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Deficit or Surplus: Where’s Aluminum Headed in 2017?

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Deficit or surplus

For commodity companies such as Rio Tinto (RIO) and Century Aluminum (CENX), the industry outlook is as important, if not more important, than their positions in the industry.

When production exceeds demand, markets (DBB) are in a surplus condition. A deficit occurs when demand exceeds production. According to most estimates, including those of producers such as Alcoa (AA), aluminum markets were in a deficit in 2016. Let’s see what senior aluminum executives had to say about the aluminum industry’s 2017 balance.

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Alcoa

Alcoa expects global aluminum markets to be in a surplus in 2017. The company expects China’s aluminum surplus to be 2.1 million–2.3 million metric tons. 

Excluding China, the world is expected to be in a deficit of 1.5 million–1.7 million metric tons, resulting in a global surplus of 0.4 million–0.8 million metric tons, in 2017. However, Alcoa expects largely balanced markets in bauxite and alumina.

Other producers

Norsk Hydro (NHYDY) expects global aluminum demand to rise 3%–5% YoY (year-over-year) in 2017. The company expects Chinese aluminum demand to rise 4%–6% YoY in 2017, and it expects China’s primary aluminum production to rise 7%–9% in the year. Norsk Hydro expects aluminum markets to be in balance this year, with expectations of a small surplus.

However, aluminum company RUSAL expects global aluminum markets to be in a deficit of 1.1 million metric tons in 2017. According to RUSAL, global aluminum markets were at a deficit of 0.6 million metric tons in 2016.

We should remember that the aluminum industry’s 2017 balance could eventually boil down to China’s demand-supply equation. We’ll discuss this in detail in the next article.

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