AUDVF - 8 Top Aluminum-producing Countries
After a few challenging years for the resource space, aluminum-producing countries enjoyed higher prices and higher production in 2018.
However, the sector was impacted when Washington levied a 10 percent tariff on aluminum imports in March 2018. Later in the year, the industrial metal was added to a list of 35 critical metals; the US will need them in the future, but does not currently have secure supply sources for these metals.
The US Geological Survey notes that world aluminum output increased slightly in 2018, coming in at 60 million metric tons (MT) compared to 59.4 million MT the previous year.
The global aluminum demand outlook is anticipated to steadily grow over the next four years. The sector is expected to benefit from solid construction industry growth and an increasing role in the auto industry as a lightweight substitute for steel.
A shortage of aluminum is forecast for between 2019 and 2023, with the aluminum stock-to-use ratio seen declining by more than 4 percent — from 9.6 percent to 5.1 percent — over the five year period.
In a Knoema price forecast, the price of aluminum is pegged to steadily climb into 2030. The forecast notes that prices will grow from US$1,940 per MT to US$2,200 in 2030.
Aluminum is one of the Earth’s most abundant metals and is produced from cryolite and bauxite mining. This is because the two minerals are large sources of aluminum; bauxite is processed to create alumina, which is then refined to create aluminum.
Aluminum is one of the most in-demand industrial metals because it is extremely versatile. The silvery metal is non-toxic and lightweight, perfect for making food and beverage cans; it also has a high thermal conductivity, is corrosion resistant and can be easily cast, machined and formed.
It is used in a huge variety of products, including cans, foils, kitchen utensils, window frames, beer kegs and aeroplane parts, as well as a host of new applications that make it an important element in the green revolution.
Because the metal is a good electrical conductor and is less costly than copper and other more expensive metals, it is often used in electricity transmission lines. It is also the second most malleable metal and sixth most ductile. It is non-magnetic and non-sparking.
While aluminum has many benefits, strength is not one. Due to this, aluminum is often used as an alloy in steel manufacturing, mixing with stronger, less adaptable metals like copper, manganese, magnesium and silicon. This increases the strength of the resultant material but allows it to remain relatively light.
One last benefit of aluminum is its high recovery rate. According to the International Aluminium Institute, because aluminum can be recycled time and time again, it has as much as 95 percent energy savings compared to primary production costs.
Here’s a look at the eight top aluminum-producing countries last year. Data was taken from the US Geological Survey’s latest report on aluminum.
1. China
Mine production: 33 million MT
First on this list of aluminum-producing countries is China. The world’s leading producer was once again responsible for more than half of global aluminum output in 2018. It put out 33 million MT, and also consumed a considerable amount of the metal.
Looking ahead, S&P Global Platts says that the country’s demand for the metal will level off to between 46 million and 50 million MT as 2023 approaches.
On the supply side, Chinese aluminum output could be somewhat restricted in the future due to the government’s five year anti-pollution measures, introduced at the end of 2016. With political tensions running high and the trade war between China and the US, tariffs have impacted Chinese exports; however, Chinese aluminum production hit a daily record of 2.97 million tonnes midway through 2019.
2. Russia
Mine production: 3.7 million MT
Russia was the second largest aluminum producer in 2018, but its output was significantly lower than China’s. Last year, it produced 3.7 million MT of aluminum, up from 3.58 million MT in 2017. Leading global aluminum producer RUSAL is headquartered in Moscow and is the world’s sixth largest aluminum company. It was taken over in 2015 and is now part of China Hongqiao Group (HKEX:1378).
Russia encountered its own import issues with the US in 2018. In early April, the Department of the Treasury issued sanctions on the sole primary aluminum producer in Russia due to activities between the owners and the Russian government. Those sanctions were later lifted and the treasury announced that companies could again import from Russia at similar levels to those prior to the 2018 sanctions.
