Global Aluminum Industry: Review and Forecast, The

For the first time in five years, world demand for primary aluminum exceeded supplies in 2004. China continued to be a major factor in the world aluminum market, fueling demand with its rapid growth and producing record-level supplies at its expanding smelters. Global consumption of aluminum increased by 9% in 2004, according to Hydro's 2004 annual report. In recent years, growth in consumption has hovered at 3% to 5% per year. China's increasing consumption of aluminum included not only primary aluminum, but also scrap, semi-fabricated, and other products. Hydro reported.

On the supply side, China in 2004 produced 6,589 kt of primary aluminum-a volume that nearly doubled since 2001, when China produced 3,371 kt. according to the International Aluminum Institute, a global organization of aluminum producers. This was the third consecutive year in which China led the world in aluminum production.

Total world production reached 28,900 kt in 2004, the United States Geological Survey (USGS) reported, up from 27,700 kt in 2003. Meanwhile. North American production declined to 5,110 kt from 5,495 kt in 2003. Canada's production was curtailed by labor strikes, according to USGS estimates, while in the United States, increasing alumina and energy costs resulted in production cutbacks in the Pacific Northwest. Canada produced 2,640 kt of aluminum in 2004. as compared to 2,790 kt in 2003. Production in the United States declined to 2,500 kt from 2,703 kt.

Aluminum consumption in the Western World rose by an estimated 5.6% in 2004 to a record of about 30.600 kt. This consumption exceeded the previous high of 29,400 kt reached in 2000. Of the aluminum consumed. 22,800 kt was primary aluminum, and the remainder was from secondary/recycled metal. In 2004, aluminum consumption increased in all major regions of the world, according to Alcan's annual report, including 7% in North America, 7% in Asia (excluding China) and 8% in Latin America. Western Europe increased consumption by 3% and China by 16%.

Thirty-one percent of Western World consumption in 2004 was for transportation, Alcan reported. 18% for building and construction, 16% for containers and packaging, 12% for other uses, 8% for electrical. 8% for machinery and equipment, and 6% for consumer durables. For the first time in five years, aluminum consumption increased in every end-use market. The fastest-growing and largest market was transportation products, which increased by 7%. Transportation growth was spurred by increased worldwide light vehicle production, increased medium and heavy truck production, and increased aluminum usage in passenger cars, especially in Europe. Containers and packaging used 3% more aluminum in 2004, rising to 4,900 kt. Can stock was up by 2% and other packaging, principally foil, rose by 5%. Strong construction growth in the Western Hemisphere pushed aluminum consumption in the building and construction sector up by 5%. The electrical market rose by 4%, the first significant gain in four years.

The increasing consumption in 2004 led to a reversal of market surpluses of the last few years. The primary aluminum market ended 2004 with a deficit of about 685 kt. as compared to a surplus of about 157 kt in 2003. Alcan reported.

In year-end production capacity, only the United States declined in 2004, according to USGS estimates, from 4,140 kt/y to 4,000 kt/y. Venezuela's production capacity remained unchanged, at 640 kt/y, from 2003. Worldwide capacity increased as expansions outside the United States became fully operational, with China's capacity increasing more than any other country's, from 5,700 kt/y in 2003 to 6,800 kt/y in 2004.

As demand and production increased, so did pricing of primary aluminum. Alcan reported that primary aluminum prices averaged $ 1.721 /t in 2004. which was 21 % higher than the average for 2003. London Metal Exchange pricing of aluminum rose steadily throughout the year, according to Noranda. That price was $0.73/lb in January, reaching nearly a 10-year high in December of $0.89/lb.

To meet increasing primary aluminum production needs, world production of alumina and bauxite climbed in 2004 to 156,000 kt, as compared to 146.000 kt in 2003. the USGS reported. However, future production of primary aluminum could be hampered by limited supplies of alumina, according to a report published by Roskill Information Services. Alumina shortfalls were reported in 2004 and anticipated in 2005. The shortage is expected to be alleviated in 2006. though, as new capacity becomes operational. In 2004 Comalco in Australia commissioned the first new alumina refinery to come on stream in 14 years, and an additional 42,500 kt/y new capacity are planned through 2010.

What follows is a look at the 2004 operations of selected companies involved in primary aluminum production, according to information gathered from these companies' annual reports and web sites.