Rising China production keeps pressure on aluminum prices

Aluminium is trading on the soft side of this year's $1,900- to $2,600-per-ton range after Chinalco, the country's top aluminum producer and the trading arm of Aluminum Corp of China ( ACH , quote ), released a statement projecting that China's production of primary aluminum is set to rise by 10.5% this year, despite the ongoing delay in starting up many smelters.

The firm says that the country will see new capacity coming onstream in the second half of this year, which would push up full-year production of primary aluminium to 21.5 million tons, whilst global output, including

China, will rise by around 7% in 2012, to 48.8 million tons as capacity in China, the Middle East and India rises.

Against this burgeoning supply, Chinalco expects world demand for primary aluminum to increase by just 6.4% in 2012 from 2011, to 48 million tons, with China consuming 21.3 million tons of this total -- a year-on-year rise of 6.6%, or only slightly more than the global total.

Slowing growth in the euro zone and other Western economies is likely to add to what analysts see as a slackening of demand for the metal, which is widely used in automobiles, packaging and construction.

Those looking for a way to trade aluminum can get exposure to the upside -- or reap the downside via shorts -- through the dedicated ETF ALUM ( quote ).