Oversupply issues

There is currently a glut of aluminium, driving prices for the packaging sector down by some 28 per cent over the last seven months, and with cost of production also reducing alongside it seems that this overproduction is set to continue, perhaps to a point where prices become so low that production will be forced to shut down or at least slow for a time.

Margins for producers have stayed reasonable, according to an article by Eric Onstad at Reuters, and the solution, he says, could lie in the following: ‘Closures or lower output are needed to slash a surplus on global markets mainly due to surging output and exports from top producer China. Consultancy CRU has increased its forecast of a global aluminium surplus for 2015 to 963,000 tonnes’.

The fallout of this oversupply is already starting to show, and as we recently reported, Alcoa has shut down another smelting operation – this time in Brazil. The company recently advised it is to review over half a million tonnes of capacity.

Elsewhere, Rusal, based in Russia, are looking into the possibility of idling 200,000 tonnes.

In Europe, Chinese exports, which have increased by 30 per cent in 2015, are posing a serious threat to the aluminium industry. The country continues to increase its smelting capacity to the point where competition concerns are starting to be raised.

How is this issue affecting the can making world? Is it short-term positive but medium to long term negative? Have your say below.

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