Tags: aluminum | Alcoa | China | exports

Aluminum Climbs as Alcoa Shrinks Capacity on China Export Deluge

Tuesday, 03 Nov 2015 02:42 PM

Aluminum rose for a third day after Alcoa Inc., the top U.S. producer, announced smelting and refining capacity cuts in the latest response to a global oversupply that’s pushed prices to a six-year low.

The metal used to make everything from aircraft to window frames and cans climbed to the highest in a week after the New York-based company said it will reduce smelting capacity by 503,000 metric tons and alumina refining by 1.2 million tons. The measures will be completed by the end of next quarter.

Aluminum has slumped 27 percent in the past year as slowing economic growth and new low-cost capacity in China helped boost exports from the biggest supplier to a record. Goldman Sachs Group Inc. has said producers face the longest period of pain in a generation with increasing surpluses through 2018. Dwight Anderson, founder of hedge fund Ospraie Management LLC, has described the metal as “miserable,” probably leading to closures and bankruptcies.

“For a while, one has lamented the absence of more production cuts, ” Michael Turek, the head of base metals at BGC Partners Inc. in New York, said in an e-mail. “Clearly, we need more doses of the same bitter medicine,” he said, referring to Alcoa’s production cuts.

Aluminum for delivery in three months rose as much as 1.5 percent to $1,516 a ton, before settling at $1,501 at 5:50 p.m. on the London Metal Exchange. Prices reached $1,460 on Oct. 28, the lowest since June 2009.

Global aluminum production will exceed demand by 1.13 million tons this year and by 832,000 tons in 2016, ICBC Standard Bank Plc estimated before the latest Alcoa cuts were announced.

While the Alcoa announcement helped prices, "it’s just a drop in the ocean if you see how much aluminum is still produced in China and how many capacities are still being built there," Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said by e-mail.

China’s slowest economic growth in more than two decades is pushing more of the metal onto the world market. Exports from the country in the first nine months of 2015 jumped 18 percent from a year earlier, customs data show. A cut in power tariffs soon may benefit producers and further weaken prices, people familiar with the matter said last week.

The increase in prices boosted producer shares. Vedanta Ltd., India’s largest aluminum maker, gained as much as 4 percent in Mumbai and Hindalco Industries Ltd. added 1.7 percent. Alcoa rose as much as 4.5 percent.

Copper settled unchanged $5,125 a ton ($2.32 a pound), as zinc rose. Nickel and lead declined on the LME, while tin was unchanged.

On the Comex in New York futures for December delivery rose 0.5 percent to $2.3305 a pound.

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Aluminum rose for a third day after Alcoa Inc., the top U.S. producer, announced smelting and refining capacity cuts in the latest response to a global oversupply that's pushed prices to a six-year low.
aluminum, Alcoa, China, exports

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