Chinese aluminum demand
Previously, we saw that aluminum producers have given different projections for aluminum markets. Alcoa sees a surplus of 1.1 million metric tons in China. It sees world ex-China to be in a deficit of ~1.9 million metric tons. Norsk Hydro (NHYDY) is forecasting a 1 million metric ton–1.5 million metric ton surplus for China. It sees a similar deficit in the rest of the world ex-China.
Meanwhile, the issue of the Chinese aluminum demand-supply equation cropped up in most aluminum companies’ 2Q16 earnings call. In this part, we’ll see what different aluminum producers are forecasting for Chinese aluminum demand.
2Q16 earnings calls
During its 2Q16 earnings conference call, Norsk Hydro raised its 2016 global aluminum demand growth projection to 4%–5% from the previous projection of 3%–4% growth. The company attributed higher Chinese aluminum demand as the key factor behind its new projection.
Alcoa (AA) expects Chinese aluminum demand to grow 6.5% year-over-year in 2016. The company listed Chinese government’s stimulus package, which has led to a rebound in the country’s property markets, as the key driver of Chinese aluminum demand in 2016. Note that China’s construction activity has been strong this year, as you can see in the graph above. Alcoa also sees strong growth in the electrical, packaging, and transportation sectors to boost Chinese aluminum demand.
Century Aluminum (CENX) also pointed to “healthy Chinese consumption growth” in 2Q16 due to the government stimulus. However, the company expects Chinese aluminum demand to moderate in 2H16 as the impact of government stimulus wanes.
Meanwhile, Century Aluminum also expects the Chinese aluminum supply to rise sharply in 2016. We’ll discuss this more in the next part of the series.
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