Steel Products Prices North America

CRU on Aluminum: Back to Pre-Global Financial Crisis Fundamentals

Written by Greg Wittbecker

By CRU Aluminum Advisor Greg Wittbecker

Aluminum prices touched a 13-year high last week, flirting with $3,000 per metric ton on the LME. That throwback to 2008 is not a coincidence, corresponding to the last time that primary aluminum supply-demand balances were as tight as they are in 2021.


In the period 2006 to first half 2008, primary aluminum was in close balance. The market recorded a deficit of about 500,000 tons in 2006, a slight surplus of 400,000 tons in 2007, and was forecast to generate a small surplus of 570,000 tons in 2008 before the “roof caved in” with the Lehman Brothers collapse in the second half of 2008.

Fast forward to the present and CRU’s forecast for 2021 and 2022 is for back-to-back deficits of over 1 million tons.

Demand is strong and China is on pace to IMPORT over 1 million tons. Concurrently, the Chinese primary producers are struggling with a host of headwinds to stunt production in 2021:

• Power shortages in the South of China are forcing involuntary curtailments in Yunnan and Guangxi of 30-50%. These curtailments are especially painful as they represent the newest and “greenest” of China’s primary production. New expansions are also being delayed due to the energy shortage.

• China’s dual control monitor of energy (energy efficiency per ton produced + total energy consumption) has put nine provinces/regions under the spotlight, impacting up to 9 million tons or about 22% of total production.

• The Winter Heating Season starts Nov. 1 and that always brings added concern that some involuntary curtailments might take place in provinces like Henan, Shanxi, and Shandong if air quality suffers. The steel industry is all too aware of this issue since Hebei Province is a major steel production center.

• China hosts the Winter Olympics from Feb. 4-20, and you can be assured that Beijing will be putting on their best face to the world with pristine air quality.

The LME price has now moved from setting its clearing price based on an assumption of steady, low-cost production growth in China to a scenario where CAPEX replacement in the World ex China is getting more play. Assuming the Chinese stick with their announced plan to cap primary aluminum production at 45 million tons (now producing just under 40 million), we are fast approaching a plateau in Chinese growth…and that’s starting to seriously influence LME price expectations going forward.

First Major Primary Aluminum Restart Announced in Brazil

As LME aluminum prices have been climbing over the past 16 months, observers have been puzzled by the wholesale lack of production restarts. We have written about this in previous columns, saying it all boils down to power cost and longevity of power deals.

Now, for the first time, we see a breakthrough on this front. The Alumar smelter in northern Brazil will restart 268,000 tons/year of capacity, representing about 60% of their installed capacity of 447,000 tons/year. The smelter is a joint venture of Alcoa and South32, idled since 2015 due to a lack of competitive power.

The partners indicate that production will resume in Q2 2022 and reach capacity by Q4 of 2022. Total restart costs are estimated at $75 million or about $280 per ton. These numbers bear out our earlier assertions that: 1) it takes a LONG time to get these long-idled smelters back into shape to run, and 2) it is VERY expensive to do so.

(Editor’s note: Greg Wittbecker will be away until Oct. 22 on an extended holiday. In his absence, guest columnists from CRU Analysis will report on aluminum.)

Greg Wittbecker joined CRU in January 2018 after retiring from Alcoa, where he was Vice President of Industry Analysis and Managing Director of Alcoa Beijing Trading, based in Shanghai, China. His career spans 35 years in the aluminum industry, having also held senior commercial and management roles at Cargill, Wise Metals and Koch Supply and Trading. Greg brings perspective on the entire aluminum supply chain from bauxite to aluminum finished products and will be a regular contributor to SMU going forward. He can be reached at

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