Aluminum Consumption in China to Grow 20%

Consumption may increase from 14.02 million metric tons in 2009, Eric Zhang, an analyst at the Shanghai-based commodities research and forecasting company, said in a phone interview. Still, the country is expected produce 17.5 million to 18 million tons of primary aluminum this year, resulting in an oversupplied market, he said.

China is taking steps to cut overcapacity in the aluminum industry, ending discounts on electricity charges and doubling surcharges for high-consumption companies. The provincial government of Henan, the biggest producer, banned new aluminum projects for the next three years.

"The recent measures to limit production will take effect gradually, the results of which can only be seen in the medium to long term," said Zhang. "In the short term, prices will be supported but will have little room to rally as stockpiles are still very high."

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