Aluminum to rise 30% on China imports

Aluminium will rise 30 per cent by 2009 because China, the world's largest consumer and producer of the metal, will become a net importer of the commodity, Sanford C Bernstein Ltd said.

Metal for immediate delivery will average $3,266 a metric tonne in 2009, analyst Andrew Keen, who has covered the metals industry since 1990, said today in a report. The contract closed yesterday at $2,503 a tonne on the London Metal Exchange.

"Aluminum is our preferred base metal," said London-based Keen. "China will retreat from its position as a net exporter by 2009 on economic and environmental grounds, leading to a cyclical upswing in aluminum prices."

Aluminum, used in beverage cans and cars, trailed copper, lead and tin this year as the metal price has declined 9.1 per cent. A rally in metal prices would benefit Rio Tinto Group as its pending $38.1 billion purchase of aluminum producer Alcan Inc would increase its earnings before interest, taxes, depreciation and amortization to 31 per cent projected this year, compared with 10 per cent last year, Keen said. The brokerage rated Rio Tinto "outperform," suggesting the the stock will outpace the market index by more than 15 percentage points in the year ahead.

China has accounted for 67 per cent of world demand growth and 72 per cent of world production growth since 2000. the analyst said.

Keen estimates that demand of the metal will beat supply by 71,000 tonnes next year, rising to 593,000 tonnes in 2009.

Exports slide
China's net aluminum exports have been falling in 2007 after the government cut tax incentives for overseas sales and placed curbs on smelter expansions. Energy accounts for about 40 per cent of the metal's production cost, according to Citigroup Inc.

"In a country short on power and long on carbon emissions, smelting aluminum for export using coal-based power is not sustainable," said Keen.

Aluminum for delivery in three months dropped $4, or 0.2 per cent, to $2,547 a tonne. Rio Tinto added 10 pence, or 0.2 per cent, to 4,336 pence in London trading. The stock has risen 59 per cent this year, outpacing a 39 per cent gain in the Bloomberg Europe Metals & Mining Index tracking nine companies including Rio Tinto.