China will produce half the world's aluminium by the end of the next decade and will be largely self sufficient in the metal through 2010, a top executive at producer Alcan said on Friday.
Pierre Arsenault, Vice President of Strategic Planning and Energy at the Alcan Primary Metal Group, said the company was in talks for new projects beyond its current smelter joint venture in Ningxia province, which it hopes to expand.
Alcan itself is the target of a $38.1 billion offer from Rio Tinto Plc, a deal that would make Rio Tinto the world's top aluminium producer. Together the firms can produce 4.4 million tonnes of aluminium a year, and both have major expansion plans to meet rising Asian demand for the metal.
"Half of the world production in 2016 or 2020 will come from China," Arsenault said in an interview on the sidelines of the World Economic Forum in coastal Dalian city.
China already produced 28 percent of global aluminium, or 9.3 million tonnes, in 2006. Its output rose 34 percent to 6.7 million tonnes in the first seven months of this year, as strong prices in the first half tempted idled smelters to come online.
Although China exports the primary aluminium, shipments have slid heavily while imports are rising -- leading to speculation the country could turn into a net importer and boost aluminium prices.
Beijing's goal of meeting but not exceeding domestic demand at home through the end of 2010, meant it was unlikely to flood or strain global markets, Arsenault said.
"They are trying to achieve self-sufficiency. That doesn't mean being a net importer and doesn't mean being a net exporter.
Sometimes they will be a little bit up and sometimes a little bit down ... but that's not going to disturb the whole world," he said.
Demand growth for the metal in China has largely tracked economic growth of around 10 percent over the last three decades, he added.
In 2004, Alcan invested about $150 million in China's first aluminium joint venture, buying a 50 percent share in a 150,000-tonne-per-year production line owned by Qingtongxia Aluminium Co., China's second-largest producer.
It is now looking at expanding its China presence, as the industry's centre of gravity shifts away from the United States and Europe, where smelters are closing rapidly because of high electricity prices and other factors.
Long-term talks about setting up another production line are on-going but the company is also looking further afield.
"We are studying other opportunities in China in different locations," Arsenault said, but declined to comment further. "Since they are not approved, the government doesn't like us to (comment)," he added.
The industry is fragmenting as Chinese and Middle Eastern smelters take on a larger role, even though mergers are bringing some bigger players to the market, he added. Western nations could see still more smelter closures, as high energy prices bite and pressure grows to act on greenhouse gas emissions.
Alcan's 25 to 50-year strategic plans already factored in an increase in electricity prices, although Arseneault said that he could not predict short term energy prices. The energy-intensive industry was exploring how to cut its greenhouse-gas emissions.
"It's a shared view if we don't deal with that threat, then in the mid-long term it could be a threat to the material itself," he said, adding that the technology path to follow was clear.
"As an industry ... the solution will come through clean coal production, you cannot escape coal."