It’s Happening, Aluminum Production is Growing and Set to Boom

Summary

1. World primary aluminum production expanded in Q2 2019…
   Annualized production grew in ROW and China, up 0.5% q/q and 1.1% q/q, respectively (per our assessment). The expansion was supported by: a) ramp-ups/revamps in Bahrain, Russia, Brazil, and India, and b) improving smelting profitability, which incentivized new operating capacity in China.
    

2. …and remains on track to expand considerably in H2 2019,
   as production restarts accelerate in the Americas, gains continue to materialize from expansions in ROW and China, and as more than 90% of world’s operating capacity is cash profitable amid lower costs of smelting raw materials.

   • In ROW: ABI’s restart (340 kmtpy) in Canada will begin shortly while Albras revamps (230 kmtpy) toward full capacity. Restarts will lead higher operating runrates, while Alba’s ramp up in Bahrain (540 kmtpy) nears completion and gains from Rusal’s BEMO project (150 kmtpy) gradually materialize.
      

   • In China: producers plan to speed up expansion projects in H2 2019, totaling about 900 kmtpy of combined capacity in Sichuan, Yunnan, and Inner Mongolia, at a time when other production ramp ups in Guangxi, Guizhou, and Shanxi have resumed amid improving domestic profitability.
      

3. Improving smelting economics reinforce our expectations for a record expansion in production.
   Specifically in ROW, where primary aluminum production is set to experience in 2019 its largest annual expansion in eight years (even after considering recent disruptions/curtailments in Europe); followed by a stronger expansion in 2020. Combined, HARBOR expects ROW to expand its production of primary aluminum in 2019-2020 by the most ever for a two-year period.