Not in your League?

15 12 2009

Just a few years ago companies were bleeding themselves out to acquire aluminium production capacity based on the assumption that demand from China and the increasing importance of aluminium in transportation were solid fundamentals. In September (late in the news, I’m so sorry), Alberto Calderon chief commercial officer from BHP Billiton, said that aluminium was losing its appeal adding that it was “clearly the house view is that aluminium is not in the league of coking coal, iron-ore, copper, potash or petroleum,”.

The reason for such a lack of optimism is the growing production capacity in China. Despite its intention to crack on oversupply, China is self-sufficient in aluminium and will become a net-exporter in the long-term as well. While this does not prevent aluminium production from being a good business, it certainly limits its potential in the short and longer-term. Especially as China has had record production for the last three months as it races to meet annual output targets for non-ferrous metals.

Still, not being in the league of potash is harsh. Potash has faced the most serious decline in its history this year. A recovery is even been postponed to some time in 2010 as farmers are still reluctant to buy and use fertilizers as they still expected prices to fall further in Q3. In the meantime PotashCorp’s Penobsquis mine, one of Canada’s largest potash deposits, will face its fourth eight-week shutdown in January 2010.




4 responses

18 12 2009

1001 ième?

22 12 2009
Martha Black

Hmmm un peu plus

3 02 2010

Quick question: would you happen to know what the L-tariff would be in different states/countries ?


4 02 2010
Martha Black

I presume the L-tariff is strictly an Hydro-Québec innovation :P. Although it would probably be possible to estimate what it is in the U.S by considering the type of energy supply contracts smelters have. I think I would have a “rule of thumb” estimate (as well as the U.S.) based on a consultant report on aluminium production/input costs based on H1 2009. Do you think that could help out?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: