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PRESS
CENTRE / CALENDAR / WORLD
ALUMINIUM SHORTAGE
WORLD ALUMINIUM SHORTAGE
Artem Volynets, Director of Corporate Strategy at UC RUSAL, the world’s largest
aluminium and alumina producer, has taken part in a panel discussion on the
anticipated global shortage of aluminium for RBC TV programme In Focus. Joining
Mr. Volynets on the panel were Oleg Petropalvlovsky, an analyst from
BrokerCreditService, and Vladimir Grinberg, the editor of National Metallurgy
magazine.
Hosted by Pavel Zimin, the panel debate covered a range of issues affecting the
world aluminium market, including industry trends in Russia; developments in
production processes; changes in consumption and recently emerging applications
for aluminium.
According to many experts, aluminium is currently one of the most undervalued
metals. It is expected that an increase in consumption in Asia, driven by the
booming growth, will lead to higher aluminium prices. In addition, industries
are increasingly using aluminium as a substitute for other, more expensive
metals. As a result, short-term demand for aluminium is set to go up by 10%,
which should allow for a sustainable increase in prices. Already, since the
beginning of the year, the price has increased by 30%, crossing the
psychologically important mark of $3000 per tonne.
 One of the key
questions discussed on the programme was the expected growth of metal
consumption in China. According to Mr. Volynets, China will remain the driving
force for world consumption. China already accounts for half of the world’s
growth in aluminium consumption and is responsible for one third of the world’s
total consumption, which is generating strong demand for the metal. This is
without factoring in the increased purchasing power of other countries.
Mr. Volynets also highlighted the growing shortage of power as another key
factor affecting the development of the industry. Many projects from the
leading aluminium companies have had to be put on hold because of an energy
shortage. These projects include Coega in South Africa, which is being
developed by Rio Tinto Alcan, and the Alcoa project in Trinidad. So,
development of new capacity is getting more difficult and requires increased
capital investment. For example, the new aluminium smelter being constructed in
the Middle East through a joint venture by Norsk Hydro and the Quatar
Government, will have a capital cost of over $8000 per tonne per annum, almost
twice that of five years ago. This trend is being replicated across the world.
In Russia, the capital costs are currently significantly lower, but an
escalation in inflation will increase the costs of capital investments
dramatically. The average cost of production is also increasing and is expected
to reach the $3000 per tonne mark soon.
 Over recent years there has
also been an increase in the substitution of other metals for aluminium. Mr.
Volynets used the automotive industry as an example. 15 years ago the average
automobile contained about 60 kg of aluminium. Today that figure stands at
around 120 kg. In the light of the climate change challenge, the importance of
producing lightweight vehicles that consume less fuel and save energy, will
inevitably lead to further increases in consumption of aluminium.
At the end of the discussion, the guests agreed that the supply of aluminium
today is simply unable to keep pace with demand. This, combined with further
falls in the dollar, will increase the cost of production outside of the US,
where most of the production capacity is located. At the same time, aluminium
is undervalued when compared with other core metals, so the price of aluminium
has a large potential for growth. Indeed, it has already started doing so.
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