Norsk Hydro Won't Be Surprised If China Pares Aluminum Outputby and
Market situation is `very sensitive,' Hydro CEO says
Deficit in global market could be reached in 2017, CEO says
With more than half of China’s aluminum makers producing the metal at a loss it won’t be “surprising” to see some of that overcapacity curtailed, according to Norsk Hydro ASA, Europe’s third-largest producer.
That may mean that the overhang of aluminum that’s depressing global prices may come to an end in 2017, Chief Executive Officer Svein Richard Brandtzaeg said in an interview in Oslo Wednesday.
“It depends how they are able to finance the loss-making operations over time,” he said. “That could be more and more challenging, but we have also seen that loss-making aluminum producers have still been able to produce. So they have to finance their operations day-to-day from other cash flow.”
The industry is struggling with a production surplus of the metal used in everything from soda cans to car production. Yet a slowdown in the Chinese economy is putting pressure on local producers that are partly responsible for creating the surplus, while at the same time easing global demand.
Hydro estimates that in 2016 without China, the world has a 1.5 million to 2 million metric ton aluminum deficit, compared with a surplus of as much 1 million when including the world’s second-biggest economy.
Aluminum at the London Metal Exchange is trading near the lowest levels since 2009. The LME primary aluminum 3-month contract traded at about $1,490 a ton on Wednesday, down from a high of $2,800 in 2011.
The global situation is “very sensitive” as to how the supply and demand situation will play out, Brandtzaeg said.