Reported Chinese aluminum demand to shoot up by 15pct

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China mining reported that aluminum demand in China is expected to grow by 15% in 2010 on the back of revivals in the construction and automobile sectors.

According to reports, aluminum's long term prospects are good as China is still heavily into urbanization and its metal intensive growth is likely to continue for many years to come. About 65% of aluminum consumption is in the east and mid south of China. The urbanization of the northwest and the southwest has great potential for aluminum demand.

The report said that in the short term, overcapacity, plenty of inventories and re-opening of smelters due to facilities returning to profitability will cap any upswing in aluminum prices. However, the current average cost of the Chinese smelters is USD 2,000 per tonne and is rising further due to increases in bauxite, alumina, coal and power prices. These cost push factors provide a strong floor for aluminum prices.

LME aluminum is expected to trade at between USD 2,000 per tonne and USD 2,400 per tonne in FY11 and analysts feel that the FY11 average will be USD 2,200.

Indian aluminum producers are best placed with captive bauxite, alumina and power and are insulated from across the board cost increases to a large extent. In the pure aluminum space, Nalco is set to benefit. It is one of the cheapest aluminum producers and has volume upside of 30% in both aluminum and alumina due to brown field expansion.
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