This is in line with the company's estimated supply shortage of 38,000 tons in January, mainly due to the expected increase in production in China, the number one producer.
“China continues to expand its production capacity,” Oplinger said in a conference call. “The refinery is reluctant to cut production because prices have rebounded.”
He pointed out that aluminum demand is still strong, global inventories continue to decline, and currently can support 66 days of consumption, only slightly higher than the 30-year average of 61 days.
He believes that strong demand will limit the decline in regional premiums. In recent years, financing transactions have kept aluminum in stocks, pushing regional premiums to record highs, although the price of aluminum on the London Metal Exchange (LME) has fallen.
After causing regulatory and political scrutiny, these transactions began to lift and the premiums began to fall, but Oplinger noted that the premium is still at a record high and will be supported by strong demand.
“Industry operations require metals,” Oplinger said. “Therefore, when the stock metal flows out, it will be digested as the demand rises.”
In addition, the decline in semi-finished aluminum exports from Chinese exporters may support premiums. In order to avoid the export tariffs on primary aluminum, Chinese exporters export semi-finished aluminum, and end users will smelt them into primary aluminum.
Exporters want to seize the opportunity of regional high water, so these exports are flooding the market, resulting in oversupply. Alcoa CEO Kleinfeld said that this in turn put pressure on the premium, thereby reducing the enthusiasm of Chinese exporters to export semi-finished aluminum.
He added that this export situation makes the Chinese authorities feel "irritated", so they may take action to limit exports.
"I am optimistic that they will stop this chaos," Kleinfeld said.
Alcoa reported a quarterly profit in the first quarter on Wednesday, better than its loss performance in the same period last year, mainly due to higher revenues from the automotive and aerospace businesses.
Keywords of this paper: Alcoa Alcoa Aluminum Aluminum Alloy American Airlines Metal (Shanghai) Co., Ltd.