Japan's Mitsui sees world aluminum shortfall of 156,000mt in 2006

Tokyo (Platts)--3Feb2006

The world will be short 156,000mt of aluminum in 2006 due to slow
output growth on the back of smelter shutdowns in Europe and the US, Japanese
trading house Mitsui & Co Metals said in its forecast report published Friday.
     MCM projects worldwide aluminum output in 2006 to grow by 4.3% from 2005
to 33.1-mil mt. Demand is forecast to grow by 5.5% on-year to 33.3-mil mt. 
     On the supply side, smelter shutdowns and output cuts in the US and
Europe would trigger a 2.6% decrease in supply in these regions this year. The
reduced supply there, however, would be partially offset by output increases
in the United Arab Emirates, India and China. 
     China is expected to produce 8.5-mil mt in 2006, up 8.3% on-year. Supply
of alumina, one of the factors affecting China's aluminum output, is expected
to be tight in the first half of 2006 but supply would rise on alumina output
hikes at Worsley refinery in Australia and Alunorte refinery in Brazil. 
     Meanwhile, demand growth in Japan, Europe, the US, Oceania and "other
western economies" is projected to grow by 2.8% on-year to 23.1-mil mt, Russia
and former socialist economies at 5.2% to 2.1-mil mt, and Chinese demand to
surge by 14.2% to 8.0-mil mt. 
     
     LME ALUMINUM PRICES TO FALL IN SECOND HALF OF 2006
     MCM also forecast that aluminum prices on the London Metal Exchange will
stay at high levels of $2,350-2,700/mt in H1 2006, little affected by changes
in the LME stocks. The pressures for higher prices are output cuts in Europe
and the US, China cutting aluminum exports, high crude prices and the US
economy that drive speculative fund buying. LME prices in H2 would ease
slightly to around $2,150-2,650/mt, after the demand peaks off after summer. 
     Meanwhile, premiums for aluminum imported to Japan are expected to move
up in 2006. According to Platts assessments, premiums for good western grade
aluminum for the current quarter were $55-58/mt CIF Japan over LME cash
prices. MCM sees higher premiums due to possible reductions of supply from
China and good western producers, and increased demand in Japan as the
country's economy picks up. 
     Second quarter premiums are forecast at $55-65/mt CIF Japan, with third
quarter premiums indicated at $55-75/mt, and fourth quarter levels at
$50-85/mt.

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