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World Aluminum Demand Slowdown Continues

KEY MESSAGES:

  • The auto and construction sectors in the Western World continue to weaken and are set to enter into contraction zone. This should negatively impact demand for aluminum semis (castings, extrusions and rolled products), and primary metal, throughout 2019-2020.
     

  • HARBOR expects demand in the US to avoid recession but to lose momentum in the quarters ahead. This US slowdown should undermine demand stabilization elsewhere in the next quarters.
     

  • However, primary aluminum production has started to expand in China and ROW, while profit margins for smelters have started to improve amid cost deflation pressures.
     

  • World’s primary aluminum inventories reached a seven-month high of 16.7 million mton in Q1 2019, hitting respective nine- and seven-month highs in China and ROW (led by North America and Europe).
     

  • World primary aluminum market on track to experience a 0.5 million mton surplus in Q1 2019 driven by China; oversupply expected to intensify in H2 2019 as primary aluminum expansions accelerate.
     

  • LME prices remain in a medium-term downward trend targeting $1,770 per mton. We expect LME Cash prices to average $1,925 in 2019 and $1,870 in 2020.