Aluminium demand may rise in 2010

Aluminum consumption in Asia may continue to grow next year as stimulus measures in China, the world’s biggest metals consumer, and rest of the region lift demand for the metal, an executive at Novelis Korea said.

“I still see Asia demand growing,” Sachin Satpute, managing director for business development at Novelis Korea, said in an interview in Seoul on Wednesday. “Look at China’s massive stimulus measures. It has generated a lot of demand.”

Aluminum prices have surged 32 per cent this year as China’s $586 billion stimulus spending increased demand for the metal used in car parts, construction and cans. China’s economy expanded 8.9 per cent in the third quarter, the fastest pace in a year. Harbor Intelligence forecasts demand will outstrip supply by 380,000 tonnes next year and prices will average $2,700. Prices have averaged $1,652 a tonne this year.

“Asia used to depend on Western countries for demand generation,” Satpute said. “This year, most aluminium and aluminium products are consumed” within Asia, driven by the stimulus spending, he said.

“There is overcapacity and overcapacity is in China,” Satpute said. Still, China is different from other parts of the world because “when prices are bad, they close capacity, and when prices are good, they start again,” he said.

Barclays Capital forecasts that the global surplus in aluminium will increase 29 per cent to 1.63 million tonnes next year as the biggest annual price increase since 1994 spurs producers to increase output.