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ROW's Production Continues to Increase Steadily toward Record Highs

Summary

  1. Primary aluminum production accelerates in ROW, while China’s output has yet to speed up its recovery. ROW’s production expanded in Q3 2019 at the fastest annual pace for any quarter in a year (up by 1.5% y/y, according to our assessment), supported by Alba’s Line 6 and Rusal’s BEMO ramp-ups, as well as by Albras’ restart. Conversely, China’s production fell in the same quarter by an estimated 1.8% y/y amid disrupted capacity in Shandong, Xinjiang, and Inner Mongolia totaling as much as 1.75 million mtpy.
     
  2. Smelting expansions/restarts continue to more than offset limited production curtailments/disruptions in ROW. Production gains from restarts in the US, the Netherlands, and Brazil, along with gains from ramp-ups in Bahrain and Russia, have more than offset so far in 2019 losses from idled capacity in Europe, Venezuela, and now India (Nalco), Egypt (Egyptalum), and Canada (Kitimat). HARBOR still projects ROW’s production to expand in 2019 (revised to 2.5% y/y) at a stronger pace than in 2018 (up by 1.2% y/y).

    Moreover, gains from smelting expansions/restarts in Canada, Iran, and India have yet to hit in the market, at a time when smelting cash-costs decline further and output curtailments seem unlikely. As a result, ROW’s production remains on track to experience in 2020 one of its largest expansions on record (1.4 million mton or 5.0% y/y; slight upward revision due to upcoming production restart in Iceland).
     
  3. In China, production growth is on track to return in 2020 amid production restarts of recently disrupted capacity (up to 1.75 million mtpy), new smelting capacity in the province of Yunnan (around 2.0 million mtpy), and attractive smelting profitability (still near recent two-year highs). HARBOR now expects China’s production to grow by 1.4 million mton or 3.9% y/y in 2020; accelerating for the first time in three-years.