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Alcoa sees aluminium prices rising in five years

Alcoa CEO Klaus Kleinfeld said he is "very optimistic" aluminium prices will rise in the next five years as producers encounter difficulty finding enough power to meet demand for the metal.

  • Bloomberg
  • Published: 23:51 August 22, 2008
  • Gulf News

New York: Alcoa CEO Klaus Kleinfeld said he is "very optimistic" aluminium prices will rise in the next five years as producers encounter difficulty finding enough power to meet demand for the metal.

Chinese demand for aluminium will climb again after the Beijing Olympic Games are finished and a "strongly managed ramp- down" of the country's industrial activity ends, Kleinfeld said yesterday in an interview in New York, where Alcoa is based.

China, the world's fast-est-growing major economy, will become a net importer of aluminium as use increases, he said.

Alcoa and rivals including United Rusal, the world's largest aluminium producer, are battling higher prices for the electricity that powers their smelters.

While those costs curtail production growth, wealthier populations in China, India, Russia and other emerging markets are driving demand for the metal used in beverage cans, cars and aircraft.

"I have not met anybody who in the long term is not assuming there will be a real issue of undersupply in the market," said Kleinfeld.

"Energy is one of the rarest commodities. It will be very, very difficult to bring new capacity on line and even to sustain old capacity."

Alcoa, the world's third-largest aluminium producer, estimates that demand will increase about nine per cent this year and double by 2020, requiring about 80 new smelters able to forge 400,000 metric tonnes each.

By 2020, Asia will consume as much aluminium as the world does today, the company projects.

Power accounts for about a third of the cost of producing aluminium.

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