Aluminum market may go from excess to deficit in 2015

The aluminum market outside of China will face a deficit as early as 2015 due to a reduction in the production capacity of large producers and a ban on the export of ore from Indonesia. These conditions could lead the market to a long-term deficit, as there is a clear recovery in demand.

According to analysts, the market will face a deficit in 2015 for the first time since 2005. However, high global aluminum stocks are likely to prevent significant price increases. The projected deficit will be approximately 444 thousand tons in 2015. Stephen Briggs, senior strategist at BNP Paribas, said the aluminum market is turning from surplus to deficit. He added that although the deficit can be long-term, it is very necessary for the normal development of the industry.

The market is now under the pressure of production cuts to cope with falling prices, bauxite export bans and increased demand from the US auto sector. Rusal, the world's largest aluminum producer, also reported a 2.3 percent drop in its output. Emirates Aluminum is expected to increase production by 449,000 tonnes this year and Saudi Arabia by 330,000 tonnes.

The Chinese aluminum market is still in surplus, but capacities of about 2 million tonnes of aluminum will soon be shut down due to high plant costs. Daily aluminum production fell to 67,000 tonnes in June from 67,500 tonnes recorded in May, according to the International Aluminum Institute.

Many hidden stocks exist not only in China, but also in the West and in warehouses. It is estimated that there are about 12 million tons of aluminum reserves outside China. LME stocks, registered only in warehouses, are approximately 5 million tonnes, although there has been a 9 percent drop since the beginning of the year.