China maintains robust aluminum output in September

Chinese primary aluminum output totaled 34 MMT in September, up 7.8% YoY, according to International Aluminum’s latest release. Despite facing several industrial headwinds in 2022, total production YTD has amounted to 266.9 MMT, increasing by 1.8% YoY. The aluminum-intensive automobile industry saw particularly strong production growth of 23.7% YoY, according to the country’s most recent economic data announcement.

Bauxite trade has so far reflected the strength in Chinese aluminum production. With the monsoon season ending, China imported 4.9 MMT of bauxite from Guinea on bulk carriers in September, rising by 27.4% YoY. Energy shortages remain a downside risk to Chinese aluminum output, however, as many smelters rely on hydropower as an energy source, which is still facing a drought. As a result, new power restrictions on smelters in Yunan province were implemented on 10 September. The region accounts for 12% of Chinese aluminum output according to Shanghai Metals Markets.

Worldsteel cuts short term demand outlook

The World Steel Association has forecast a 2.3% reduction in global steel demand in 2022, a 270-basis point cut from its previous forecast in April. Worldsteel also trimmed its 2023 demand forecast by 110bp, estimating demand growth of 1%, referring to increased infrastructure spending as the primary driver. A slowdown in China’s economy was cited as the main reason for the contraction in 2022. Worldsteel forecast Chinese steel demand will decline 4% to 914 MMT in 2022 and then remain flat in 2023. The latest Chinese steel production figures from Worldsteel showed mild signs of improvement at 87 MMT, increasing by 17.6% YoY in September. Though from a low base, the absolute volume is still solid.

In Europe, the broad economic slowdown is expected to drive steel demand lower by 3.5% in 2022 and 1.3% in 2023, according to Worldsteel’s latest figures. In the US, however, a recently passed infrastructure spending bill and pent-up demand in the steel-intensive automobile industry is forecast to prevent a contraction in the country’s steel demand, which is estimated to grow by 2.2% in 2022 and 1.6% in 2023.

Steel demand in India is expected to rise by 6.1% in 2022 and 6.7% in 2023 to 120.3 MMT, driven by infrastructure spending and demand for capital goods and automobiles. This is the largest growth in demand forecast for any major steel consumer by Worldsteel. India has been the only major producer to maintain growth in steel production in 2022. According to Worldsteel, output totaled 93.3 MMT from January-September, up 6.4% YoY.