Alcoa Lowers 2015 aluminum surplus forecast on lower China supply

alcoa-lowers-2015-aluminum-surplus-china

Alcoa lowered its forecast for the 2015 global aluminum surplus to 551,000 tonnes from its second-quarter estimate for a 762,000-tonne surplus, the company said in a presentation to announce its third-quarter financial results on Thursday.

Reuters | October 9, 2015

Alcoa lowered its forecast for the 2015 global aluminum surplus to 551,000 tonnes from its second-quarter estimate for a 762,000-tonne surplus, the company said in a presentation to announce its third-quarter financial results on Thursday.

It said it expects a aluminum market deficit in 2016, though it did not specify how much.

The decline in the expected 2015 surplus came as Alcoa lowered the amount of new smelting capacity it expected to come online in the rest of the year in both China and the rest of the world, as weak aluminum prices force producers to delay maintenance and scale back planned capacity upgrades.

Chief Financial Officer Bill Oplinger told investors the lower surplus projection was “primarily due to the effect of the executed Chinese curtailments and the slower launch of greenfield smelter projects in China.”

The company expected Chinese supply to total 31.1 million tonnes, down from 31.4 million tonnes the last quarter, and said supply in the rest of the world would be 26.819 million tonnes, down from its forecast for 26.844 million tonnes in the prior quarter.

Oplinger added that while China’s exports of “fake semis”, or metal exported as semi-fabricated to evade export taxes only to be re-melted later, continued to fill the primary aluminum deficit in the rest of the world.

However, Chinese semi-fabricated exports fell 21 percent between the second and third quarter, Oplinger said, as continued weakness in regional premiums paid on top of London Metal Exchange prices for physical delivery reduced the attractiveness of exporting fake semis.

“There’s no outflow of primary metal from China, and the export of fake semis has decreased significantly,” Oplinger said

Alcoa reported a smaller-than-expected quarterly profit due to the slide in aluminum prices, earning 7 cents per share versus analysts’ average expectations of 13 cents per share.

Source: http://www.reuters.com/article/2015/10/08/alcoa-results-surplus-idUSL1N1282KF20151008