BL reported that aluminium prices are unlikely to bounce back in the near term as capacity surpluses continue to exert downward pressure, despite major global producers resorting to cuts. From a medium term perspective, a dip in automobile purchases amid renewed economic uncertainty in Europe and a slowdown in imports by China are expected to result in demand growth deceleration over the next few years.

Aluminium smelters globally are expected to operate at 84% capacity in 2013 with production pegged at 47.6 million tonnes during the year, as against capacity of 56.9 million tonne per year. This translates into greater curtailment of production than in 2012, when production stood at about 46.2 million tonnes from operational capacities amounting to 54 million tonne per year. In addition to primary aluminium, recycled metal accounts for around one third of global consumption.

According to a projection made by aluminium giant Alcoa, demand is expected to mount to 49.4 million tonne in 2013, a 7% growth in comparison with the previous year. Most of the demand will come from China, the world’s biggest consumer which is expected to witness 11% growth in consumption to 23 million tonnes.

But China is well on its way to becoming self sufficient in aluminium, with the country limiting itself to strategic imports of aluminium, thanks to massive capacities built at home, even though it still relies on overseas suppliers for its bauxite requirement. This makes it imperative for global producers to explore and develop new markets for their produce.

Among the other top aluminium consuming regions, Indian demand is expected to rise by 7% to 3.8 tonnes in 2013. The country’s aluminium industry comprises four primary producers, namely Hindalco, Nalco, Balco and Vedanta Aluminium. The cumulative capacity of these firms amounts to around 1.6 million tonnes.

Demand from Europe, on the other hand, is expected to decline by 1% to 6.5 mt, even as North American consumption is projected to rise by 4 per cent to 6.2 mt.

Primary aluminium prices never recovered after the crippling global recession in 2008. Prices of the metal touched an all time high of USD 3,271.3 per tonne in November 2008 before crashing to 5 year low of USD 1,251.8 per tonne in February 2009. The metal managed to claw back much of the lost ground in subsequent years, but has fallen 32% since April 2011. And since the start of 2013, aluminium prices have tanked by 9% on the LME.

• [Editor:editor]