Aluminium price recovery unlikely in 2016

Excess aluminium capacity continued to put downward pressure on prices in 2015. Prices are not expected to recover in 2016 as continued additions to capacity, particularly in China, contribute to a build-up of stocks, according to a report by Australian Dept of Industry Innovation and Science.

Aluminium spot prices are estimated to have decreased by more than 10 per cent to average US$1663 a tonne in 2015 as excess capacity and subdued global demand contributed to a build-up in stocks. Global aluminium stocks are estimated to have increased by 12 per cent in 2015 to 6.5 weeks of consumption, as per the report.

The profitability of many smelters has been reduced at current prices, which may force the closure of some capacity in high-cost regions. However, this is expected to be more than offset by the addition of new low-cost capacity in China. The pace of new additions has been faster than expected and is unlikely to slow in 2016 with substantial new capacity planned.

As a result, the aluminium price is forecast to average US$1575 a tonne in 2016, a decrease of 5 per cent relative to 2015. However, the price decline is expected to be less than in 2015, as demand is forecast to be supported by increased use of aluminium in automobile manufacturing to reduce vehicle weights and meet fuel-efficiency requirements.

World aluminium consumption is estimated to have grown by 8 per cent in 2015 to 57.4 million tonnes, supported by strong consumption growth in emerging economies, particularly China, and a recovery in the US automotive sector.