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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (2800)	3/12/2004 7:13:33 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

World faces aluminum shortage as China demand soars: survey WASHINGTON : The world faces an aluminum shortage in 2004 and 2005 as white hot Chinese demand meets limited supplies of the raw ingredient alumina, an industry survey found. The survey by Merrill Lynch led to a re-think on the aluminum industry, and a sharp upgrade for the share price outlook of aluminum production giants including Alcoa and Alcan. Advertisement China, which consumed 18.7 percent of the world's aluminum and produced 19.7 percent last year, is rapidly expanding smelter capacity but will be forced to curb output because of limited alumina, it said. As a result, prices for aluminum -- used for beer and softdrink cans, home sidings, roofing and windows, car and plane bodies and overhead transmission lines -- would soar in 2004 and 2005. But when alumina supply caught up with the massive new Chinese capacity, Merrill Lynch predicted a price reversal in 2006. "Our forecast of the supply/demand balance shows the aluminum price story is one of short-term gain and long-term pain," said the survey by Merrill Lynch analysts Vicky Binns, Mike Harrowell and Daniel Roling. Lack of alumina would constrain global aluminum output growth to six percent this year and five percent in 2005, while demand would surge 7.7 percent this year and 5.8 percent in 2005. The shortfall would amount to 223,000 tons of aluminum in 2004 and 505,000 tons in 2005, it said. "We are increasing our aluminum price forecasts by nine percent in 2004 to 80 cents a pound and by 20 percent in 2005 to 90 cents a pound to reflect this tightening," it said. "By our estimates, new alumina supply from 2006 should allow aluminum supply growth of 8.5 percent in 2006 and 7.0 percent in 2007, creating a growing aluminum surplus and driving prices lower, back to trend levels." In 2007, prices were expected to be 76 cents a pound, and long-term they were likely to be 68 cents. Despite the limited alumina supply, Chinese production would likely soar 19 percent to 6.6 million tons in 2004 and 12 percent to 7.4 million tons in 2005, it said. China would have enough smelting capacity by the end of 2005 to surpass forecasts of its production needs for several years, the group said. "But that does not mean capacity constraints will cease," it warned. The West had not faced a commodity shortage since the oil shock 24 years, the analysts said. "The Chinese are also managing a high-growth economy, which faces risks of commodity shortage that have been largely swept aside by the 'just in time' manufacturing culture in Western economies," they said. "We believe China has a national strategic requirement to secure and maintain availability of raw materials." - AFP channelnewsasia.com