Farmington, PA — China is unlikely to flood the global market with aluminum, despite concerns by some industry analysts and commentators. The country also is not likely to become a consistent net exporter of this primary metal for many years to come, Alcan Inc.'s senior executive with responsibility for worldwide primary metal production said today.
"Rather than becoming a destabilizing influence, China will emerge as a dynamic and valued member of the global aluminum industry," said Cynthia Carroll, president of Alcan Primary Metal Group, the world's second largest aluminum supplier.
Speaking to the annual meeting of The Aluminum Association, Carroll said she did not foresee a repeat of the situation that occurred in the early 1990s when a weak internal economy prompted Russia to oversupply the world aluminum markets, driving prices downward. Some industry analysts and commentators fear the same will happen with China, the world's largest aluminum producer, which increased yearly domestic aluminum production by 600,000 tonnes in 2001 and by another 24 percent this year.
First, unlike Russia, China's robust Gross Domestic Product is forecasted to grow 7 to 8 percent annually. Yearly industrial production is forecasted to expand by about 8 percent, fueling internal demand for aluminum that has been growing at a compounded annual rate of 14 percent since 1997, Carroll said. She pointed out that per-capita consumption of aluminum in China is about two kilograms compared to 35 kilograms in the United States, so "there still is ample room for growth."
China has about 130 smelters, but many are relatively small, using high-cost older technology with significant environmental liabilities, Carroll said. With China's entrance into the World Trade Organization, there are pressures to reduce tariffs that have protected that country's inefficient smelters and to adopt higher environmental standards, she said.
Some 85 of these smelters use older Soderberg technology that may be closed in the near term, Carroll said. Analysts reported recently that the Chinese government plans to close these smelters (1.4 million tonnes) by the end of 2003.
In addition, electrical power shortages in key parts of that country's aluminum-producing regions will constrain expansion, she said.
Finally, leaders of the central government in China appear to be aware of the current global over capacity of aluminum production, Carroll said. Premier Zhu Rongji has ordered senior government leaders to address this problem and to enforce the closure of inefficient smelters that do not meet environmental protection requirements, she said.
Alcan is a multinational, market-driven company and a global leader in aluminum and specialty packaging with 2001 revenues of US$12.6 billion. With world-class operations in primary aluminum, fabricated aluminum as well as flexible and specialty packaging, Alcan is well positioned to meet and exceed its customers' needs for innovative solutions and service. Alcan employs 48,000 people and has operating facilities in 38 countries.
Statements made in this press release which describe the Company's intentions, expectations or predictions may be forward-looking statements within the meaning of securities laws. The Company cautions that, by their nature, forward-looking statements involve risk and uncertainty and that the Company's results could differ materially from those expressed or implied in such statements. Reference should be made to the most recent Form 10-Q for a summary of major risk factors.
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To obtain a copy of Alcan's background information on this issue, please contact Catherine Doyle or refer to "A Strategic Perspective" (document in Acrobat PDF).
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