Brazil will become net aluminium importer ahead of time on consumer demand

Brazil could become a net importer of primary aluminium sooner than expected as consumer demand booms, while domestic production falls because of high energy prices

Brazil could become a net importer of primary aluminium sooner than expected as consumer demand booms, while domestic production falls because of high energy prices.

Domestic consumption of aluminium products may rise 13.2% this year to almost 1.47 million tonnes, according to Abal, the country’s aluminium association. This follows a 29% rise in 2010.

But primary aluminium capacity has already slipped below 1.6 million tpy, and there are no expansion projects underway.

Aluminium premiums in Brazil and imports to the country have increased rapidly as a result, MB reported last month.

Aluminium manufacturers have been investing heavily in new capacity to meet domestic demand, according to Mauro Moreno, coordinator of Abal’s economy and statistics commission.

“But this high consumption also embeds a threat to these industries – the massive growth in imports of aluminium products from Asian countries, which benefit from tax incentives granted by their governments,” Moreno said in a statement.

Abal previously forecast that Brazil will not become a net importer of aluminium until 2016 as it expected local demand to grow at just 6.8% per year.

In 2010, aluminium output stood at 1.53 million tonnes, the same level as 2009.

But since Novelis permanently shut its 60,000 tpy Aratu smelter in December and Brazil’s largest smelter, Votorantim Metais’ CBA, recorded falls this year due to a planned maintenance stoppage, aluminium output this year is likely to fall below 1.5 million tpy.

In the first quarter of 2011, output was down 6% at 354,700 tonnes.

“There will be a fall this year of at least some 70,000 tonnes,” Moreno confirmed to MB.

“But note that part of the Brazilian consumption comes from the recycling industry, so we don’t need our whole domestic primary aluminium output to manufacture all the required processed products,” he added.

Domestic scrap output fell to 216,100 tonnes in 2009 from 319,600 tonnes in 2008, but it is expected to have increased significantly in 2010.

Abal is yet to release such figures in its 2011 annual report in the middle of this year.

But one worrying factor is that much of what is produced by smelters located in northern Brazil is exported.

Despite a drop of more than 100,000 tonnes in ingot exports last year, they were still high at 524,799 tonnes.

The first quarter of 2011 was the ninth consecutive quarter of increased domestic consumption of aluminium products, Moreno said.

Last year all aluminium consumer segments experienced increases, according to Abal’s figures.

The packaging sector led the way with a 31% stake in the total consumption, followed by transport (21%), building and construction (14%), consumer durables (11%), electrical (9%) and machinery and equipment (5%).

Consumption of sheets and plates went up 27.9% to 502,500 tonnes, while extruded products recorded a 31.4% lift to 310,600 tonnes and castings increased 23% to 208,800 tonnes.

Wires and cables, which experienced a 19.5% lift last year, are expected to record the highest rise in 2011 at 58.4% to 167,100 tonnes.

Exports revenues reached $3.93 billion, up 21% from the $3.25 billion in 2009, but alumina represented 63% of all exports.

Imports totalled $1.17 billion in 2010, a 79% boost from the previous year.

In January and February this year, imports of ingots had already risen to 13,899 tonnes from just 422 tonnes in the same period last year.

In March alone imported ingots reached 11,970 tonnes according to the Brazilian foreign trade ministry, taking total Q1 figures to 25,869 tonnes – up from 17,752 tonnes in the whole of 2010.