ALUMINIUM-Major Market Developments in July

LONDON, Aug. 12 -- Global aluminium prices are a fair reflection of the metal's fundamentals for now, but that would soon change if demand weakens and the massive inventory overhang starts to increase again.

"I think prices around $2,100-2,200 are probably about right for the current market balance. But if demand drops off prices will fall from there," said independent consultant James King.

The London Metal Exchange three-months aluminium price <CMAL3> was last indicated at $2,159 a tonne.

King did not expect consumption to fall and thought it would continue to more or less match supply.

But Will Adams of BaseMetals.com was more concerned about the possibility that demand would weaken, especially with Chinese production still rising despite cutbacks at some operations and high stocks of aluminium.

Inventories in LME warehouses were at around 4.39 million tonnes on Wednesday, not far off record levels above 4.6 million tonnes seen in January.

Cedric Chehab, head of commodities research and strategy at Business Monitor International, expected prices to trade in a $2,000-2,400 range in coming months.

Below are some of the more significant recent developments in production, stocks and prices that may continue to influence the direction of the market in 2010.

PRODUCTION:

July 29 - Russia's UC RUSAL <0486.HK> said state-run lender VEB had approved a 50 billion rouble loan to help it complete the construction of the Boguchany smelter and hydro power plant. UC RUSAL postponed the smelter project when commodity prices tumbled in 2008. The first start-up complex, which will have a capacity of 147,000 tonnes of aluminium per year, is 30 percent complete, and construction will resume in September with a view to launch in 2013.

July 28 - A consortium of Japanese investors has offered to invest $367 million to expand an aluminium smelter in Indonesia, an effort to maintain their majority ownership as Indonesia wants to increase its stake. The government will soon kick off negotiations with Nippon Asahan Aluminium, a consortium of 12 Japanese firms, over the fate of an aluminium smelter in Sumatra island after a 30-year ownership contract expires in 2013.

July 28 - India-focused Vedanta Resources Plc <VED.L> defended its human rights record at a shareholders' meeting where some fund managers joined pressure groups to protest over its plans to build a bauxite mine in an area sacred to indigenous people. Vedanta denied building a mine to extract the raw material to make aluminium in India's eastern Orissa state would harm the indigenous Dongria Kondh people.

July 23 - UC RUSAL said it had restarted operations at its Windalco Ewarton alumina plant in Jamaica that was mothballed in 2009 due to the economic crisis. RUSAL said in a statement it plans to refine by the end of the year around 321,000 tonnes of alumina at the refinery, which has an annual capacity of 650,000 tonnes.

July 22 - The annual rate of primary U.S. aluminium production increased by 7.3 percent to 1,719,625 tonnes in June from 1,603,153 tonnes in June 2009, but declined 1.0 percent from May's annual rate of 1,736,611 tonnes, the Aluminum Association said in its latest report. During the first half of 2010, the annual production rate was down 7.6 percent at 1,713,050 tonnes from an annual production rate of 1,854,341 tonnes for the comparable 2009 period.

July 20 - India's top aluminium maker, Hindalco Industries <HALC.BO> said its Hirakud aluminium smelter in eastern India was affected by bad weather and heavy rains, which is likely to reduce output by 20,000 tonnes this fiscal year. The operations are expected to be fully restored by end-August, Hindalco said in a statement.

July 20 - Global daily average primary aluminium output rose to 66,600 tonnes in June from a revised 66,400 tonnes in May, provisional figures from the International Aluminium Institute showed. Daily average primary aluminium production in China rose to 47,500 tonnes in June from 45,700 tonnes in May.

July 16 - Alcoa Inc <AA.N> plans to return its 93,000 tonne-per-year aluminium smelter in Aviles, Spain, to full production by the fourth quarter, after it was idled due to heavy flooding in the region in mid-June.

July 15 - China produced 8,191,000 tonnes of primary aluminium in the first half of the year, up 45.6 percent from the same period last year. Output of alumina rose by 44.3 percent to 14,694,000 tonnes over the period.

July 15 - More than 1,000 villagers in China's Jingxi county, in Guangxi near the border with Vietnam, took to the streets to protest against the Shandong Xinfa Aluminum and Power Group plant, the official China Daily said. The Chinese government has become increasingly worried about rising public anger at environmental problems, especially pollution.

July 11 - The UAE's state-owned Emirates Aluminium has secured loans worth around $737 million from export credit agencies to help finance its smelter project, the company said in a statement. When completed, the $5.7 billion project would be the world's largest single-site aluminium smelter complex at Al Taweelha in Abu Dhabi. Emal is a 50-50 joint venture between Dubai Aluminium Company Limited and Mubadala Development Company , Abu Dhabi's investment vehicle.

July 10 - Alcoa's joint-venture with Saudi Arabian Mining Co <1211.SE> has raised $4.5 billion in debt for their giant aluminium project, three bankers close to the deal said. The $7.5 billion project, expected to be one of the world's largest aluminium projects, consists of a rolling mill and a smelter which will each be financed separately and signed by September, bankers said.

July 7 - Rio Tinto Alcan <RIO.L> said its Laterriere aluminum smelter in Quebec was operating at half capacity following a power failure. The smelter suffered a significant outage on July 6 after two electrical transformers failed, leaving the plant without adequate energy to continue operating at full capacity, the company said.

July 1 - Aluminum Corp of China <601600.SS> <2600.HK> has terminated a $2.5 billion agreement to develop the Aurukun bauxite mine and alumina operation in Australia, opening the door for Rio Tinto <RIO.AX>, Xstrata <XTA.L>, Alcoa and other miners to resubmit proposals.

PRICES

Aluminium's was one of the more lacklustre performances in July, but even so it made some gains, pulled along by LME benchmark copper as optimism grew for global demand prospects.

Three-months prices finished July at $2,175 a tonne, up around 10 percent from $1,977.50 the previous month.

Aluminium spent most of the month trading either side of the $2,000 a tonne level, but prices picked up in line with other metals as more positive economic data came through.

The market ended July around the month's highs and went on to make further gains in early August. On Aug. 4 three-months reached $2,249, its highest since the end of April.

In July, the twice-yearly Reuters base metals price poll [MET/POLL] put the median average for the LME cash aluminium price <MAL0> at $2,094 a tonne, unchanged from the January forecast.

STOCKS

Total exchange stocks fell to 4.873 million tonnes at the end of July, equating to just over 46 days of demand. At the end of June they totalled 4.918 million tonnes.

Of the end-July total, some 4.381 million tonnes were held in LME warehouses, down from 4.422 million a month earlier.

Total visible stocks, including latest International Aluminium Institute unwrought stocks were 6.065 million tonnes, down from 6.169 million a month earlier.

Estimated aluminium stocks at the Japanese ports of Yokohama, Nagoya and Osaka totalled 201,500 tonnes at the end of June, down 3,300 tonnes, or 1.6 percent, from a month earlier, trading house Marubeni Corp <8002.T> said.

Aluminium stocks were about 3 percent below levels from a year earlier, narrowing sharply from a 15.8 percent year-on-year drop in May, suggesting inventory levels were normalising.