3. India
Mine production 3.7 million MT
Aluminum production in India grew a fair amount in 2018 and has been on the uptick since 2017. Last year, production totaled 3.7 million MT compared to 3.27 million MT in 2017. On the demand side, aluminum use in the country declined by 50 percent in 2016, but demand has reportedly been picking up since then, especially for scrap metal.
Hindalco Industries (NSE:HINDALCO), the world’s leading aluminum rolling company, is located in Mumbai and is said to be among the largest producers of primary aluminum in Asia.
Concern that Indian exports may be impacted by a Chinese ban, or limitations on the amount of scrap aluminum the country imports, has weighed on the Indian sector since May. The Chinese government plans to add aluminum to a restrictive imports list, which many believe is a precursor to an outright ban on scrap imports that will likely go into effect by by 2020.
4. Canada
Mine production: 2.9 million MT
Last year, Canada’s aluminum production slipped slightly from the previous year’s total, coming in at 2.9 million MT in 2018 and 3.2 million MT in 2017. Rio Tinto (NYSE:RIO,ASX:RIO,LSE:RIO), another leading global aluminum producer, has roughly 16 operations in the country.
The province of Quebec is the main aluminum jurisdiction in Canada. There are 10 primary aluminum smelters in Canada in total. One is in Kitimat, British Columbia, and the other nine are all in Quebec. There is also one alumina refinery located in Saguenay, Quebec.
Canada was once again the leading supplier of imported aluminum for the US in 2018, accounting for more than half of all imports.
5. United Arab Emirates
Mine production: 2.6 million MT
Fifth on this list of aluminum-producing countries is the United Arab Emirates. Aluminum production in the United Arab Emirates has remained steady over the last 36 months. In 2018, the country’s output was 2.6 million MT for the third year in a row. That was a new record for the Arab nation, which has kept the pace since hitting the mark in 2017.
Emirates Global Aluminum is the largest aluminum producer in the Middle East and contributes 4 percent of all global aluminum. The company reported net income of US$325 million in 2018, after reaching record output levels of 2.64 million tonnes of cast metal, exceeding 2017’s 2.6 million tonnes.
6. Australia
Mine production: 1.6 million MT
Australia’s aluminum production was up in 2018, climbing to 1.6 million MT from 1.45 million MT the previous year. In addition to its work as a major aluminum producer in Canada, Rio Tinto also produces the industrial metal in Australia. The mining major sees aluminum as a valuable resource in the new automotive industry.
“We’ve created a range of innovating alloys that are helping make the transition to aluminum easier. We continue to develop innovative technologies and products that will serve you for decades to come,” reads the Rio Tinto aluminum and auto innovation guide.
7. Norway
Mine production: 1.3 million MT
Aluminum production in Norway experienced a small uptick last year, hitting 1.3 million MT compared to 1.23 million MT in 2017. Norsk Hydro (OTCQX:NHYDY), a Norwegian aluminum and renewable energy company, has a number of aluminum projects and plants in the country, and in Germany and Brazil.
In mid-July, the Norwegian leader in aluminum production and renewable energy announced plans to partner with German auto manufacturer Audi (FWB:NSU,OTC Pink:AUDVF) to supply the latter with sustainable aluminum for the battery housing of Audi’s first fully electric car model.
8. United States
Mine production: 890,000 MT
Rounding out the list is the US, whose aluminum production has taken a hit the past few years. Last year, the country produced just 890,000 MT of the metal, up from 741,000 MT in 2017, but significantly lower than its 1.59 million MT output in 2015.
According to the US Geological Survey, three companies operate seven primary aluminum smelters in six states, including two smelters that were idled at the end of 2017. The domestic smelters were operating at roughly 55 percent of their capacity of 1.79 million tons per year in October 2018.
Transportation applications accounted for the most US aluminum use in 2018, coming at 40 percent. Packaging accounted for 19 percent of domestic consumption, with building and electrical coming in at 14 percent and 9 percent, respectively.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.