China's Transport Sector Demand To Reduce Aluminum Oversupply

The expected surplus of aluminum in China in 2014 will decline, in accordance with the latest analysis of the situation. Strong demand from the transport sector and the completion of infrastructure facilities here will require the use of special equipment for the transportation of oversized and heavy cargo. Intensive construction of bridges and housing facilities can also reduce the surplus of aluminum from the previously forecasted 1 million tons to less than 500 thousand tons.

According to sources, in the country in the period from the end of 2013 to May of this year, the capacities of expensive melting equipment with a production volume of almost 2 million tons were stopped. This comes after the sharp drop in aluminum prices last year. Prices hit a 5-year low in March this year. However, the shutdown factories with a capacity of almost 500 thousand tons returned to work after the recovery in prices. Aluminum product prices have already climbed nearly 15 percent from their March lows.

In the first five months of this year, the main indicators of aluminum production in the country increased by 7.9 percent compared with the output during the corresponding five months in 2013. China's primary aluminum production was 9.59 million tonnes during January-May this year. The growth rate slowed down from 8.2 percent growth recorded in 2013 over the previous year. Analysts lowered their projected annual volume to less than 28 million tonnes from the 28.3 million tonnes previously forecast.

Strong demand from the transport sector is likely to drain any surplus from China. Exports of semi-finished products, which lead to the use of primary aluminum, increased sharply in the second quarter of 2014.