.1 billion of cash for assets including the world's largest alumina refinery and one of the world's biggest bauxite mines. The Norwegian company will assume USD 700 million of debt. He said that the deal was unrelated to that dam auction and had been negotiated long before it.

Analyst of HSBC said that we see the sale of aluminum and bauxite assets as strategically positive for Vale. The aluminum division has always had weak performance and the capital freed up can be applied to develop more lucrative assets in iron ore.

Analysts for UBS Investment Research said that this transaction provides with the flexibility to exit the assets in future through a liquid instrument, but also provides a strategic stake in Hydro should Vale turn more constructive on aluminum longer term.
http://www.steelguru.com/news/index/MTQ0NjE0/Vale_stays_in_aluminum_with_Norsk_Hydro_deal.html