The following article comes from Reuters. Some numbers are difficult to believe. For instance, this article puts China 2009 consumption at 15 million tonnes. The general consensus is that it is at least 1 million tonnes lower than that. It also forecasts consumption growth at 20% for 2010. That is hugely optimistic. The best forecasts indicate growth of no more than 15%.
On the other hand, it is a good ploy to sell metal into China, especially in the first half of 2010. China is now running close to full capacity, with no new smelters coming on line until H2. There is likely to be some upward pressure on metal prices in China, which should deliver Rusal with some windfall profit.
Here is the article.
UC RUSAL, the world’s largest aluminum producer, plans to secure between five and eight major Chinese buyers on long-term contracts to carve a larger share of the world’s biggest market for the metal.
UC RUSAL, fresh from Russia’s biggest-ever private sector debt restructuring, also plans to restart 100,000 tons of idle capacity by the end of the first quarter as global consumption enters the second phase of recovery, a senior official said.
“Large Chinese companies represent a very interesting customer segment, and that is where we would like to focus our efforts,” Artyom Volynets, RUSAL’s deputy chief executive for strategy, said at the Reuters Global Mining and Steel Summit.
UC RUSAL, whose largest shareholder is Russian billionaire Oleg Deripaska, is seeking a bigger share of a Chinese market where per capita aluminum consumption has doubled to 10 kg a year in the last five years, versus 20-25 kg in western Europe.
The company struck a deal in November to sell 1.68 million tons of aluminum to Chinese state conglomerate NORINCO over seven years.
“We are in discussions with several similar-sized corporations, which will hopefully be buying from us at the same levels,” Volynets said on Monday. “Our goal is to sign five to eight similar customers over the next three to five years.”
Demand for aluminum, used in transport, construction and packaging, was rising as the global economy enters its second wave of recovery, Volynets said.
In China, demand could rise about 20 percent this year from the 15 million tons consumed in 2009. India, with annual per capita consumption of 1.8 kg, was also a growth market, he said.
UC RUSAL has capacity to produce 4.6 million tons a year of aluminum and produced about 3.9 million last year. About 100,000 tons of idle capacity, in Siberia, Sweden and Nigeria, would be operational by the end of the first quarter, he said.
“The other 500,000 tons can also be added. It is also profitable at today’s aluminum prices, but we are not in a hurry to do that,” he said. “We’ll review plans for this idle capacity every quarter.”
Though aluminum stocks in London Metal Exchange warehouses are near record highs in excess of 4.5 million tons, Volynets said supply was tighter than it might appear.
“A very significant proportion of those inventories are still locked into long-term financial deals: 60 or 70 percent,” he said. “These were two- to three-year deals, so they are not yet up for renewal.
“It’s inventories in Asia that matter for the global market. In Japanese ports, in South Korean ports, they are done to a single day’s consumption and that has pushed up premiums.”