BEIJING, Mar. 23 (Platts) -- China's increase in aluminum output for February is threatening to undermine production cutbacks made elsewhere in the global industry, RBS said in a research note Friday.
"Once again Chinese aluminum producers have in one fell swoop managed to eradicate all the work done by other producers in cutting smelting capacity," the bank said.
Three-months aluminum on the London Metal Exchange traded below $2,000/mt in the fourth quarter 2011, a level at which 50% of global capacity is estimated to be cash negative.
This cost pressure saw a number of producers announce cutbacks.
Alcoa announced it would close or curtail about 531,000 mt, or 12%, of its global aluminum smelting capacity.
Norway-based Norsk Hydro said it intended to idle one potline at its Kurri Kurri primary aluminum smelter in Australia, trimming production at the plant by 60,000 mt from a total capacity of 180,000 mt.
Rio Tinto Alcan announced plans to divest or shutter significant amounts of uncompetitive capacity in Europe, North America, Australia and New Zealand.
This included the closure of Rio Tinto Alcan's Lynemouth smelter in England. While Dutch aluminum producer Zalco closed its primary aluminum smelter in Vlissingen with a nameplate capacity of 275,000 mt/year.
According to data from the International Aluminum Institute (IAI) China's primary aluminum production averaged 53,400 mt/day in February, up from 48,900 mt/day in January and from 46,600 mt/day in February 2011.
RBS notes that this is a daily output increase of 9.1% and is equivalent to annualized production of 19.48 million mt/year.
"World primary aluminum production including China (which accounts for around 41% of global supply) was up 3.7% to 122,276mt/day -- the second highest on record," the bank said.
China's February production totaled 1.548 million mt, up from 1.517 million mt in January and from 1.304 million mt in February 2011, according to figures from the IAI.
"North American output has dropped 5.7% since end 2011, but all of this has been undone by the Chinese reactivation and new smelter additions," RBS said.
The bank also notes that bauxite imports hit a record 4.665 million mt in February, up 45% month-on-month.
RBS is forecasting spot aluminum prices to average $2,315/mt in 2012, down 4% from 2011.
Three-months aluminum was trading at $2,175/mt on LME select at 1135 GMT.