The Biggest Aluminum Surplus in a Decade

KEY MESSAGES

• If there is a shortage of metal in the Western World, why then have: a) LME prices plummeted, b) VAP premiums fallen to multi-year lows, c) equity prices of primary producers plunged, d) LME spreads widened significantly, e) world inventories continued to experience buildups, and f) aluminum market sentiment weakened to two-year bearish lows.
   

• ROW’s primary demand is estimated to have contracted by 2.6% y/y so far in 2019 amid contraction in the auto sector, stalling/ contracting construction activity, and pervasive cannibalization effects from growing scrap usage and imports from China.
   

• Aluminum production in ROW has managed to expand so far this year and is set to accelerate further, projected to experience in 2020 one of its biggest-ever expansions—amid ongoing production ramp-ups in Bahrain and Russia, restarts in Brazil and Canada, and upcoming ramp-ups in Iran and India.
   

• The Western World primary aluminum market has shifted to a surplus in 2019, deteriorating from a 0.9 million mton deficit last year and consecutive annual deficits since 2013.
   

• We expect ROW's primary aluminum market to experience in 2020 the biggest annual surplus since 2010 and then a bigger one in 2021.