Aluminum Demand Contracts the Most in Ten Years, Shift to a Growing Surplus Continues

KEY MESSAGES

• Western World primary aluminum demand contracted the most in ten years during H1 2019 amid auto sector demand weakness, oversupply of scrap units, and booming Chinese semis exports.
   

• Headwinds for demand seen persisting into 2020 (cheap/abundant scrap units, and growing semis imports).
   

• Primary aluminum inventories outside China experienced in H1 2019 their sharpest increase in four years (off-warrant buildups in North America and Europe).
   

• We continue to expect the current emerging market surplus to intensify in H2 2019 and to widen considerably in 2020.
   

• Smelting profitability has improved considerably around the world amid falling alumina and carbon prices; basically all of ROW’s operating capacity is now making money on a cash basis.
   

• Our end-user demand leading indicators suggest that the ongoing downturn in the world’s manufacturing cycle could begin to subside from August onward.
   

• LME prices remain in a downward trend but may be close to bottoming out. HARBOR continues to forecast prices in 2019 and 2020 to average around $1,870 per mton.