For commodity companies like Rio Tinto (RIO), the industry outlook is as important, if not more important, than the company’s position in the industry. Let’s see what senior aluminum executives had to say about the aluminum industry’s outlook during their companies’ 4Q16 earnings calls.
Alcoa (AA) expects global aluminum markets to be in a surplus in 2017. You can define a “surplus” as production in excess of demand. Markets are said to be in a “deficit” when demand exceeds production. Notably, global aluminum markets were expected to be in a deficit in 2016 after almost a decade of surplus.
Alcoa expects China’s aluminum surplus to be 2.1 million metric tons–2.3 million metric tons. World ex-China is expected to be in a deficit of 1.5 million metric tons–1.7 million metric tons resulting in a global surplus of 0.4 million metric tons–0.8 million metric tons in 2017. However, Alcoa expects largely balanced markets in bauxite and alumina.
Alcoa expects global aluminum demand to grow 4% YoY (year-over-year) in 2017. The company expects Chinese aluminum demand to rise 6% YoY this year. It expects the ex-China demand to rise 2% YoY.
Norsk Hydro (NHYDY) expects global aluminum demand to grow 3%–5% YoY in 2017. The company expects Chinese aluminum demand to rise 4%–6% YoY in 2017. It expects China’s primary aluminum production to increase 7%–9% this year. Norsk Hydro expects aluminum markets to be in balance this year with expectations of a small surplus.
Having said that, China would be the wild card for global aluminum markets (CENX) (DBB) this year. You can read Alcoa Stock in the Lens of Industry Indicators to analyze China’s demand-supply indicators.
You can also visit Market Realist’s Aluminum page for ongoing updates on the industry.