Alcoa Sees Oversupplied Aluminum Market Shifting to Deficit

  • Demand is set to climb by 6.5 percent this year, Alcoa says
  • Aluminum has slumped more than 40 percent from a 2011 peak

Alcoa Inc., the largest U.S. aluminum producer, maintained its forecast for global consumption of the metal this year and sees the currently oversupplied market shifting to a deficit in 2016.

Demand for the metal used in everything from aircraft to beer cans is set to climb by 6.5 percent in 2015, New York-based Alcoa said Thursday in its third-quarter earnings statement. That matched its prediction in July.

While Morgan Stanley forecasts another aluminum surplus next year and Bloomberg Intelligence warns China’s glut may worsen as capacity growth accelerates, Alcoa sees the market moving to a deficit in 2016. The company reduced its 2015 surplus forecast to 551,000 metric tons, from 762,000 tons in its second-quarter presentation. 

The price of aluminum has slumped more than 40 percent from a peak in 2011, and is down 12 percent this year, amid the slowest Chinese expansion in a generation. Morgan Stanley analysts predict a 2016 surplus of 1.18 million tons. Industrial metal prices surged Friday on signs that suppliers are reacting to the slump by cutting output.

China may account for 90 percent of a forecast increase in global capacity this year, which could exacerbate local oversupply and pull down prices, Bloomberg Intelligence analyst Yi Zhu wrote in a research note dated Friday.

China Slowdown

Alcoa, which plans to split into two parts by separating its metal-making business from manufacturing, lowered its China consumption forecast to 9.3 percent in 2015, from 9.5 percent. It still expects global aluminum demand to double between 2010 and 2020.

“The biggest country-specific end market for aluminum is the Chinese non-residential construction space,” Andrew Lane, an analyst at Morningstar Inc. in Chicago, said by telephone before the announcement. “With fixed-asset growth growing much less than expectations in recent years, that’s a clear negative for global aluminum consumption.”

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