Demand growth expected to slow

IN FOCUS/ ALUMINIUM

Alcan, the world's second largest producer of primary aluminium has forecast a slowdown in demand growth in 2005 to about 4 per cent against 9.4 per cent rise in consumption in 2004.

Alcan said rapid growth in demand in 2004 was a result of consumer stockpiling of material ahead of widely perceived rise in copper prices brought about by strong global economic growth.

Alcan is predicting a fall in the global copper deficit from 685,000 tonne in 2004 to 200,000 tonne this year as production is set to increase by 5.7 per cent.

Alcan recorded a fourth quarter loss as a result of its purchase of former competitor Pechiney.

Alcan posted a net income of $66 million for 2004, around the same as last year, despite revenues increasing by 79.6 per cent to reach $24.88 billion.

According to the International Aluminium Institute, global primary aluminium production was flat in December 2004 month-on-month.

Daily production, excluding China, was 61,900 tonne, up only marginally from the 61,700 tonne average seen in December 2003.

The total production of primary aluminium in 2004 reached 22.59 million tonne, up 3 per cent from last year.

Chinese production reached 6.59 million tonne in 2004, up 18.7 per cent year-on-year, and was 614,000 tonne in December.

This represents an annualised rate of 7.3 million tonne, not taking into account seasonal variations.

According to GFMS Metals Consulting, the growth in 2005 is expected to be higher by 10.6 per cent over the last fiscal.

GFMS expects further drawdowns in aluminium stocks which will support prices at high levels of above $1,800 per tonne.

The report suggests that while there are still large amounts of exchange stocks, cancelled warrant levels imply that the stocks will decrease.

Cancelled warrants currently account for around 19 per cent of total London Metal Exchange (LME) stocks.

An inventory drawdown will see further pockets of tightness, particularly in the US.

This is expected to force a rise in prices towards the second half of 2005.