Aluminum headed for $4,000 a ton, Rio Tinto says
Dale Crofts, Bloomberg News
Published: Wednesday, April 09, 2008
canada.com
Dick Evans, chief executive officer of Rio Tinto Group's aluminum unit, says prices for the metal may rise to more than $4,000 a ton because of increasing power costs and higher production expenses in China.
The metal may gain next year because of "a continued weak U.S. dollar, a strengthening of the (Chinese yuan) and continued high energy prices, all of which are not unreasonable," Mr. Evans said yesterday in an interview in Montreal. Prices are likely to remain "strong," he said.
Aluminum has risen 24 per cent this year on the London Metal Exchange after power cuts in China and South Africa forced companies including BHP Billiton Ltd. to curtail production. Rising power prices have added $300 to the cost of producing a ton of aluminum in the past three years, Mr. Evans said.
Aluminum for delivery in three months fell $12 to $2,986 a metric ton yesterday in London.
China tripled export taxes in 2006 to 15 per cent and removed a tax rebate on exports of some aluminum products to slow the expansion of smelters. The country produces one-third of the world's aluminum.
"As power rates continue to move up in China, which we think they will, and the (yuan) strengthens, then that's just continuing to tilt up the high end of the cost curve," Mr. Evans said.
Supply constraints also are pushing up prices amid rising demand for the lightweight metal used in aircraft and beverage cans. The company recently said the aluminum market would be "balanced" in 2008, compared with a previously forecasted surplus of about 700,000 tons. Alcoa Inc., the world's third-largest aluminum company, says it expects an "essentially balanced" market this year.
World demand for aluminum probably will climb about 9.6 per cent to 41.7 million tons this year, led by a 24-per-cent jump from China and an 8.3-per-cent gain in India, Alcoa said. China's consumption this year will be about 14.9 million tons, more than double U.S. use of about 6.8 million tons.
Rio Tinto Alcan and rival Alcoa have closed or sold some smelters in North America and Europe because of high power costs. The two companies are seeking investments in the Middle East and other regions to tap cheaper energy supplies. Electricity accounts for about one-third of the cost of smelting.
Rio Tinto Alcan is talking with Libya and Algeria about smelting projects. The company expects to offer its technology and form joint ventures with local partners to secure access to energy supplies, Mr. Evans said.
South Africa's state-owned utility Eskom Holdings Ltd. has curbed power supply to mines and smelters since January after the government delayed allowing it to expand for four years.
BHP plans to partly shut a smelter in Richards Bay.
Aluminum gained about 80 per cent in the past five years, while nickel more than tripled and copper gained fourfold. Increased Chinese aluminum production in the past five to six years has been a "damper" on pricing, Mr. Evans said in November. |
