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Albras’ Restart to Add More Production to Booming Supply

SUMMARY

1. World’s primary aluminum production remained firm in April, mainly supported by recovering run-rates in China. Specifically, China’s production grew by an estimated 0.2% m/m in April, while ROW’s declined by about 0.4% m/m amid unspecified losses in Africa and Latin America and surprisingly absent reported gains in the Middle East.

2. ROW’s primary aluminum production should increase notably in the coming months, as production restarts get confirmed, expansions accelerate, and production cash-costs continue to decline.

  • Indeed, Albras’ 230-kmtpy production restart in Brazil has been confirmed, as previously anticipated.
     

  • This restart will add more primary aluminum to the market at a time when there are ongoing production ramp-ups in Bahrain (Alba’s Line 6), Russia (Rusal’s BEMO smelter), and India (Vedanta’s Jharsuguda II).
     

  • Moreover, smelting production costs should continue to decline ahead amid increased alumina supply from Brazil, which is supportive for expansions and restarts in the Western World.
     

Indeed, ROW’s primary aluminum production is set to expand in 2019 by the most in eight years, and to experience the largest two-year production expansion on record (2019-2020).

3. China’s smelting profitability has improved with higher SHFE prices and lower production costs, which is supporting production expansions and restarts in the country (and would partly counterbalance temporarily higher alumina prices). Additionally, new capacity additions should more than offset potential production curtailments (for transferring capacity permits).

We now expect China’s production to expand by 1.0 million mton or 2.9% y/y in 2019.