China aluminum demand to shoot up by 15pct (Commodity...

China aluminum demand to shoot up by 15pct
(Commodity Online)
Updated: 2010-01-04 11:07
Counter:169

Aluminum demand in China is expected to grow by 15% in 2010 on the back of revival in construction and auto segments.


According to reports, long term prospect of aluminum is bright as China is still in the middle of completing urbanization and its metal intensive growth is likely to continue for many years to come. It added that about 65% of aluminum consumption is in the east and middle south China. The urbanization of North West and south west has great potential for aluminum demand.


In the short term, overcapacity, plenty of inventories and reopening of smelters due to return to profitability will cap any upswing in aluminum prices. However, the current average cost of the Chinese smelters is USD 2,000 and is rising further due to increase in bauxite and alumina and coal and power prices. These cost push factors provide a strong floor for aluminum prices.


LME aluminum is expected to trade between USD 2,000 to USD 2,400 in FY11 and analysts feel that FY11 estimate will be USD 2,200.


Indian aluminum producers are best placed with captive bauxite, alumina and power and are insulated from across the board cost increases to a large extent. In the pure aluminum space, Nalco is set to benefit. It is one of the cheapest aluminum producers and has volume upside of 30% in both aluminum and alumina due to brown field expansion.