The new Range Rover Sport weighs about 400kg less than its predecessor. New fuel-efficiency laws in the US will require cars to be lighter by 2016. This is good news for aluminium, which has taken a beating since the financial crisis. Rising demand helped the world’s biggest producer report a 4 per cent recovery in earnings before interest, tax, depreciation and amortisation in its first quarter from a year earlier yesterday. But Rusal and its peers are hardly shiny investments yet.
Demand for aluminium is expected to grow at by least 6 per cent this year. Rusal reckons that the average car, a big consumer of the metal, now contains 150kg of aluminium, up from 120kg a few years ago. Meanwhile, demand growth in China – two-fifths of the global total – should be helped by the use of aluminium in electricity transmission lines. Low interest rates also buoy financial trading in the metal.
But there remains a supply glut. Outside China there are 10m excess tonnes of capacity. Inside China grants have encouraged investments in new capacity while old plants have not been idled. Only this year is China’s excess capacity growth expected to come under control. As a result, the aluminium price is still falling. After a 1 per cent increase in the first quarter, it has since fallen by an average 8 per cent to $1,886 per tonne. Rusal’s cash cost of $1,970/t means it can only keep its head above water because of the premiums its buyers will pay for fast delivery. Indeed, as much as a fifth of total global production outside China remains loss making on a cash cost basis. In China, this proportion is as high as 35 per cent.