China’s Supply a Wildcard, but Aluminium Demand to Remain Strong: Rio Tinto’s Barrios
04 April 2017 by Staff
Rio Tinto’s Chief Executive of aluminium Dr. Alfredo Barrios says uncertainty in output from producers in the People’s Republic of China may lead the market into volatility in the coming months, but such uncertainty will do little to dim demand in the North American market.
“That’s really where the uncertainty is at the moment,” he told Bloomberg. “There’s no doubt that if you look at the supply side, if you look at the environmental issues, sooner or later that will change. But when is a question mark.”
Although China ordered reductions in aluminium output in over two dozen cities almost a month ago, experts say that such cuts have done little to decrease inventories on the Shanghai Futures Exchange.
In any event, the commodities market appears well on the road to recovery. Prices on the LME are up by 28% over the past year, 16% over the past three months alone. However, despite the improved market, Barrios takes a conservative tack to predictions on the market.
“There’s a number of factors which will dampen any price increase if it goes too far,” he opined. “If you look at what are the fundamental reasons behind why prices are where they are, and how different they are from a year ago, it’s sometimes very difficult to see what has made aluminum be higher at all. What’s changed so radically in the last year?”
On the demand side, Barrios is significantly less guarded. He predicts demand in North America to grow in the neighborhood of 2.5% per year for the next fifteen years, buoyed by a projected 60% increase in the automotive sector. Barrios believes growth in the automotive market over the next fifteen years will rival growth in the market over the previous four decades.
“We’re very optimistic on the demand side for North America, and I think everybody continues seeing demand growth, be it in China, be it other markets as well,” said Barrios.