Trade conflicts between China and the United States continue to cause uncertainty in the market and have a negative impact on the economy. While there was some optimism in the aluminum market in the first quarter of 2019, reflected in a slight increase, in the second quarter of 2019, demand for aluminum decreased. Thus, in the first half of 2019, global demand for primary aluminum showed an increase by percentage on an annualized basis to 33 million tons (outside China, it remained practically unchanged - at 15 million tons, while in China it grew by 1.4 percent in in annual terms - up to 18 million tons).
Combined with the current global contraction in manufacturing activity (JP Morgan Global Manufacturing PMI fell from 49.8 percent in May to 49.4 percent in June, the lowest in more than 6 years) analysts are concerned the fact that the global macroeconomic situation will have a negative impact on demand for aluminum in the second half of 2019.
In the first half of 2019, global aluminum production increased by 1 percent - to 31.9 million tons, while in the world without China, growth was 1.4 percent in annual terms - to 13.9 million tons, and in China, it amounted to 0.4 percent in annual terms - up to 18 million tons. In general, in the first half of 2019, the global market experienced a deficit of 1.1 million tons.
Looking at the cost curve, today around the world outside of China, roughly 12 percent of aluminum smelters are still operating at a loss, despite declining alumina and carbon materials costs. Around 3.4 million tonnes of capacity outside of China is operating at a cost above current prices, including 1.5 million tonnes of non-integrated capacity.
The growth in production capacity in China in the first half of 2019 was modest, and now its total capacity is 36.6 million tons, remaining almost at the same level as at the end of 2018. About 1.1 million tonnes of capacity remain closed due to low prices, while new capacity is being built up at a slower pace.
In the first half of 2019, stocks of aluminum in the warehouses of the London Metal Exchange (LME) fell below 1 million tonnes, showing a decrease of 284 thousand tonnes compared to the beginning of 2019. LME warrants remain at 640 thousand tonnes. In June 2019, Chinese regional stocks continued to actively decline and in total in the first half of 2019 fell by 235 thousand tons - to 1.05 million tons.
