Market situation

mine worker

Upstream market developments

Three month LME prices started the year around USD 1,470 per mt and reached a level of USD 1,653 per mt in the second quarter before falling to USD 1,569 per mt in September. Thereafter prices increased again. At the end of the year prices were around USD 1,700 per mt. Prices averaged around USD 1,550 per mt in the first half of 2016 and increased to an average of roughly USD 1,670 per mt in the second half of the year.

Standard ingot and product premiums started the year closer to more historical levels, compared to the extraordinary high levels in 2014 and 2015, and continued to fall during 2016. Average North American standard ingot premiums decreased to around USD 170 per mt or around 40 percent lower than average premiums in 2015. Corresponding standard ingot premiums in Europe declined to about USD 130 per mt or 44 percent lower than in 2015. Premium developments have been influenced by exports of semi-finished products from China and increased metal availability from warehouses partly due to a reduced contango during the year, as well as changes implemented to the LME warehouse rules, affecting the outflow of metal.

Global primary aluminium consumption increased by 5.4 percent to 59.6 million mt in 2016. Global supply increased by about 3.2 percent resulting in a deficit of around 0.7 million mt. For 2017, global primary aluminium demand is expected to increase by 3-5 percent while supply is expected to increase by about 4-6 percent, still resulting in a largely balanced global market in 2017.

Demand for primary aluminium outside China increased by around 3.2 percent, while corresponding production increased by 2.4 percent. Overall, demand outside China exceeded production by close to 1.2 million mt in 2016. Demand for primary aluminium outside China is expected to grow around 2-4 percent 2017. Corresponding production is expected to be up 2-3 percent, resulting in a deficit in the world outside China also in 2017.

Demand for primary metal in China increased around 7.4 percent to 31.5 million mt in 2016. Production increased by around 3.8 percent, resulting in a surplus of around 0.5 million mt for the year. Chinese primary production growth is expected to increase in 2017 to around 7-9 percent influenced by announced restarts and new capacity entering the start up phase during 2016 and into 2017. The Chinese authorities have on several occasions expressed concern regarding further aluminium capacity build-up. More recently, the Chinese government has announced plans to curtail certain amounts of aluminium capacity during the winter months due to pollution issues. If implemented, this could subdue surplus capacity going forward.

LME stocks fell throughout the year from 2.9 million mt at the end of 2015 to 2.2 million mt at the end of 2016. Most of the metal in warehouses continues to be owned by financial investors. Also total inventories, including unreported inventories are estimated to have decreased, by about 0.7 million mt throughout 2016, amounting to around 12.3 million mt at the end of 2016.

Demand for foundry alloys and sheet ingot in Europe has been solid also during 2016 and increased compared to the previous year. The demand for wire rod in the European market was weaker than expected. Consumption of extrusion ingot in 2016 was slightly higher than the year before. Consumption of extrusion ingot has been strong in the US also in 2016, while the demand for primary foundry alloys also increased compared to 2015. In Asia (excluding China), the market for extrusion ingot and primary foundry alloys continued to show moderate growth.

Platts alumina spot prices started the year at USD 199 per mt ranging from USD 197 - 351 per mt during 2016 and ending the year at USD 349 per mt. Prices averaged USD 254 per mt for the year, a decrease of 16 percent compared to 2015. Average prices as a percentage of LME varied, averaging 15.7 percent for the year compared with 17.8 percent in 2015. Spot prices at the end 2016 represented 20.6 percent of LME.

Chinese alumina imports amounted to 3.0 million mt in 2016, a decrease of 35 percent compared with 2015. Bauxite imports into China decreased to 52.0 million mt, or 7 percent lower compared to 2015. The decrease was driven by significantly lower imports from Malaysia which dropped to 7.7 million mt in 2016 from 24.2 million mt in 2015 because of a bauxite mining moratorium imposed in January and maintained the whole year. Chinese imports from Guinea soared to 11.9 million mt from 0.3 million mt in 2015 as a new mine came into production. Australia was the largest exporter to China with 21.2 million mt, 9 percent higher compared to 2015.

roll of aluminium

Downstream market developments

The European market for flat rolled products increased by 2.7 percent in 2016. The automotive segment continued to be the dominant market driver due to the growing substitution of steel by aluminium together with an increase in European car production of 3.5 percent in 2016.

Demand for general extruded products in North America grew 2.1 percent over 2015. European extrusion markets grew 1.5 percent over 2015. The increase was driven mainly by stronger automotive and transportation demand and a somewhat improved building and construction market.

waterfall

Energy market developments

In 2016, Nordic electricity prices increased compared to the previous year. Developments were influenced by a somewhat drier than normal spring and autumn which led to a deteriorating hydrological balance in the Nordic region. From November however, the hydrological balance improved and spot prices declined. Nordic consumption increased by 9.1 TWh to 386.8 TWh in 2016 while total power production decreased by 1.5 TWh to 391.9 TWh.

The economic downturn in Brazil has had a negative influence on demand for power throughout the country for the second consecutive year. This, combined with other hydrological factors has resulted in a balanced power market over the year. 

 


Footnote 1Value adding casthouse premiums are deducted from production costs to calculate business operating costs.

  • Annual report 2016

  • Annual report 2016

  • Annual report 2016

  • Annual report 2016


Updated: January 25, 2017