Aluminum industry to stay resilient despite growing capacity

Business Tuesday 07/November/2017 19:30 PM
By: Times News Service
Aluminum industry to stay resilient despite growing capacity

Muscat: Aluminium industry across the globe will remain resilient amid growing Asian capacity and policy uncertainty in China and the USA as global economic growth will drive demand curve steeper.
Growth of capacity in India and China has threatened to lower London Metal Exchange (LME) prices but GCC-based aluminium producers, including Oman, are optimistic about growth in the sector riding on the back of Chinese government pollution related curtailment and demand in infrastructure and automotive sector. Moreover, uncertainty of the US to impose duties were also rubbished by experts as they don’t make economic sense, a high level panel discussion at the Arabal conference concluded.
“The demand still beats supply by 1.8 million tonnes so rise in India should not be a problem or challenge to production,” Abdullah Elzhar Hassan, Chairman and CEO of Egyptalum said, answering a panel question related to Indian production which aims to increase by a million ton by next year.
Reiterating the comments, Said Al Masoudi, chief executive officer of Sohar Aluminium said that although India will grow its capacity, there would not be a major impact on the markets as most of its production will be absorbed by domestic markets.
“Duty on primary metal does not make sense economically so it should not happen but politically we cannot be sure,” he said.
“Only 20 per cent of the US market needs are currently covered by local production so Trump administration imposing duties will be harsh.”
China accounts for around 50 per cent of the production of aluminium in the world and boasts nearly similar consumption figures but recent ruling by Chinese government to control huge emissions from industry is being seen as a move where Chinese production can take a hit. Gulf producers, on the other hand, have enjoyed a stable growth and an enormous growth in demand for aluminium due to their growing infrastructure sector and global growth.
However, capacity expansion within GCC smelters is still under consideration and not a straight forward demand supply process. Sohar Aluminium expansion as recommended by Tanfeedh, Oman’s National Plan for Economic Diversification is under consideration by the board and still no decision has come forth. Other GCC producers have repeated a similar story.
“The current LME prices are lucrative but we will not make a decision right away. We will wait and see how the Chinese policies play out and then take a decision on balancing markets as current economic environment is still uncertain. Let the LME prices be about $2,000 plus for now and we will make a decision soon,” Khalid Laram, chief executive officer of Qatar Aluminium Limited said.
According to the speakers, as more competition creeps into the market, services, reliability and quality will make the difference to suppliers.