Surplus availability of aluminium could force manufacturers to close plants in 2020 — in the absence of a demand rebound, — said a Forbes overview of the aluminium market.
Supply cuts in excess of 1mn mt a year are needed to prevent aluminium from slipping to $1,657/mt in 2020, given that the demand is unlikely to rebound in the near term. Morgan Stanley had indicated that the aluminium market needs deep supply cuts in July.
Leading miners Alcoa and Rio Tinto have signaled possible closure following the 15pc drop in LME aluminium price from $2,000/mt year prior. Alcoa is review production at its facility in Victoria, Australia, while Rio Tinto is reviewing Tiwai Point Smelter in New Zealand.
Early this month, Aluminum Bahrain (Alba) kicked-off production from its Line 6 project, which is expected to flood the already oversupplied aluminium market. This expansion makes the company the biggest aluminium producer outside China.
Adding to the woes of aluminium producers is the new rule governing LME-managed warehouses effective February 2020, which calls for disclosure of hidden or invisible stockpiles at the warehouses. Revision of warehouse stockpiles are expected to reverse the downward trend in LME inventory levels. Clients of the LME have 1.27mn mt of aluminium compared to 4mn mt of aluminium five years ago. Morgan Stanley reported that falling visible inventories raised hopes that market was tighter than the price suggests.
Official inventory, including LME and other warehouse systems, of aluminium totals 2.78mn mt, but unreported stockpiles are estimated at 9mn mt. This invisible stock is a cause of worry to aluminum producers competing against low-cost suppliers such as Alba.
